Once upon a time, my family went through a "pet rollover." Many Foolish dog owners will be familiar with how this works: several dogs are in the family. One dog chases a fire truck too many and departs the pack. A lower-rung dog assumes top dog position, and a new puppy is brought in to assume the "bottom dog" slot.
Except for us, it did not work that way. The new puppy refused to accept her place in the pecking order. No sooner was she in the house than she was nipping at the top dog's dewclaws and stealing his toys.
Needless to say, the top dog was not pleased. But the puppy refused to acknowledge his growls and snarls. The puppy knew he was an old softy and took full advantage of this. Ultimately, the "top dog" did the only thing he really could do in the situation: he jumped up on a couch that was too tall for the puppy to reach, and there he hid.
The situation in the airline industry is like this, but more so -- with several old top dogs (AMR
For the last few years, the puppies have ruled the roost (to mix a metaphor). They've stolen the old dogs' customers and decided when to lower airfares, when to raise them, and when to make the old dogs regret trying to do the same. According to Tuesday's Wall Street Journal, the puppies are at it again. JetBlue, Southwest, and the other discounters have started yet another fare war that the old dogs cannot afford to fight, dropping round-trip ticket prices to dozens of U.S. cities below $100.
And what are the old dogs doing in response? The only thing they can do. They are lowering fares they cannot afford to lower... and hiding out on the proverbial couch. Which is to say, raising airfares the only place they can -- on overseas flights where the discount airlines do not compete.
The question that investors in the old dog airlines must ask themselves is how long will it be until one, or more, of the puppies grows tall enough to reach the international "couch"? For I guarantee you, one day soon, air travelers will be presented with the choice of flying nonstop to London on a crowded old Delta plane -- or paying half price to take the same trip on extra-wide leather seats, watching live television on a personal video monitor on a brand-new JetBlue Airbus.
Check out Motley Fool Stock Advisor by subscribing today. There's a six-month money-back guarantee if you're not completely happy.