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Exploring Network Effects of Point-to-Point Networks: An Investigation of the Spatial Entry Patterns of Southwest Airlines

  • Jia Yan
  • Xiaowen Fu
  • Tae Oum


    (School of Economic Sciences, Washington State University)

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This paper explores network effects in Point-to-Point airline networks by examining the spatial entry patterns of Southwest airlines during the 1990-2006 period. Estimation results from a spatial probit model reveal clear spatial dependence in profitability across different routes served by the carrier. Detailed investigation suggests two main sources of network effects, namely: (1) airport and regional presence, and (2) substitutability of markets. Findings of the paper suggest also that the network effects embedded in Southwest’s Point-to-Point network have many distinguishing features as compared to those identified in a typical Hub-and-Spoke network. This study brings some fresh insights on airline network effects in general, as well as explaining the pattern of aggressive network expansions of LCCs in particular.

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Paper provided by School of Economic Sciences, Washington State University in its series Working Papers with number 2008-21.

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Length: 37 pages
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:wsu:wpaper:yan-3
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