We’re starting to see the consolidation in the airline industry that we’ve need so badly for the last 5 years or more. ATA Airlines, Aloha Airlines and Skybus (which I wrote about almost a year ago) all quit flying this past week.

I gave Skybus a 3 in 10 chance of surviving, and it looks as if I was right. Rising jet fuel costs and a slowing economic environment got the best of them after only one year. Of course, when you offer tickets for $10 per seat, it doesn’t take a financial analyst to figure out that you might not be in business for long.

That begs the question: if I could figure that out, why couldn’t the execs at Skybus?

Actually, it appears the CEO saw the writing on the wall. Less than two weeks ago, CEO Bill Diffenderffer resigned to pursue a book-writing career. A BOOK WRITING CAREER! Retired sports stars resign to go write books or become sports analysts. Movie stars and politicians resign to go write books. A no-name CEO dumps his company that he spoke so highly of less than a year ago to go write books!? Give me a break! This guy wasn’t even in it to begin with.

I digress.

From a personal standpoint, you never like to see companies go out of business. ATA had to lay off 2,000 employees, which only creates more downside pressure on the economy, and it’s never good when people get laid off. That is, unless you’re going to resign to go write books…

While it’s a personal tragedy to see this happen, consolidation is a key ingredient in a free market. You absolutely have to let the failures fail, and let the successes continue to let their chips ride.

For one, I’ve become tired of hearing airlines complain about rising fuel costs yet refuse to raise ticket prices over fear of dwindling market share. If my companies costs go up, you can bet that part of those costs are passed on to the customer. That’s how a good business works. You’re going to face a reduction in sales when prices go up, but you’re going to face a reduction in revenue if they don’t.

It’s too bad these airlines are going out of business. Now, as long as the government sits on it’s hands and lets the free market play out, the airline business will be healthier for it.

Business airlines, bankruptcy, Bill Diffenderffer, business management, Skybus