Southwest Airlines’ ability to reduce fares in the US domestic air travel market has reduced over the last six years, according to a recent MIT study.
Other low cost airlines such as JetBlue and ultra-low cost carriers such as Spirit and Allegiant have much more price moderating impact on the routes where they operate, according to the airfare study by MIT’s International Center for Air Transportation.
In the past, Southwest’s entry into a market often lead to the lowering of fares as other carriers tried to compete with it.
However, since 2007, Southwest’s fares have increased by 25% after inflation and the fare-moderating effect of the airline has significantly weakened.
In 2007, having Southwest operate from an airport led to an average dip of $36 in the average one-way fare. This dip has been reduced to $17 in 2012.
In comparison, currently JetBlue’s presence leads to an average drop of about $32 in the average one-way fare, Allegiant leads to a drop of about $29 while Spirit Airlines leads to a fare reduction of about $22.