Minneapolis-St. Paul Offers Proof of the 'Southwest Effect'

As Southwest Airlines has grown from a regional, Texas and southwest-based airline into a national behemoth, airline analysts are well aware of something they call the "Southwest Effect." 

Which is to say, as Southwest has gradually and methodically begun new service in cities across the country, airfares in those cities fall dramatically with the arrival of the competition.

Earlier this month,Southwest began flying between Minneapolis-St. Paul airport (MSP) and Chicago's Midway airport.  It was Southwest's first foray into MSP, but you can be sure that the airline will begin linking MSP to cities other than Chicago over the next year.

So here's the Southwest Effect writ large: Before Southwest began service, it cost nearly $400 to fly between MSP and Chicago.  (It's a six-hour drive, by the way.)  Southwest announced a special $49-each way fare between the two cities if you booked 14 days in advance.  Northwest, the dominant airline at MSP which is slowly morphing into Delta Air Lines dropped its fares to match Southwest immediately.  And just this week, I received two e-mails from Delta offering double frequent flyer miles on top of the low fare.  (Taxes and fees actually raise the promotional fare to about $60 each way.)

I'm betting that when the promotional fares end, it'll cost about $200 or less to fly round-trip between the two destinations--on all airlines.  That's about 50% less than it did before this month. And that's the Southwest Effect.