AA’s excessive luggage fee- Brief critique on capitalism- Market forces

So now American Airlines is charging passengers $15 for their FIRST piece of luggage. What does that mean for American Airlines? What does that mean for passengers? What does that mean for the market? How could American Airlines have miscalculated the cost of fuel so poorly that they were forced to take such drastic measures? Were the fluctuations in fuel prices really that unforeseen? Are other airlines getting ready to do the same thing?

American Airlines should probably get ready for more financial dents, because I don’t think these measures are going to help their financial status. The first way to lose customers is to unfairly pass on additional costs to them. American Airlines made the miscalculation mistake, not the consumer. Only the American Airlines pocket should be taking a hit from this unfortunate circumstance. I’m sure the American Airlines chief officers are making a hefty salary, and could afford a substantial pay cut to alleviate some of the corporations financial worries. But of course they won’t be doing that. How could we expect the chief officers to take one for the team? Instead they are passing the cost on to the laborers that they are laying off and the consumers who are being charged additional fees.

This type of behavior is what causes the capitalist system we have in place to fail. Capitalism can work for everyone and be a good thing for the economy if it is exercised correctly. But when it isn’t, situations like this occur. The chief officers exploit the labor of their working class staff by extracting the surplus value that these workers create. Instead of reinvesting all of the surplus value into the corporation to insure the sustainability and security of the corporation, these chief officers cut bigger paychecks for themselves and improperly handle the distribution and allocation of the remaining value. This will inevitability lead to taking drastic measures during economic downturns such as firing hard workers and excessively charging consumers. If the surplus value had been handled appropriately and allocated adequately, the corporation would have the secure base and ability to function normally even in economic downturns.

Thankfully for consumers, we have other players in the market besides American Airlines. There may initially be some fear that other airlines will follow American Airlines’ lead and begin excessively charging consumers as well. However, consumers should not fear this for the following reasons. First of all, if other airlines are appropriately handling their surplus value and are making the proper calculations and speculations for the cost of fuel amongst other cost, there should be no reason for them to start playing this game that American Airlines is playing. If they do, they are simply being motivated by greed and will fail to successfully exploit consumers for the following reasons. The markets we have in place in this capitalist system are set up to ensure perfect competition. Of course, perfection competition is merely a theoretical concept, but its principles are applicable in practical implementation. Basically if American Airlines and others attempt to exploit the market by cutting flights and charging excessive fees, they will cause shifts in the supply and demand curves. This will move the supply and demand intersection point away from its optimal location and thus cause new players to enter the market or cause the other current players to change their current behavior and drive the supply and demand curves back to the optimal location.

Sorry for all that Microeconomics 001 nonsense, but to put it simply, if American Airlines charges excessive fees, there is always a competitor in the market who won’t charge these excessive fees. This competitor will attract some or all of American Airlines former customer base. If the competitor attracts enough of Americans Airlines customers, American will be forced to either drop their excessive fees or risk the possibility of going out the business. That is how our market is supposed to function. It is designed to weed out the weak or incompetent players. It’s very similar to Darwin’s theory of evolution and the survival of the fittest. So, current and/or former American Airlines customers, my message to you is: don’t worry too much. This only a phase and it will pass. Use another airline for now. Unless American Airlines plans on going out of business, they will realize soon enough that these measures are bad for business and they will make the proper adjustments. Don’t agree with me? Was my economic analysis off? It could have been off; I didn’t really like Microeconomics 001? Anyways, if my facts are off or if my opinions are radical, let’s fix that. Let’s Deetrio.