Question

In the airline industry, companies like American, Delta, and US Air have a difficult time competing because their industry has become commoditized. What does this mean for firms in the airline industry?

Answer 1

Commoditization in the industry happens when the goods/services offered by several firms that create a competition become too similar in the eyes of the consumer, so he/she opts for the cheapest. Of course, there will always be buyers of expensive airline tickets (class upgrade, last minute booking, added service, etc...), but the point is that the pricing power of the airline firms is weakened by a commoditized industry.