Delta Fares

What are the short and long run prospects of Delta Airline and Why?

Public Comments

1. Short run 'prospects' if translated as short run output equilibrium will equate to a loss in revenue because of the pending Delta pilot strike. In macroeconomic terms, wage (the unit rate of labor) is insufficient for them, and thus a greater wage becomes necessary to provided their highly specialized services. Greater wages means the company will have higher direct labor costs, one of the three factors in determining cost of services sold. Because the airline industry is a near-perfectly competitive industry, this translates to an extremely large decline in short run output, in turn leading to a large decrease in revnue. Because free entry and exit is a condition of perfectly competitive markets, in the long run, the market demand will adjust to the leftward shift it supply and Delta will operate at the same cost, but with lower output. (revenue decrease but stable employment)