The so-called “Spirit Effect” — the depressing influence on pricing of a low-cost carrier (LCC) entering an established market historically only serviced by a legacy airline — can reduce airfare prices by almost half, according to a recent study.
Hopper Director of Partnerships, Nick Young published his research in a piece titled Forecasting Vulnerability in an Ultra-Low-Cost World, using Hopper’s billion data points to analyze exactly how prices behave before and after an LCC moves in on an existing route. His findings should come as no surprise; it turns out low-cost carrier flights beget lower-cost flights from legacy airlines.
Young examined 5,000 domestic, nonstop routes across 160 markets where an LCC had entered (142) or exited (18), and what he found is that Spirit, Frontier, or JetBlue coming to an airport near you essentially means surefire savings when it comes time to buy airfare. Thanks Ben Baldanza!
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Photo: Hopper
Take the Houston-to-Kansas City route, for example. Historically serviced primarily by United, fares averaged in the $300 range for as long as anyone could remember. But in April of 2014, Spirit began operating flights on that route as well, at the ultra low-cost of $150. United immediately adjusted its fares to match Spirit’s $150. Now, almost two years later, United has evened its pricing out at $180, while Spirit has plunged its prices even further down to $90 — and we’re talking roundtrip here, people.
The Hopper study shows that sales of the original, legacy carrier’s flights may decrease by 20% on average in the face of newer, more affordable options, but that the route’s popularity across all airlines skyrockets 60% due to its newfound availability and affordability.
So why did that Houston-to-KC United route eventually pump back up to more than Spirit’s asking price? Airfarewatchdog’s George Habica says legacy carriers at least have the fee-heavy reputation of LCC’s like Spirit providing a bit of a pricing buffer. He tells Travel Weekly:
“What we’ve seen is that in many cases [the legacy carriers] don’t match the exact fare. But they figure the other airlines are charging $50 or $60 roundtrip for a carry-on, so they’re going to price $50 or $60 more.”
So thank you, Spirit, Frontier and JetBlue. Even if you aren’t flying their no-frills, ancillary fee-heavy flights, you can still credit the Spirit Effect for significant savings when it comes time to fly.
