Nobody is disputing that when prices decrease, capacity might also decrease. But the claim was that capacity drops to zero, which I still think is absurd.
Well, I think the claim that worldwide capacity will drop to zero is absurd. But after enough price erosion, domestic capacity will dwindle significantly and these companies' goal is to remain in business.
I love low airfare as much as anybody but the claim that price transparency leads to price erosion isn't ridiculous. I honestly think that the trend towards lower prices has led to the reduction in quality of the flying experience as the airlines try to accommodate both low prices expected by consumers and high margins expected by Wall Street.
But your point is fair. The capacity rarely disappears completely because of price transparency. Only innovation and obsolescence will completely take that capacity offline.
