The Benefits of Substitutes

For the past few weeks, Air France pilots have been on strike “over the creation of the discount carrier Transavia, where their colleagues would learn lower wages” (News). The main reason for this strike was that the pilots feared that “their jobs would be outsourced and pilots would be employed on local foreign contracts” (News).  While Air France is estimated to lose 280 million euros due to the strikes, the following BBC article (click here) covers the story of how the low-cost carrier Easy Jet has been booming with revenue.

Air France’s competitor and substitute, EasyJet has been gaining handsomely due to the strikes that have been occurring. According to the aforementioned article, revenues boosted up by about 5 million Euros and it increased shares as well (Air France). This is a prime example of how competitors (or substitutes) are beneficial for companies as well. When we look at substitutes and competition, we often look at how they can threaten the company in question. This is mainly due to the fact that companies do not have control over the actions of their substitutes, its an exogenous cost that must be dealt with and monitored. In this case, Air France has harmed itself which has allowed their competition to advance immensely.

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