GAME ON?

There will be many iterations of the game called "Prisoners Dilemma" played.

At the time the industry was emerging from the Great Recession, balance sheets were weak as oil had wreaked havoc. Southwest's hedge book was no longer. Between 2010 - 2014, AA, DL, WN and UA were judicious in deploying capacity. Higher unit revenues resulted.

None of these carriers added capacity over the period greater than the rate of GDP growth. It was always a matter of time before one would break from the group by seeing opportunities that would benefit itself.

The game of Prisoners Dilemma was being played. Per Investopedia: The prisoner’s dilemma presents a situation where two parties, unable to communicate, must each choose between co-operating with the other or not. The highest reward for each party occurs when both parties choose to co-operate.

All players can collectively enrich themselves by restricting output. Each carrier individually has an incentive to break from the group and increase output to capture rents away from others.

I think about jetBlue's route announcements yesterday. New service into network carrier hubs? Not that hubs are the sole domain of the hubbing carrier, but ... What about after Labor Day?

Opportunistic? or putting a marker down?

#swelbar