Fare War

Republic of the Philippines
City of Taguig
Taguig City University
Gen. Santos Ave. Central Bicutan, Taguig City

Case Study

Submitted By:
Group IV
Lee Ward O. Butihen
Ericka Shayne G. Cara
Camille A. Oriel
Charlene C. Violeta
Alvin T. Santoalla
BSBM/A31 (am)
Submitted to:
Ms. Queencifel Mabugay  

Company Case 11
  I. Title:
U.S. Air: Surviving the Fare Wars
  II. Abstract:

The years between 1990 and the end of 1992 have meant big trouble for the industry of airlines. After losing $8 billion over the past three years, the carriers are laying off thousands of workers, cutting wages, eliminating flights and replacing jets at many airports with smaller turboprops. And they're trimming some passenger comforts -- no meals on short flights, chicken instead of beef on longer ones. (Wooton, 1993)
Since 1982, costs such as wages and fuel have doubled while the average price paid per mile flown has fallen 25 percent. In addition to the fare wars, underlying problems that are crippling much of the industry were blamed by analysts for the losses.
Despite increased travel during the summer round of fare-slashing, the recession has caused people to travel less and businesses to cut travel budgets.
USAir is the major carrier at Baltimore-Washington International Airport, with more than 60 percent of the market.
In an effort to reverse the losses, USAir has been cutting costs. Recent agreements have cut pilots' and machinists' pay. The savings are expected to top $100 million. (Johnson, 1992)

  III. Introduction.

The relationship between price discrimination and market structure has been the focus of a great deal of economic research. Traditional textbooks argue that market...