Do you ever wonder why an 89-mile trip from BWI-PHL on US Airways can cost over $500 but a 2,000-mile PHL-PHX trip can be as cheap as $80? It’s all about competition.
Southwest Airlines announced it will be starting service from PHL-BOS this summer and will offer an introductory rate of $59 o/w. Currently, US Airways is the only carrier on that route and "discounted Economy" ticket prices average $550 o/w. Guess what’s going to happen to US Airway’s ticket price on that route now?
We’ve seen the "Southwest Effect" at other airports across the United States and we’ve also seen carriers like Virgin America force prices down significantly in markets like LAX-SFO or LAX-SEA.
Is this good or bad for the consumer? Naysayers argue that it is bad for the consumer because severely undercutting prices eventually forces out competition and leads to higher prices in the long-run. I’m not so sure I buy that argument, but even if true I’ll now be more apt to fly to Boston rather than take Amtrak or the bus thanks to Southwest’s new flights.
Not just since deregulation, but in the last decade we have seen airfare lower than it has ever been before when adjusted for inflation in many markets. I think that can only be hailed as good news for the consumer.
Southwest PHL-BOS story here.
"We are dropping the fares to one-tenth of the normal fares," [Southwest Airline’s Vice President of Properties Bob] Montgomery said. "Typically, when we lower fares, more people are able to fly, and so it expands the marketplace."