The U.S. airline industry is in a period of consolidation through mergers between leading carriers. A number of recent mergers have been approved by the Antitrust Division of the Department of Justice (DOJ), in part because of the presence of Southwest Airlines in the affected markets. In its approval of the mergers, DOJ makes a key assumption that Southwest is unresponsive in its pricing strategy to the reduced competition when its competitors merge. Numerous studies have validated the so-called Southwest effect, through which potential or actual entry into a market by Southwest Airlines is associated with lower market fares. However, considerably less work has examined Southwest's postentry pricing strategies. This study finds that Southwest raised fares more between 2005 and 2010 in markets affected by the Delta–Northwest and US Airways–America West mergers than in other markets. Southwest's fares either decreased or rose by less when the company was facing direct or adjacent competition from a low-cost carrier (LCC). DOJ's approval of Southwest's merger with AirTran, its biggest LCC competitor and strongest deterrent to raising fares in merger-affected markets, raises questions about Southwest's ability to continue as a suitable deterrent to postmerger fare hikes, particularly in the absence of other LCCs in those markets.


    Access

    Download

    Check availability in my library

    Order at Subito €


    Export, share and cite



    Title :

    Is There Still a Southwest Effect?


    Additional title:

    Transportation Research Record


    Contributors:


    Publication date :

    2013-01-01




    Type of media :

    Article (Journal)


    Type of material :

    Electronic Resource


    Language :

    English



    Is There Still a Southwest Effect?

    bin Salam, Sakib | Online Contents | 2013



    Telematik - There is still a lot to do

    Busch, Fritz | Online Contents | 2004



    Fuel cells: Optimism gone – Hard work still there

    Sörensen, Bent | Tema Archive | 2013