First she wanted no more cancelled flights. Now Meredith Vieira’s asking for a “guarantee” against higher airfares.
Unfortunately, despite her $10-million annual salary, according to the April 13 Parade Magazine, NBC “Today” host Vieira has difficulty reporting on business practices in a free market. In an interview with Delta Air Lines (NYSE:DAL) CEO Richard Anderson, she asked for a “guarantee” that fares would not increase and services would not be reduced after a merger between Delta and Northwest Airlines (NYSE:NWA).
“I was just going to ask if you could guarantee your consumers that you would not reduce their service or raise their fares?” Vieira asked.
Anderson had to give Vieira a rudimentary explanation of market pressures dictating those variables and the fact that it isn’t as simple as issuing an executive decree that nothing will change.
“Well, this, this is an end-to-end combination,” Anderson replied. “And our goal is to take two networks that really have very little overlap and connect those networks together and create actually the first airline in the United States that’s truly global.”
Anderson also put one of the biggest pressures the airlines face – the rising cost of fuel – in perspective.
“With respect to airfares, regardless of this combination, the skyrocketing cost of fuel has got to be covered in the ticket prices of airlines,” Anderson said. “Just like when you go to the gas pump, ExxonMobil doesn’t subsidize the cost of the fuel in your car, and your local utility company charges full price for your heating oil.”
But as Anderson explained, the competitive market ultimately dictates the fares.
“Airline tickets, just like other, other services and goods in our economy, have got to reflect the full cost of the commodities to produce the product,” Anderson said. “With that said, we still have an incredibly competitive U.S. and global airline business in the United States. Discount carriers have grown 60 percent the last seven years. There’s free entry, there’s free exit. And pricing in the airline industry will always be based upon competitive market forces.”