IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/hal-01021532.html
   My bibliography  Save this paper

Entry strategy of Southwest Airlines

Author

Listed:
  • Jonathan Cobb

    (ENAC - Ecole Nationale de l'Aviation Civile)

  • Nico Metzger

    (ENAC - Ecole Nationale de l'Aviation Civile)

  • Steve Lawford

    (LEEA - ENAC - Laboratoire d'Economie et d'Econométrie de l'Aérien - ENAC - Ecole Nationale de l'Aviation Civile)

Abstract

The aim of this project is to understand the main determinants of Southwest Airline's presence on U.S. domestic routes, over the period 2002 to 2007. A new dataset has been constructed, using quarterly and annual data from the U.S. Department of Transportation (DB1B and T100 Origin and Destination databases), and a number of socio-economic and geographic (regional) variables. A range of discrete choice (probit and logit) models have been built and estimated, both for individual quarters, and for the full sample period, and under various assumptions on the construction of key variables. The resulting model is seen to outperform one of Boguslaski et al.'s (2004, Review of Industrial Organization) recently published Southwest Airlines entry models, in terms of model fit. The model is used both to examine Southwest's current route presence, and to form predictions of its likely future behaviour. In particular, it is suggested that Southwest's announced Mar 2009 entry into Minneapolis-Saint Paul International Airport (MSP) is likely to be more successful than its planned expansion into New York's LaGuardia Airport (LGA). Further, the model is able to identify likely expansion of routes out of airports that are currently served by Southwest, such as Denver International Airport (DEN) and Bob Hope Airport (BUR), and can be used to explore the potential implications of a repeal of the 1979 Wright Amendment restricting Southwest's traffic out of Dallas Love Field (DAL).

Suggested Citation

  • Jonathan Cobb & Nico Metzger & Steve Lawford, 2009. "Entry strategy of Southwest Airlines," Working Papers hal-01021532, HAL.
    • Handle: RePEc:hal:wpaper:hal-01021532
    Note: View the original document on HAL open archive server: https://enac.hal.science/hal-01021532
    as

    Download full text from publisher

    File URL: https://enac.hal.science/hal-01021532/document
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Austan Goolsbee & Chad Syverson, 2008. "How Do Incumbents Respond to the Threat of Entry? Evidence from the Major Airlines," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(4), pages 1611-1633.
    2. Lin, Ming Hsin, 2008. "Airline alliances and entry deterrence," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 44(4), pages 637-652, July.
    3. Harumi Ito & Darin Lee, 2003. "Incumbent Responses to Lower Cost Entry: Evidence from the U.S. Airline Industry," Working Papers 2003-22, Brown University, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gayle, Philip G. & Wu, Chi-Yin, 2013. "A re-examination of incumbents’ response to the threat of entry: Evidence from the airline industry," Economics of Transportation, Elsevier, vol. 2(4), pages 119-130.
    2. Tsunoda, Yushi, 2023. "Airport concession revenue sharing and entry deterrence," Economics of Transportation, Elsevier, vol. 33(C).
    3. Zou, Li & Yu, Chunyan, 2020. "The evolving market entry strategy: A comparative study of Southwest and JetBlue," Transportation Research Part A: Policy and Practice, Elsevier, vol. 132(C), pages 682-695.
    4. Daraban, Bogdan & Fournier, Gary M., 2008. "Incumbent responses to low-cost airline entry and exit: A spatial autoregressive panel data analysis," Research in Transportation Economics, Elsevier, vol. 24(1), pages 15-24.
    5. Zhang, Li-Hao & Zhang, Yang-Guang & Wang, Shan-Shan, 2022. "Ocean shipping company’s encroachment with outsourcing competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 167(C).
    6. Avogadro, Nicolò & Malighetti, Paolo & Redondi, Renato & Salanti, Andrea, 2021. "A tale of airline competition: When full-service carriers undercut low-cost carriers fares," Journal of Air Transport Management, Elsevier, vol. 92(C).
    7. Philip G. Gayle & Xin Xie, 2018. "Entry Deterrence And Strategic Alliances," Economic Inquiry, Western Economic Association International, vol. 56(3), pages 1898-1924, July.
    8. Cristina Barbot, 2006. "Entry and Accommodation in Airline Markets: Easyjet Caught in the Middle on the London-Grenoble Route," CEF.UP Working Papers 0602, Universidade do Porto, Faculdade de Economia do Porto.
    9. Homsombat, Winai & Lei, Zheng & Fu, Xiaowen, 2014. "Competitive effects of the airlines-within-airlines strategy – Pricing and route entry patterns," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 63(C), pages 1-16.
    10. Kappes, Jan Willem & Merkert, Rico, 2013. "Barriers to entry into European aviation markets revisited: A review and analysis of managerial perceptions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 57(C), pages 58-69.
    11. Steven Berry & Panle Jia, 2010. "Tracing the Woes: An Empirical Analysis of the Airline Industry," American Economic Journal: Microeconomics, American Economic Association, vol. 2(3), pages 1-43, August.
    12. Kim, Sung-Hwan, 2009. "Predatory reputation in US airline markets," International Journal of Industrial Organization, Elsevier, vol. 27(5), pages 592-604, September.
    13. Valido, Jorge & Socorro, M. Pilar & Medda, Francesca, 2020. "Airport capacity and entry deterrence: Low cost versus full service airlines," Economics of Transportation, Elsevier, vol. 22(C).
    14. Kuljanin, Jovana & Kalić, Milica & Begović, Boris & Mijović, Nemanja & Renold, Manuel, 2021. "The effect of LCC market entry on dominant FSC's price into long haul sector: A case of Norwegian competition on British Airways' prices on selected transatlantic routes," Journal of Air Transport Management, Elsevier, vol. 91(C).
    15. Ali Hortaçsu & Olivia R. Natan & Hayden Parsley & Timothy Schwieg & Kevin R. Williams, 2021. "Organizational Structure and Pricing: Evidence from a Large U.S. Airline," NBER Working Papers 29508, National Bureau of Economic Research, Inc.
    16. Miguel Ángel Ropero, 2021. "Entry deterrence when the potential entrant is your competitor in a different market," Southern Economic Journal, John Wiley & Sons, vol. 87(3), pages 1010-1030, January.
    17. Kai Huschelrath & Kathrin Muller, 2014. "The Value Of Bluer Skies. – How Much Do Consumers Gain From Entry By Jetblue Airways In Long-Haul U.S. Airline Markets?," Articles, International Journal of Transport Economics, vol. 41(1).
    18. Maria José Gil-Moltó & Claudio A. Piga, 2007. "Entry and Exit in a Liberalised Market," Rivista di Politica Economica, SIPI Spa, vol. 97(1), pages 3-38, January-F.
    19. Yongmin Chen & Scott J Savage, 2011. "The Effects of Competition on the Price for Cable Modem Internet Access," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 201-217, February.
    20. Peter Gal & Alexander Hijzen, 2016. "The short-term impact of product market reforms: A cross-country firm-level analysis," OECD Economics Department Working Papers 1311, OECD Publishing.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-01021532. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.