The “Southwest Effect” in multi-airport regions

The impact of hub hierarchy and market competition on airfare pricing in US hub-to-hub markets

“…Airports are increasingly part of multi-airport systems (MAS) (de Neufville, 1995;Derudder et al, 2010), implying multiple gateways for accessing metropolitan areas. Recent research has shown that LCCs not only influence pricing and traffic patterns at the airports they serve, but also at the other airports in a MAS (Brueckner et al, 2013;Tierney and Kuby, 2008;Vowles, 2001). This competitive effect has, for instance, been observed after the entry of Southwest in the Baltimore-Midway route: the significantly lower price offered on this route connecting the Washington and Chicago metropolitan areas forced carriers operating on other routes between Washington and Chicago to reduce the fares to protect their market share, which Vowles (2001) has dubbed the "spatial Southwest effect."…”

“…Recent research has shown that LCCs not only influence pricing and traffic patterns at the airports they serve, but also at the other airports in a MAS (Brueckner et al, 2013;Tierney and Kuby, 2008;Vowles, 2001). This competitive effect has, for instance, been observed after the entry of Southwest in the Baltimore-Midway route: the significantly lower price offered on this route connecting the Washington and Chicago metropolitan areas forced carriers operating on other routes between Washington and Chicago to reduce the fares to protect their market share, which Vowles (2001) has dubbed the "spatial Southwest effect." More recently, Brueckner et al(2013) reappraised the impact of airline competition on domestic US airfares and confirmed that LCCs have dramatically reduced airfares whether they provide services in the airport-pair markets or at adjacent airports.…”

The Southwest effect: A time-series analysis on passengers carried by selected routes and a market share comparison

“…Estimates exist in the past papers of Windle et al (1995), Dresner et al (1996) and Vowles (2001). The first mentioned paper looked at data from 1991 to 1994 and found that the 1 Airport Business (2006) entry of Southwest onto a route resulted in an average price decline of 48 percent and a traffic increase of 200 percent on the Southwest routes whereas the second paper, which in part focuses on Southwest's start up at BWI in 1993, develops a general econometric model so as to comment principally on pricing behaviour.…”

“…As for the comparison with the previous estimates for Southwest, focussing on the change in traffic at the airports where Southwest operates, the approach previously used, is likely to give more dramatic impacts than when the whole corridor is examined in what Vowles (2001) might call routes between multi-airport regions and the estimated impacts are in keeping with the simple examination of the data. 1999MAY 1998JUL 1997SEP 1996NOV 1995JAN 1995MAR 1994MAY 1993JUL 1992SEP 1991NOV 1990JAN 1990 1999MAY 1998JUL 1997SEP 1996NOV 1995JAN 1995MAR 1994MAY 1993JUL 1992SEP 1991NOV 1990JAN 1990 1999MAY 1998JUL 1997SEP 1996NOV 1995JAN 1995MAR 1994MAY 1993JUL 1992SEP 1991NOV 1990JAN 1990 1999MAY 1998JUL 19...…”

Low Cost Carriers in China and its Contribution to Passenger Traffic Flow

“…Numerous studies have confirmed the negative effect of low cost carriers (LCCs) on the airfares of the routes they operate in the US and European aviation markets, widely known as the "Southwest effect" and the "Ryanair effect" (see for example, Alderighi, Cento, Nijkamp, & Rietveld, 2012;Morrison, 2001;Vowles, 2001). Bennett and Craun (1993) once estimated that if airfares on the routes where Southwest served were raised to the level of the airfares on the routes without Southwest, the industry revenue would increase by US$2.5-3 billion (holding traffic constant).…”