Trying to debunk the ''Southwest effect''

[Todd B]

By STEVE HUETTEL, Times Staff Writer
St. Petersburg Times
published June 2, 2003
Southwest Airlines has worked relentlessly over the years to get people to associate it with low fares. And a federal study once showed that after the Dallas carrier entered a market, fares invariably tumbled. Authors called it the Southwest effect.
http://www.sptimes.com/2003/06/02/Business...bunk_the_.shtml

 

[Blue Dude]

The Media. Again. Rant mode on.

It''s a nice little blurb, but the whole premise of the article is flawed. The Southwest Effect isn''t having the lowest fares everywhere they fly. The Southwest Effect is stimulating traffic *with* a rational, low-fare structure. It is competing by creating a new market or greatly increasing an old one instead of just poaching the other guy''s passengers. The Cause is lower fares, the Effect is higher volume. This uninformed reporter badly confused cause and effect, burst a non-existent bubble and followed it up with the most banal type of consumer warning: shop around. Gee, never though of that, thanks. Is it any wonder journalists are regarded on the same level as used-car salemen and politicians?

Sorry. End of gratuitous Media bashing. Rant mode off.

 

[IFLYA9]

bigbus,
you beat me to the submit key!

 

[IFLYA9]

KC,
I think you missed the "2" key in reference to
the maximun fare on SW.
Maximum one way is $299. Check their website.

 

[KCFlyer]

I suppose what the article DIDN'T state was the following:

1. The most anyone will pay on Southwest is $199 one way

2. Changes to the advance purchase fare on Southwest will result in a net "service charge" of $0.00. Changes on other airlines result in a fee of $50 to $100 per change

3. If you've bought an advance purchase ticket on Southwest and you have to change plans, but cannot decide where to go before your original departure date, you still have up to one year to get full credit towards another trip. The other airlines force you to purchase a new itinerary prior to the original departure date (along with the penalty assessment) or else forfeit the entire amount of the ticket.

4. Senior citizens and fly coast to coast for $129 each way, anytime. Most other airlines have abolished the senior discount program.

and last but certainly not least

5. Southwest is making a profit on the flight. Are the others?

Taking those things into consideration, I can see the extra "value" in paying just a few dollars more for a Southwest ticket.

Southwest never ever claimed to have the lowest fares....just the fairest fares.

 

[KCFlyer]

Please excuse me, as it was rather early when I posted that. The maximum one way trip (coast to coast ISP-LAX)) on Southwest is $299 I stand corrected. The unrestricted, refundable one way fare from NYC to LAX on the others is:

AA JFK - LAX - $1,234
UAL - JFK - LAX $1,234
US - LGA - LAX $1,237

How much additional service will I get on those airlines for an additional $1,000?

 

[IFLYA9]

KC,
Ever been to NYC?
Big difference from leaving a meeting in the
city and going to LGA or JFK vs. ISP!
Worth $1000 difference? Probably not. Time is
money. If ISP had such an influence on the
LGA/JFK fliers those $1200 fares would not
exist. I would think that JetBlue would have
killed the $1000+ fares in the NYC markets?
$1200 fares are kind of like a dog licking.....
well you know, because they can.

 

[bigbusdrvr]

----------------
On 6/2/2003 7:03:59 AM KCFlyer wrote:


I suppose what the article DIDN''T state was the following:

1. The most anyone will pay on Southwest is $199 one way

2. Changes to the advance purchase fare on Southwest will result in a net "service charge" of $0.00.  Changes on other airlines result in a fee of $50 to $100 per change

3.  If you''ve bought an advance purchase ticket on Southwest and you have to change plans, but cannot decide where to go before your original departure date, you still have up to one year to get full credit towards another trip.  The other airlines force you to purchase a new itinerary prior to the original departure date (along with the penalty assessment) or else forfeit the entire amount of the ticket. 

4. Senior citizens and fly coast to coast for $129 each way, anytime.  Most other airlines have abolished the senior discount program. 

and last but certainly not least

5. Southwest is making a profit on the flight.  Are the others?

Taking those  things into consideration, I can see the extra "value" in paying  just a few dollars more for a Southwest ticket.

Southwest never ever claimed to have the lowest fares....just the fairest fares. 

----------------​

---------------------------------------------------

columbus/burbank 299.00 refundable
fll/kansas city 275.00 refundable (492.00 restricted r/t)
long island/ omaha 218.00

 

[bigbusdrvr]

----------------
On 6/2/2003 7:03:59 AM KCFlyer wrote:


I suppose what the article DIDN''T state was the following:

1. The most anyone will pay on Southwest is $199 one way

2. Changes to the advance purchase fare on Southwest will result in a net "service charge" of $0.00.  Changes on other airlines result in a fee of $50 to $100 per change

3.  If you''ve bought an advance purchase ticket on Southwest and you have to change plans, but cannot decide where to go before your original departure date, you still have up to one year to get full credit towards another trip.  The other airlines force you to purchase a new itinerary prior to the original departure date (along with the penalty assessment) or else forfeit the entire amount of the ticket. 

