Thus, labor expense per seat mile is twenty-five percent lower than American's. Low-cost carriers also manage the productivity of their aircraft more efficiently. Their point-to-point systems minimize downtime for aircraft and employees. In 2002, JetBlue operated each of its aircraft for an average of 12.9 hours per day, while legacy carriers with hub-and-spoke systems struggled to reach 10.0 hours per day. The lower labor productivity for legacy carriers arises from paying pilots and crew members having to wait in airports or hotels for their next flight. Even more devastatingly, some of the low-cost carriers were far less impacted by the rise in fuel prices and did not have to cut back on their flights. Southwest, for one, had an eighty-five percent of its fuel bill hedged at $26 a barrel and is now paying far less than the rest of the airline industry (American cancels some flights on fuel costs, 2005). As a result of substantially higher costs than low-cost carriers, older airlines such as American find it difficult to pass on the higher oil prices on to their customers. .

             The airline industry is characterized by very complex pricing dynamics, depending on travel distance, type of traveler, and domestic and international flights, to name a few of the many factors that determine the degree of price elasticity or inelasticity (Air travel demand elasticities: Concepts, issues and measurement). For long-haul international business travel, demand is not sensitive to fare changes because there are few close substitutes. On the other hand, long-haul domestic business travelers have much higher elasticities than international business travelers. Telecommunications has become more acceptable as a substitute in domestic markets due to common culture, laws, contracts, etc. Likewise, international leisure travelers have greater elasticity than do international business travelers.