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Southwest Airlines Community

NYC To Test Southwest Effect

Frequent Flyer A
By Jay Boehmer

DECEMBER 08, 2008 -- Southwest Airlines' plan to make its New York City debut through the purchase of 14 slots at LaGuardia Airport has spurred corporate travel buyers' hopes that the carrier's presence will lower fares in the biggest U.S. business market.

Southwest intends to purchase the slots at LaGuardia, which can accommodate seven daily roundtrips, through a $7.5 million acquisition of former codeshare partner ATA Airlines, which filed for bankruptcy and discontinued flights in April (BTNonline, April 3).

The bankruptcy court in Indiana overseeing ATA's proceeding this month approved the carrier's sale to Southwest, though a Southwest spokesperson said, "Nothing is final until early March when the court is expected to approve ATA's overall plan of reorganization." Given the timeframe, Southwest is keeping mum on "timing or type of service we could offer," the spokesperson said.

The "Southwest Effect," coined by the U.S. Department of Transportation in a 1993 report, describes the drop in fares and stimulation of demand that often occurs after Southwest enters a market. Though some buyers anticipating a similar effect are cheering the move to New York, some analysts said the effect could be tempered by the carrier's minimal market presence and a cost structure that is tightening the margin with its legacy competitors.

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