Entry strategy of Southwest Airlines

Jonathan Cobb (1) , Nico Metzger (1) , Steve Lawford (2)

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

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).

Domaines: Economies et finances

Jonathan Cobb, Nico Metzger, Steve Lawford. Entry strategy of Southwest Airlines. 2009. ⟨hal-01021532⟩