Opposite of the Southwest effect
Everybody knows of the Southwest effect. There is a certain route with limited competition ---> higher fares. A low cost carrier like Southwest moves in and drives ticket prices down 40%. Airlines lower prices to remain competitive, get less revenue, file for bankruptcy, cut pay, lay people off, etc... The race the bottom begins.
Once upon a time there was a carrier named JetBlue that followed Southwest's lead, lowering prices all up and down the east coast. JetBlue had an advantage with lower labor costs and lower maintenance costs. But now that JetBlue has matured from a toddler to a somewhat grown airline, this advantage has been wiped away. Last quarter JetBlue posted its first quarterly loss in 3 years.
But JetBlue got the picture. The Southwest effect is bad for the industry. So what is JetBlue doing now. JetBlue Chief Executive David Neeleman earlier this week said the airline would seek routes on which there was limited competition as it looks to raise ticket prices.
A low cost carrier is going to move into a market with less competition and keep the prices high in hopes of increasing revenue.
I like this idea. Any thoughts?