Originally Posted by shrsailplanes

Your example is flawed, because you are not accurately describing the relationship between indigo, Frontier and where the money actually comes from.

let’s say a rich dude calls four of his rich dude buddies and proposes the following:

Hey, I found a plastic resin supplier that will sell us polypropylene for half the cost that anyone else is getting it for as long as we buy 10M lbs.

If we build a shell company that manufactures a widget and that company only buys the resin from us, our profit margin on selling resin would be XX%. As long as our widget company can keep the lights on by selling widgets, we are in the black. It doesn’t matter if we have a good widget. It doesn’t matter what competitive widget manufacturers are doing. The shell company just has to sell enough crappy, ol’ widgets to cover their resin costs and stay above water and we make money on resin sales.

Great plan, Jeeves. But what if the shell company can’t remain in business because of the competition and/or employees wanting competitive benefits?

No worries. We sell the remaining resin to our competitors, close the shell company and call it a day. Now let’s go play some golf.