One route Southwest did not offer when it entered this market was Philadelphia to Jacksonville, Florida (JAX), which is a Southwest airport. Every time Southwest begins service to a new airport, it raises the threat that Southwest will offer routes connecting that airport with other airports in its network.įor example, on May 9, 2004, Southwest entered the Philadelphia market with nonstop flights from Philadelphia (PHL) to six cities in its network and one-stop service to several other cities. Southwest is unique because it can start flying between nearly any pair of cities quickly thanks to its elaborate route system. "Do the major airlines accommodate Southwest, try to deter Southwest, or do they just try to live life to its fullest before their date with destiny?" "We wanted to find out how major airlines react when Southwest threatens to enter their market, but before actual entry," says Goolsbee. The authors use American, Continental, Delta, Northwest, TWA, United, and US Airways as the major carriers.
Goolsbee and Chad Syverson use the evolution of Southwest Airlines' route network to study how major airlines respond to the threat of entry from low-cost competitors, as distinguished from their response to competitors' actual entry. In the new study, "How Do Incumbents Respond to the Threat of Entry? Evidence from the Major Airlines," University of Chicago professors Austan D. How does the pattern of Southwest's expansion affect ticket prices of major airlines?įrom 1993 to 2002, Southwest Airlines grew tremendously, with revenues expanding to $5.5 billion from $2.3 billion, passenger miles growing to 45.4 billion from 18.8 billion, and service added at 21 new airports. In the last 15 years, major airlines in the United States have suffered at the hands of low-cost carriers, with Southwest Airlines emerging as the largest and most successful of these economy carriers.
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