Patrick Surry - Tue Jan 27 2015
Consumers don't have much control over airfare prices. In fact, travelers often find it difficult to understand the mysterious and complex way in which airfare prices are determined by airlines. But here's what we do know: we know that a new airline entering a market can have a disruptive effect on airfare prices on the routes it serves. This is especially true when a budget airline enters a market, as their low prices can often lead to price wars between airlines. Of course, price wars are awesome for budget travelers, but let's take an in-depth look to see which airlines lead to the largest airfare savings and under what circumstances.
Competition is red hot for domestic airfares
Ten new airline routes are scheduled to be added in May and June of 2014 alone, and Hopper has analyzed each of the routes, looking at the fares quoted to travelers, along with 96 other domestic market entries from 2013 to 2014 to determine the impact on prices when a new airline enters the market. (Do note, we do not have access to data from Southwest Airlines.)
Some of the new routes planned for May and June.
And what did we find? Well, we found that JetBlue has the largest impact on domestic airfare, as it drives prices by over 50% on the routes it serves – and, in some cases, even as much as 67%! Other budget airlines like Spirit and Frontier have a similarly disruptive effect on airfares, as both generally create savings of approximately 30% when they enter a market.
Compare this to non-budget airlines like Hawaiian Airlines and US Airways, both of which actually cause slight price increases when they enter a new market.Fare competition on international routes is less important
When it comes to international markets, the entry of a new player on the route doesn't have anywhere near as much of an effect as it does in domestic markets. In this case, the two airlines whose market entry lead to the largest savings are US Airways and JetBlue, both of which cause a savings of approximately 12%.
That said, JetBlue has spurred huge savings of up to 26% in a few of the Caribbean routes it has entered, like Fort Lauderdale or JFK to Trinidad and Tobago.
Mostly, it means that travelers should hope that JetBlue decides to start serving new routes from their home airports. It will mean more beach vacations to Fort Lauderdale for less dollars, as travelers, for once, will enjoy the financial rewards of a free market economy when it comes to airfare.
On average, prices in a domestic market drop by over 50% when JetBlue enters, significantly more than any other airline
On some domestic routes, JetBlue drives prices down by as much as 67%
Spirit and Frontier Airlines drive down domestic prices by around 30%
On average, US Airways, has the highest impact on international markets and drives prices down by a little over 12%
JetBlue has the highest impact on specific international markets and lowers prices by about 26%