Southwest Claims Enduring ‘Southwest Effect’
Jackie Reddy January 02, 2017
The carrier’s legendary impact on fares and passenger traffic is still a talking point in the aviation industry.
Even after all these years, it seems that the “Southwest Effect” is still a force to be reckoned with. The term, coined in a report by the United States Department of Transportation (U.S. DOT) back in 1993, refers to the observation that traffic rises and fares drop whenever Southwest Airlines enters a new market.
A case in point, the airline says, is its recent expansion at Ronald Reagan Washington National Airport (DCA). Referencing data from U.S. DOT, Southwest has revealed that since it increased its presence at DCA back in 2014, fares have dropped by 12 percent on its non-stop routes from the airport and passenger traffic from the site has increased by 38 percent.
Speaking of his airline’s impact on new markets, Andrew Watterson, Southwest’s senior vice president for network and revenue, told USA Today that, “The Southwest Effect, people heard about in the early 1990s. [It] happens when we enter new markets. We are a low-cost carrier, so we have low costs. So we’re able to come in with low fares.”
While Southwest’s success is quantifiable, some within the aviation industry wonder if the idea is a bit old-fashioned. Seth Kaplan, a managing partner at trade publication Airline Weekly, told the outlet that, “Southwest has been very positive for consumers over the decades,” but also explained that, “Back when the term was coined, Southwest was the only large low-cost carrier in the United States .”
Low-cost carriers are now commonplace and the country’s legacy airlines, which were once Southwest’s main competition, have become more agile in terms of their ability to fight for their share of the market.
But Southwest maintains that its effect is the real deal. It says that it has benefited both directly and indirectly from mergers and acquisitions throughout the 2010s and also claims that its success comes from the fact that it flies only a single type of aircraft.
This, according to Watterson, makes Southwest a formula that’s hard to beat. “It’s common because of our success for people to evoke us but fortunately we’re never quite emulated,” he said.
[Photo: Shutterstock]
How about part 2: Reduction in service, increase in fares, once competition has been driven out. This is now coming full circle, particularly intra-California, where Alaska is taking WN on in most markets.
I hope DCA enjoys it while it lasts. In a lot of other established Southwest cities the 'Southwest effect' goes something more like this: "wow Southwest fares are high. Whatever happened to their low fares? I'm flying United (or insert the legacy carrier of choice) instead because they're cheaper"
While there may still be a "Southwest effect", it seems to me that they are a different carrier today than they were even a few years ago and their days of being a bargain compared to the majors are long gone. In my searches, Southwest often comes up higher than the major carriers.
I believe this is, in fact, a true situation. I noticed this when Southwest entered a market about 60 miles from my home airport two decades ago. With that said, I have never flown the airline. I have no objection to doing so, but also using a carrier such as DL gives me miles for personal travel to Asia, the Middle East, and Europe--places that Southwest does not fly.