The effect, often referred to as "the

Southwest The points of the compass are a set of horizontal, radially arrayed compass directions (or azimuths) used in navigation and cartography. A '' compass rose'' is primarily composed of four cardinal directions—north, east, south, and west— ...

effect", is the increase in

airline An airline is a company that provides civil aviation, air transport services for traveling passengers or freight (cargo). Airlines use aircraft to supply these services and may form partnerships or Airline alliance, alliances with other airlines ...

travel originating from a community after service to and from that community is inaugurated by Southwest Airlines, or any similar airline that improves service or lowers cost.

Original description

The U.S. Department of Transportation coined the term in 1993, 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. The Southwest Effect was said to have three elements: * The new-entrant airline ''increased supply'' and ''offered lower prices''. Southwest offered dramatically lower air fares than established

s that usually enjoyed a near-

monopoly A monopoly (from Greek language, Greek and ) is a market in which one person or company is the only supplier of a particular good or service. A monopoly is characterized by a lack of economic Competition (economics), competition to produce ...

in the communities. * Incumbent ''airlines lowered their own fares''. Established airlines competing with Southwest Airlines sought to avoid Southwest's entering their markets, and feared losing passengers and having to offer lower prices. Upon Southwest's entry, incumbent carriers lowered their own fares in that market (and thereby reduced their profitability), to remain

competitive Competition is a rivalry where two or more parties strive for a common goal which cannot be shared: where one's gain is the other's loss (an example of which is a zero-sum game). Competition can arise between entities such as organisms, indi ...

. * ''Sales rise for all airlines'' in the market. For the communities affected, Southwest's entry and the corresponding drop in air fares stimulated business and increased

demand In economics, demand is the quantity of a goods, good that consumers are willing and able to purchase at various prices during a given time. In economics "demand" for a commodity is not the same thing as "desire" for it. It refers to both the desi ...

for air transportation. This, in turn, increased the revenues of all airlines offering transportation to the community, and sometimes resulted in a net profit increase.

Other carriers with similar effects

In recent years, some new airlines have had a greater "Southwest Effect" than Southwest itself. An MIT study released in August 2013 found newer, smaller airlines were having a greater impact on lowering the average price of a ticket where they fly. According to an MIT International Center for Air Transportation analysis of ticket statistics, between 2007 and 2012, Southwest's ability to lower fares had weakened from $36 per one-way fare to only $17 per one-way fare. At the same time, JetBlue, Allegiant, and

Spirit Airlines Spirit Airlines, Inc. is an American ultra-low cost airline headquartered in Dania Beach, Florida, in the Miami metropolitan area. Spirit operates scheduled flights throughout the United States, the Caribbean, and Latin America. Spirit was the ...

were associated with dips of $32, $29, and $22, respectively, in markets that they entered. However, other airlines' lower fares don't account for the ancillary products that are a significant component of their business. In August 2013, ''

USA Today ''USA Today'' (often stylized in all caps) is an American daily middle-market newspaper and news broadcasting company. Founded by Al Neuharth in 1980 and launched on September 14, 1982, the newspaper operates from Gannett's corporate headq ...

'', in noting the competitive effect on prices continued to be seen, but JetBlue's impact on prices was now largest, suggested, "You might want to start calling it the ''JetBlue effect.''" The article also draws attention to JetBlue's much smaller footprint in overall domestic passenger traffic, making any claims about a widespread effect much more tenuous.

Original description

Other carriers with similar effects

References

Further reading