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Travel Tip: Will the Southwest Effect Reach Hawaii?

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In the airline business, it’s called the Southwest Effect.

Since the 1990s, whenever Southwest Airlines enters a new market, airfares tend to drop.

In some cases, that price fall is dramatic.

It happened in Philadelphia.

In 2014, it happened when Southwest began flying to Mexico and the Dominican Republic.

A study by the University of Virginia found that Southwest still has great pricing power to force its competitors to lower prices when the airline flies to a new destination.

It’s not just Southwest.

Spirit Airlines apparently has the same effect when it enters a market.

The one-way fare between Detroit and Philadelphia was as much as $385 until Spirit started flying the route last year.

Then airfares dropped to $283.

Now all eyes are on Hawaii.

Southwest has announced that early next year it will begin flying to the islands.

If past history holds true, get ready for some fare reductions to the 50th state.

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