The airline industry has been saddled with high fixed costs, and in turn, high operating costs from the start. To counter such effects, you can hope that the price of oil falls, or try to achieve economies of scale with a better passenger to airmiles ratio. Given the global travel downturn, and vast number of travel options available [Hello Southwest!], the KLM/Air France merger is dubious at best. Both airlines will maintain their brand identity, which may be a good move from a marketing standpoint, but due to the complicated nature of the deal, excessive regulation in the EU, and strong nationalist tendencies in Europe, will NOT achieve any cost reducing benefits of a merger. There will still be redundant staff...where are the economies of scale? Which begs the question has Southwest solved the air travel cost puzzle? If so, why aren't more airlines willing to accept the reality and adopt a similar business model?
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