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Tesco’s shares are down by half, in no small part because of a dubious accounting trick that saw profits overstated by £263-million ($474-million).Reuters

Airlines and supermarkets have a lot more in common than customers banging into each other in uncomfortably narrow aisles. Both have fallen victim to the discounters.

The discount, or low-cost, airlines – Ryanair and easyJet PLC in Europe, Southwest Airlines Co. and WestJet Airlines Ltd. in North America – have sucked millions of passengers away from the high-cost, debt-laden traditional airlines. The same is happening to the traditional supermarkets in Europe, especially in Britain. The discounters are coming on strong, and the profits, sales and growth of the chains that have been part of the urban and suburban landscape forever are feeling the pinch.

At least one of the British biggies, Tesco PLC, is in middle of a full-blown crisis. Two of its three main competitors, William Morrison Supermarkets and J. Sainsbury PLC, have seen their shares fall faster than a poorly stacked pile of canned fruit; they're are down by a third in the past year. To them, it is no consolation that Tesco's shares are down by half, in no small part because of a dubious accounting trick that saw profits overstated by £263-million ($474-million).

Judging the performance of the fourth competitor, Asda Group PLC, is harder because it is buried within the Wal-Mart Stores Inc. empire, though recent trading statements suggest it is holding up better than the others (partly because its strategy of stuffing the aisles with cheap clothes as well as food seems to be paying off).

On Nov. 12, Sainsbury will release interim results that should give investors a better idea of its performance in the supermarket wars. Shareholders will be clamouring for details of a turnaround strategy. They already know part of the plan, which is to take the battle to the discounters' turf. Sainsbury has just formed a joint venture with the low-cost Danish supermarket chain Netto. They plan to open 15 stores in Britain in the next year.

The Netto-Sainsbury business will cut prices by offering a vastly reduced range of about 2,200 products, compared to an astounding 40,000 or so in the big-box supermarkets, in relatively small stores. Many of the products will be own-label goods and some of them Danish. Shoppers will be charged for bags.

The strategy of launching a chain that competes with yourself may not work. It generally didn't work with the airlines when they launched in-house discount brands, like British Airways' defunct Go. And the discounters are big, well-financed chains who don't shy away from competition. This group is dominated by Aldi and Lidl, both from Germany, whose British market share is expected to double to about 15 per cent within five years. They have expertly exploited a market in which consumers' income is growing more slowly than the economy. They also know that many consumers find no advantage in driving to the middle of nowhere to shop in airport-sized supermarkets.

Speaking of large: Big Oil has, so far, held up fairly well as oil prices come tumbling down. What about the smaller players?

This week, we'll find out when two British middleweights, EnQuest PLC and Tullow Oil, report their interim statements. The former is one of the biggest independent producers in the North Sea; the latter, with a market value of £4.6-billion ($8.3-billion), is probably the biggest independent name in Africa, with recent discoveries in Uganda, Ghana and Kenya.

To be sure, the oil price – down about 25 per cent since June – is putting pressure on the earnings of the bigger players. But because they are well diversified, have sophisticated hedging strategies and can deploy billions of dollars on dividends and share buybacks, investors have not been slaughtered. BP, the former British Petroleum, has lost about 12 per cent in the last six months. Shell is down only 6 per cent; measured over a year, the shares are up almost 8 per cent.

The smaller oil producers should be so lucky. EnQuest, which had not hedged against falling oil prices, has seen its shares fall by half in the past six months. Tullow has suffered only slightly less damage, with a 44-per-cent fall.

While a profit crunch should be expected, the bigger question is budget planning. How much of the 2015 budget has been trimmed to reflect the new world of $80 (U.S.) oil? Will that inevitable budget reduction result in lower production? And where do the CEOs of these companies think oil prices are going?

While most oil bosses are hesitant to make price predictions, most would agree that less drilling will eventually tighten up supply, triggering a price bounce. But when? Just because an oil share has fallen by half doesn't mean it's a bargain.