Airline Instability

Last month, there were attempted hostile takeovers of major airlines by smaller competitors. This signals that the airline market may become even more unstable in the near future. The consolidation of Delta Airlines with AirTran will cause a shortage of air travel, and also an increase of air fare from destination to destination. This same thing has happened in the past with the dissolution of TWA and Pan-Am, two airlines that people thought would be unstoppable. We could see a Pigovian governmental intervention, in order to protect the aviation industry and try to keep it affordable for the consumers.

This will be an interesting news story to watch, with many real world applications of the various economic principles we have covered in micro economics.