The Southwest Effect is the increase in airline travel originating from a community after service to and from that community is inaugurated by Southwest Airlines or another airline that improves service or lowers cost.
Contents |
The term was coined in 1993 by the U.S. Department of Transportation to describe the considerable boost in air travel that invariably resulted from Southwest's entry into new markets, or by another airline's similar activity (Ritter) . Southwest offered dramatically lower air fares than established airlines that usually enjoyed a near-monopoly in the communities.
Airlines competing with Southwest Airlines resisted Southwest entering a new market, due in part by the necessity to lower fares in that market (and reduce profitability) to remain competitive.
The established airlines also feared losing passengers to Southwest Airlines. Instead, it was found that the entry of Southwest and the corresponding drop in air fares stimulated business in the communities and increased demand for air transportation.