SHARE WARS: THE SEQUEL

Over time, the industry has engaged in fare wars, skirmishes and used miles to compete for share. Does anybody really think that yesterday's inflation news will move air fares up anytime soon?

Briefly, the myopic focus on market share had actually given way to earning profits and reinvesting in the business.

Consolidation did stabilize a fragmented market. 80%+ of the US domestic market ended up in the hands of a few. Among the many structural shifts following 9/11 passenger revenue and ancillary fees as a percent of GDP shifted down from .91% to .72%.

At the time the network carriers did not have cost structures to survive the new revenue world. The chasm in unit costs between Southwest, other LCCs and the network carriers invited a share grab. And grab they did.

With court assistance the network carriers got their unit costs down. Cost convergence between Southwest and the network carriers occurred. The share grab slowed.

Well, yesterday's consolidated market is being fragmented again. PX rev and ancillary fees as a percent of GDP has dropped precipitously. It will recover, but by how much?

Don't look now, but a chasm in unit costs has reappeared, Now it is WN and the network carriers v. the ULCCs.

Maybe its just hot flashes.