Is there still a Southwest effect?

• Main Author: bin Salam, Najmus Sakib
• Other Authors: McMullen, Starr
• Language: en_US
• Published: 2012
• Subjects: Airline; Economics; Southwest; Competition; Southwest-Effect; Mergers; DOJ; Antitrust; Market-Power; Southwest Airlines Co.; Airlines > Economic aspects > United States; Airlines > Mergers > Economic aspects > United States; Airlines > Mergers > Government policy > Economic aspects > United States; Airlines > Rates > United States; Competition > United States; Antitrust law > United States
• Online Access: http://hdl.handle.net/1957/29774

The US airline industry is going through a period of consolidation through mergers between leading airlines. A number of recent mergers have been approved by the Antitrust Division of the Department of Justice (DOJ) based on the presence of Southwest Airlines in merger-affected markets. In doing so, the DOJ makes a key assumption that Southwest is unresponsive to the reduced competition when its competitors merge. We find that Southwest raised fares more in markets where Delta/Northwest and US/America-West used to operate jointly between 2005-2010. However, Southwest's fares either decreased or rose by less if facing direct or adjacent competition from a low-cost carrier (LCC). Furthermore, Southwest is now merging with AirTran Airways, its biggest LCC competitor. This implies that the DOJ should not rely on Southwest Airlines as a post-merger deterrent to fare increases. === Graduation date: 2012