Is Southwest Really Cheaper?
In November of 2012, Topaz International, the global leader in airfare, hotel and car rental auditing, completed a study to determine if Southwest Airlines was in fact the lowest cost alternative for business travelers in top markets served by Southwest Airlines. Our study looked at both the base airfares plus any baggage fees. Since Southwest Airlines does not charge a fee for the first two bags, the results are dependent on whether a business traveler does check a bag, as well as the number of bags.
In the 100 markets studied, we found that eight airlines competed with Southwest Airlines. They include American Airlines, Alaska Airlines, JetBlue, Delta Air Lines, Frontier, Spirit, United Airlines and US Airways. In all routes, only comparable flights were used when determining a comparison (i.e.non‐stop to non‐stop, connection to connection and same airport). When comparing airfare only, competing airlines were lower than Southwest Airlines over 60% of the time, and higher than Southwest Airlines 35% of the time. This result is surprising given the perception in the marketplace, and with many travel managers, that Southwest Airlines is in fact the low cost carrier in all markets they serve. However, when checking one bag, the results differ because Southwest Airlines does not charge baggage fees for one checked bag. In this case, competing airlines are lower than Southwest Airlines only 40% of the time, and are in fact higher when adding those fees 60% of the time. Finally, however unlikely for a business traveler to be checking two bags, when those fees were included Southwest Airlines is almost always a better option in the 100 markets analyzed. Only 12% of the other airlines fares were lower than Southwest Airlines. In fact they were higher 88% of the time
Airlines are both raising base fares as well as adding restrictions
“We have had a lot of success in what I would call some smaller changes to the fare environment,” said Delta executive vice president Glen Hauenstein. “Clearly some of our competitors don’t like some of the absolute fare increases that have been in the market, but there has been a lot of strengthening in the fences, a lot of strengthening of the advance purchase, of the stay requirements. You have to look at fares in more than just the dollar amount we are charging but also in qualifications in how you actually get those fares. That is what is driving industry yield up across the board. While we have had some resistance to fare increases, we made some progress on the other side of the fare equation.”
US Airways president Scott Kirby has stated “While the fare increases are easy to follow through ATPCo reporting and they get a lot of the headlines, they are third or fourth in importance in terms of what our yields wind up being. If you look historically, one in three fare increases goes through successfully, even in strong demand environments, for a whole host of reasons. I wouldn’t read anything negative into the failure of a fare increase. What’s more important, or at least as important, is the lack of deeply discounted fare sales.
“There’s also been a lot of what I would call cleanup going on in the market with getting fares that used be seven-day advance purchase and somehow became zero advance purchase back to a seven-day advance purchase, and a lot of other initiatives like that,” Kirby continued. “The demand environment certainly feels strong, yields are robust and the industry is successfully passing on the increase in fuel prices.”