It's a good question, but I believe airlines would be classified either as monopolistic competition, or a non-collusive oligopoly. There's an identifiable difference between a flight on Virgin America and one on American Airlines, so at least some of the competition occurs on a dimension other than price.
There's a model called 'Porter's five forces' that is often used to evaluate the strength of business models, and Thiel's choice of language seems to indicate that he's familiar with and supports at least some aspects of this model. It looks at five major factors:
1) threat of new competition (new airlines)
2) threat of substitutes (WebEx, high-speed rail)
3) bargaining power of buyers (you and me)
4) bargaining power of suppliers (Airbus, Sysco Foods, Airports, Labor, Fuel)
5) Intensity of competition
Thinking quickly about airlines, my thought is that items 2 and 5 are the largest problem areas. Item 2 because if prices rise too much, businesses can shift some travel to email/webex/conference call, and pleasure travelers can pick alternate destinations either on lower-priced (likely less profitable) routes, or can simply not fly to their destination.
Item 5 because if A creates a profitable flight, there's a fairly strong incentive for B to start offering a very similar flight and competing (in part) on price. This is likely to eventually drive the profit generated from that flight down to zero. After all, even if A and B managed to reach a profitable equilibrium, C is likely to notice and compete on that flight, and this is likely to continue until everyone's revenues are just meeting their expenses.
There's a model called 'Porter's five forces' that is often used to evaluate the strength of business models, and Thiel's choice of language seems to indicate that he's familiar with and supports at least some aspects of this model. It looks at five major factors:
1) threat of new competition (new airlines) 2) threat of substitutes (WebEx, high-speed rail) 3) bargaining power of buyers (you and me) 4) bargaining power of suppliers (Airbus, Sysco Foods, Airports, Labor, Fuel) 5) Intensity of competition
Thinking quickly about airlines, my thought is that items 2 and 5 are the largest problem areas. Item 2 because if prices rise too much, businesses can shift some travel to email/webex/conference call, and pleasure travelers can pick alternate destinations either on lower-priced (likely less profitable) routes, or can simply not fly to their destination.
Item 5 because if A creates a profitable flight, there's a fairly strong incentive for B to start offering a very similar flight and competing (in part) on price. This is likely to eventually drive the profit generated from that flight down to zero. After all, even if A and B managed to reach a profitable equilibrium, C is likely to notice and compete on that flight, and this is likely to continue until everyone's revenues are just meeting their expenses.