ABSTRACT

On Thursday, 19 March 2009, Southwest Airlines announced it was reducing fares across its travel network. Fares on flights from Los Angeles to San Francisco fell to as low as US$49 one-way, and from West Palm Beach in Florida to Chicago to US$69 one-way. This was obviously a boon to travellers. But imagine what the situation was like at Southwest’s main rivals:AmericanAirlines,UnitedAirlines andDeltaAir Lines. The cut in fareswas significant and Southwest had advertised that it was going to last for travel up to 14 August 2009, over most of the summer holiday travel period. The other airlines had to react quickly or risk losing business to Southwest. In fact, within hours, the rival airlines matched Southwest’s fares on most of the routes flown by Southwest. Given the dramatic reduction in travel demand due to the onset of recession in the United States and the global financial crisis of late 2008, it is probably not overstating the case too much to say that a quick and sensible reaction to Southwest’s fare-cutting was vital to the profitability of the other airlines.