Realist, not conformist analysis of the latest financial, business and political news

WOW Goes Bust – That’s Airlines A Nicely Competitive Market Then

WOW Air has, so far at least and in the absence of an investment lifeline, just gone bust. Which is useful evidence that the airline business is nicely competitive and balanced nicely in favour of consumers, of passengers. There will, of course, be cries that there must be more regulation of airline finances as a result of this and all such calls will be coming from the sort of idiots who don’t understand what it is that we’re trying to do here. Which is, of course, make you and me out here, us consumers, as rich as it’s possible for us to be. That Wow has just gone bust showing that this is what the system is currently doing.

That is, we want this to happen. Not necessarily to this airline, not to all of them, but we’re delighted that it’s happening from time to time at least:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Crisis-hit Icelandic airline Wow Air says it has “postponed” all flights as it awaits news on a possible cash lifeline. It grounded aircraft on Thursday following months of talks with prospective financial backers – saying it was in the final stages of negotiations with a group of investors and further information would be provided later in the morning. [/perfectpullquote]

Go on, they’re bust.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Wow Air has closed down, leaving thousands of passengers stranded – and wrecking the travel plans of hundreds of thousands more. The troubled Icelandic airline was heavily in debt and has been seeking a backer for months. Talks with a US financier and the rival carrier, Icelandair, broke down in the past few days. [/perfectpullquote]

If running the airline was a goldmine then they wouldn’t be in trouble in the first place. And if it could easily be made so then there’d be someone shovelling in cash right now. Thus, we can usefully assume that it’s not a goldmine and also that it’s not easy to make it one.

Which is the very point of market competition in the first place. We want all suppliers to have to strip costs out of their systems. For that’s what provides us consumers with a good deal. They have lower costs, if there are several of them with lower costs then someone will break ranks to offer a lower price to gain our custom. This competition is the whole point of the process.

Now, obviously, companies are run by mere mortals, not everyone is going to get their calculations – or, as is obvious at times, their hopes and dreams don’t come true – right. So, some will foray into business and then go bust. But it’s that very going bust which gives us the confidence that we’re in a competitive market.

Think about it for a moment. That someone can go into business means there’s the possibility of entry. If there were great profits to be had then people could go chase them. And that people do go bust shows that there’re no fat profits there just for the taking. Sure, some people do succeed – Ryanair, Easyjet, being obvious examples. But they both brought something new into the equation. It was their new technologies which allowed them to lower costs faced by everyone else.

Which means that fun though this is we’re perfectly happy with the background events:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Wow Air failure: ‘They gave us pizza – then cancelled our flight'[/perfectpullquote]

Well, at least they got fed.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Fortunately no. Whether you are in Iceland or somewhere else that WOW Air flew to and from, you do have options available. The first thing to do is to check to see if there are other flights going where you need to go. In some cases, other airlines may offer a discounted “rescue fare” in light of the current situation. That said, you may be able to narrow your search—the Icelandic Transport Authority has posted that Icelandair and EasyJet have so far offered to pitch in by offering rescue fares to select destinations. You would do well to refresh that page as more airlines or destinations may be added. Icelandair and WizzAir have also announced that they are doing everything they can to help stranded passengers get home. [/perfectpullquote]

There is a rescue system in place too.

If a supplier or suppliers in a market go bust then that means that there just aren’t the fat profits that the capitalists so love. They’ve been competed away in that market. Thus Wow Air going bust shows us that airlines are a nicely competitive market. We the consumers are the people who win here, not the capitalist plutocrats and ain’t that nice?

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