Is Southwest Airlines Partially Responsible For Lower Domestic Airfare?

There was a time when Southwest was the low-cast carrier in the US. They flew from secondary airports, avoiding major airports like Washington Reagan and Dulles, instead focusing on BWI to keep costs cheap.  In Chicago, they established a base at Midway instead of O’Hare.

Southwest Airlines

Photo courtesy of Steve Lagreca

It’s been a long time since Southwest was cheapest, though.  In a growing number of cases, I’ve actually seen them more expensive than others, though they still offer lots of cheap flights to lots of places.  And, they’ve been increasing their presence at Dallas Love Field (DAL) since the Wright Amendment was lifted.

There have been a lot of developments at Dallas Love Field (DAL) since the Wright Amendment was lifted.  I hadn’t considered it, but could all of the action in DAL be causing downward pricing pressure on some routes?  Quoting from Terry Maxon’s recent piece:

“The pricing environment, I think, has been well publicized, that there’s weakness in Dallas,” Delta president Ed Bastian said at the conference. “Again, it’s not a demand weakness. People are traveling. Pricing is at lower price points in Dallas than in other U.S. marketplaces. And, as a result of that, that’s caused some knock-on effects in traffic flow across the U.S. system.”

United Continental vice chairman Jim Compton said some competitors are trying to compete more aggressively with some of the ultra low-cost carriers like Spirit Airlines.

“And also, we’ve seen some more competitiveness as Love Field has opened up and the Wright Amendment. I would tell you we’re seeing more of that in the marketplace,” he said. United is having to decide in each market whether it needs to adjust its pricing.

“So, for instance, in the case of Chicago where we’ve seen American match more of Southwest pricing at Midway relative to O’Hare, once a large competitor does that, it’s a lot of inventory at O’Hare that’s exposed competitively. right? And so the right optimal revenue thing to do is to be competitive,” he said.

The article also brings up the point that Southwest may be driving fares down to further discourage Delta from hanging around DAL.  And, while all the bickering over 2 gates at DAL is going on, Delta continues to sell seats on flights that they don’t have gates to operate.  Interesting times.

Traditionally, I don’t recall seeing American (or anyone else) matching Midway fares ex-O’Hare.  While there’s plenty of O&D traffic in Chicago, there’s also massive connecting traffic for American and United from both their international flights and alliance partners.  With that sort of demand, there have been plenty of reasons not to discount flights due to a low-cost competitor at a nearby airport.

I haven’t noticed the fare matching in Chicago that United notes, though it’s not a market I keep a watchful eye on.  But, there’s evidence of it cited by other news sources that seem to indicate that American’s philosophy on competing is evolving to define the lucrative Chicago to Dallas market as MDW-DAL as well as ORD-DFW.  And, in some ways United is following suit.

There are folks out there in the blogsphere smarter than me when it comes to analyzing pricing trends like this (both Gary and Seth come to mind), but for now color me intrigued.  The airline industry appears to be taking a more nuanced approach to pricing as the big guys find ways to compete against Spirit and other low-cost carriers.  That feels like it should open up more opportunities for savvy travelers to save cash on routes where cheaper fares have been harder to find.

The post Is Southwest Airlines Partially Responsible For Lower Domestic Airfare? was published first on Pizza In Motion.

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  1. In my mind, WN is no longer a LCC. While they may be low-cost with regards to their costs thanks to their efficiency (flying only 737s, flying more point-to-point and less hub-and-spoke than legacy carriers), they are often not the lowest cost with regards to consumer base price. Despite this, about half of my flying is on Southwest for a number of reasons. First of all, their companion pass offers tremendous value. Secondly, their tickets, even at the lowest level, are more flexible than other airlines (being able to speculatively book tickets on points and then cancel 10 minutes prior to departure is huge). Combine this with free checked bags, free on-board entertainment, free drinks and snacks, and a meaningful loyalty program, and you have a more bundled fare than you’ll find with many legacies.

    Sure, you can’t reserve seats in advance so you have to be one of the first to check in (unless you pay for EBCI), but increasingly we’re seeing similar behavior by the legacies, in order to compete in the market (e.g. DL’s basic economy fares). In my view, LCC is the new legacy, and ULCC (i.e. F9, NK, G4) is the new LCC.

    I keep a pretty close eye on fares from south Florida, where the impact of LCCs/ULCCs is very easily seen in prices to various destinations. Want to go anywhere that a LCC/ULCC flies? Wait a few weeks and you’ll likely see a legacy match. Recent examples are Chicago (on UA/AA), Detroit (B6, DL), New Orleans (AA, DL), and Dallas (AA). A route I fly very often is MIA/FLL/PBI-ATL, which has a ton of competition (DL, AA, WN, NK, and F9). Fares have been driven so low in this market that I never expect to pay more than $150, and frequently pay <$100. On the other hand, flights to CLT, another southeast hub that isn't served by the LCC/ULCCs from south Florida, are rarely <$250.

    My friends/colleagues always bring up the valid complaint that WN doesn't show up on OTAs. Enter Google Flights. When searching for a route WN flies on Google Flights, there will be a small note under the blue "Choose an outbound flight" box saying that prices are not available for Southwest. Scroll down, click on one of the WN departure times, choose a return, and then click the blue "Check Price" box. You're automatically taken to and all of the available flights for the dates selected are shown. Piece of cake! And what do you know, the random FLL-ATL dates I selected are $98 r/t :D.

    1. nsSam, I wouldn’t consider Southwest an LCC anymore, either. Interesting to see their growth strategy. I do think they’re a viable choice for many because of the reasons you state above.

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