Both Air Canada and WestJet, which are two of the biggest airline companies in Canada, introduced a charge for the first checked luggage of $25 for economy passengers on domestic and other flights within North America in 2014, A proposed class action lawsuit recently alleges that the two companies “colluded to fix the price” and aims to get the money back for passengers.
Air Canada and WestJet are competitors in the Northern American airline market while competitors do compete to attract more potential consumers by taking more competitive advantages, which includes low cost and product uniqueness, so that the comparatively leading company achieves the most profits at the end. However, in this particular case, the two competitors to some extent cooperate to get to the same destination, which is maximizing their profits, seeming opposite to the common sense that competitors can never cooperate. Considering this from the contrary, it is fair and reasonable because Air Canada and WestJet are the ones that denominate the market so that charging extra fees for checked luggage is not worth competing. Concluded from the above, there are strategies other than basic business strategies we discussed in class, depending on the specific scenario and having the final target unchanged.
From the perspective of business ethics, some people may argue that this is not right since they are simply asking for extra fees and offering nothing more for customers. However, from my point of view, the action of two companies is totally ethical, and there is indeed nothing to do with business ethics. First of all, the fixed cost of Canadian airplane companies is consistently rising, mainly driven by fees, taxes, duties and surcharges, and the charge of $25 seems not much thinking in this way. An increase in price (revenue) is required to balance the profit when cost rises. Additionally, since the two companies are selling similar kinds of products, it is common for them to have the similar price and propose similar actions. Now that both of them can benefit from the same particular action, why not do it? Furthermore, it is considered ethical because it is not causing harm to other people; I mean, passengers mainly. Trying to make more profits is certainly part of business as long as being ethical; adding an additional cost of this type of amount is not considered non-ethical in my opinion.
From the perspective of customers, it does cause some frustration in customers since costumers are the ones who pay more for no better services, and the two companies needs to shoulder the blame.
Building a more harmonious and neighbourly relationship between sellers and buyers may improve the market’s atmosphere in the meantime of doing “good” business.
word-count: 446
reference list: