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How Discount Airlines Have an Impact on Airfare

Travel Tips / Airlines & Airports

Image Credit: Stephen M Keller

In the airline business, it’s called the Southwest Effect.

What happens to airline ticket prices when Southwest enters a particular market?

Do the fares really drop across the board with other airlines?

Recently the University of Virginia School of Business decided to find out.

Researchers studied ticket prices in the first 12 months of 109 different travel markets that Southwest entered between 2012 and 2015.

Guess what?

When Southwest entered a market, ticket prices dropped by an average of more than 15 percent, and the number of flyers increased more than 27 percent.

Across the U.S., one way fares were $45 cheaper when Southwest is in a market than when it is not.

But here’s a real surprise.

Airfares dropped an average of 50 percent when airlines like Spirit or Frontier compete with a legacy carrier.

One caution: the research only compared base fares, not all the fees that can then be added for baggage.

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