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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
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    References listed on IDEAS

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    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.
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