4. Senior citizens and fly coast to coast for $129 each way, anytime.  Most other airlines have abolished the senior discount program. 

and last but certainly not least

5. Southwest is making a profit on the flight.  Are the others?

Taking those  things into consideration, I can see the extra "value" in paying  just a few dollars more for a Southwest ticket.

Southwest never ever claimed to have the lowest fares....just the fairest fares. 

----------------​

---------------------------------------------------

columbus/burbank 299.00 refundable
fll/kansas city 275.00 refundable (492.00 restricted r/t)
long island/ omaha 218.00
and on and on......

I agree they are fair fares, but you will pay more than 199.00 one way!! and the service sucks!!!!

 

[KCFlyer]

Let me offer another example then - a fully refundable fare (round trip) from TPA (one of the "poor" cities for SWA) to MCI is $525. Same thing on American is $1,642.

I suppose what I find rather disturbing about this article is that the information was provided by a volunteer analyst for this very website. Surely if anyone has any knowledge whatsoever of this web site, they most likely are aware that United Airlines is in bankruptcy, that USAirways emerged from bankruptcy but is once again talking of liquidation, AMR is still on the brink of bankruptcy, and the financial situation of most of the other "major" carriers is questionable. So...they provide information to the media that pretty much says that you might be able to book a flight on another airline for less than you can on Southwest. And the end result is that, while load factors might look positively cheery, the profits are just not there. And that''s not really in the best interest of the other airlines, IMHO.

 

[KALB2]

I don''t have specifics, but before WN came to ALB the fares from Albany were among the highest in the country. When WN started serving ALB, the average fares out of Albany became one of the lowest in the country. That is the meaning of the "Southwest Effect". No need to debunk it.

The only time I received superior sevice to that which WN provides was when I upgraded to first class on UA on a flight to DEN several years ago.

 

[KCFlyer]

From the article - " But Bird says the survey underscores the first rule of consumerism: You''d better shop around".

It''s true that many airlines can beat Southwest fares. Why over at "clarkhoward.com" they are touting a $118 roundtrip from Atlanta to Seattle. That''s a great deal, but is the airline making money at that fare? Most likely not. And how are they hoping to recoup those losses? By charging someone else over $2,000 for the same trip. Problem is that the consumer has become so accustomed to "shopping around" that they feel like they are getting ripped off when they pay a higher fare that still costs the airline more to operate.

I really have no sympathy for those airlines who have to "out low fare" the low fare carriers. For the most part, only southwests lowest fare bucket does not cover their costs. Almost every other one does. So for a carrier that has a CASM of 3 to 4 cents higher than Southwest to be charging a fare that would not cover SWA''s is pretty much suicidal. And you''re conditioning the consumer to expect those loss leader fares. And when you do that, the consumer could care less what the employees are paid...indeed, some posts on that "consumer advocate" website have said "They need to stop paying those "waiters" (the posters words, not mine) $80,000 a year". When I point out that the vast majority of FA''s aren''t making anything close to $80,000, and any "waiter" that is making 80K is suffering from severe jetlag because of all the overtime they had to work, the response from the others was "That''s their problem, not mine". That''s where your industry is at, and feeding the public these loss leader fares in the name of "market share" is killing you.

 

[KCFlyer]

Bus...you''re welcome to all those "lower than Southwest fares" on United, obtained by those who were smarter than the average bear and "shopped around". How much additional revenue did UAL bring in by having a butt in that seat at a fare that is on average about half of UAL''s CASM?

 

[whlinder]

Blue Dude is right, the article title is incorrect- the study is not trying to debunk the Southwest effect, but rather to prove that on any give route on any given day Southwest won''t necessarily have the cheapest flights.

The real Southwest effect is indisputable- WN enters city, other airlines cut fares to stay competitive, more people fly out of that city. (Instead of driving or Greyhound or simply not traveling)

But any savvy/seasoned traveler knows that you have to check everywhere to get the lowest fare for what you want. Sometimes it will be WN, sometimes not. But the fact remains that WN will have no more than what, 6? 10? different fares on a given route, while your typical major airline can have 60 different fares.

And even though the majors continually sell loss-leader fares, thats their own problem, not consumers''. A fair fare is whatever the airline is willing to sell it for.

 

[whlinder]

----------------
On 6/2/2003 9:08:30 AM KCFlyer wrote:


Let me offer another example then - a fully refundable fare (round trip) from TPA (one of the "poor" cities for SWA) to MCI is $525. Same thing on American is $1,642.


----------------​

While thats true, the majors have gotten into the habit of offering similar or even cheaper fares than WN with little purchase. For the market you mentioned, TPA-MKC, you can buy your fully refundable WN ticket for $525 departing tomorrow and returning Thursday (1 day advance, no Sat. stay). Or AA for $400, which is non-refundable. Interestingly, if you put in on AA.com to search for economy class without restrictons, it is $515.
Of course, this pricing is in response to WN.

How often do passengers really pay full Y fares anymore on the majors? Most of the time I don't know why the carriers bother publishing them, I guess its so that if UA oversells a flight and has to send their passengers to AA, that AA can charge UA full Y...