Michael Perelman writes: >> The basic flaw is that the cost of flying one more passenger is minimal. >> According >> to basic economic theory, competition drives prices down to that level, >> which cannot >> support the fixed costs.
I suppose the same problem theoretically exists for hotels, theaters, cruise ships. Again, I don't see any evidence that entrepeneurs, investors, lenders, etc. agree with that it is impossible to make money in these industries. It is a metaphysical certainty that at a certain level of fixed cost, the investment will lose money. But there is going to be an income stream, and that income stream is going to be profitable assuming a certain level of fixed debt. If the fixed debt is too high, that's what bankruptcy reorganization is for. David Shemano
