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Southwest airlines business case analysis
Southwest airlines business case analysis
Southwest airlines business case analysis
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Southwest determines routes and flight schedules to meet their customers’ needs. By having a one-model fleet, they can deliver many operational efficiencies and structural savings. Other airlines spend millions in training techs and stocking parts for multiple aircrafts. In Dallas, Southwest flies out of Love Field rather than the larger Dallas/Ft. Worth airport. Gate fees are less expensive at the regional airports where schedules typically remain more on time than at the larger airports. Plus, most Southwest flights avoid layovers by flying directly to the destination. Savings from decisions like those compound to keep Southwest’s costs lower than competitors’ costs (Maggiore, 2017).
Operations
Southwest serves 100 destinations across the
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The heart is now more prominent in the branding and the biggest and most unique reflection of this is a large heart painted on the underbelly of each plane (Phelps, 2016).
Southwest positions itself in all its marketing communications as the only low-fare, short-haul, high-frequency, point-to-point carrier in America that is fun to fly. Its low-priced fares are a brand equity which it "owns" in the mathematical sense of being the only major airline with a strong score on this attribute based on consumer research. Southwest’s brand exudes an element of fun: a down-home attitude which it leverages to present the consequences of low fares in a positive light (YouSigma).
One of Southwest’s most successful marketing campaigns is called Transfarency. Transfarency is the philosophy in which Customers are treated honestly and fairly, and low fares actually stays low. There’s no unexpected bag fees, change fees, or hidden fees (See Appendix G Advertisement 15). Not only does Southwest offer low fares every day, but they have “Wanna Get Away” sales throughout the year (See Appendix G Advertisements 3,5,7,8, and 11). Fares as low as $59 one way are promoted which target people who wouldn’t normally travel because of financial reasons (Southwest
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The company takes their time in hiring the right candidates because they want to be confident that their employees make the right decisions when dealing with customers. This behavior builds strong employee loyalty to the company. The company also hasn’t had many legal issues. Within the last year, one was passengers accusing the four largest U.S. carriers of conspiring to raise fares by reducing seating capacity. Southwest agreed to pay $15 million to settle the nationwide antitrust litigation (Reuters, 2018). Just recently, Southwest had a jet engine malfunction that killed one passenger. The company responded promptly and stated that the entire Southwest Family is devastated and extends its deepest, heartfelt sympathy to the Customers, Employees, Family Members, and loved ones affected by the tragic event. CEO and Chairman, Gary Kelly, responds to the disaster by creating a video giving his deepest apologies and stating that they’ll fully corporate with the National Transportation Safety Board. Southwest also gave passengers on board a $5,000 check and $1,000 travel voucher to show customers how much they care. With the promptness of Southwest’s response to the incident, this shows good infrastructure (Southwest Airlines Community,
Spirit makes our fares so low because they know that draws in the attention of the consumer. Once they have your attention you’re shocked at the price so you go for the deal, oblivious to the fact that you walked into their trap. Southwest’s symbol for shareholders is LUV while Spirit’s is SAVE. They are not the only companies to start to enter into these paths. Hotels, rental cars and cruises are all faced with the same choice to embrace the LUV or the thriftiness with SAVE (Elliot
Southwest Airlines roots can be traced back to Texas in the 1960’s where a company by the name of Air Southwest Co. was created to provide interstate flights in Texas to avoid federal aviation laws. This technique of trying to avoid federal regulation was challenged when 3 other major airlines filed a lawsuit against Air Southwest Co.; later the state of Texas upheld Air Southwest Co. right to fly within the state of Texas and the Supreme Court decided not to review the case. (Southwest Airlines, n.d.) This was a challenging start for Southwest as it was being targeted right off the bat by some of its competitors. The company name was changed in the early 1970’s to Southwest Airlines Co. and a headquarters was established in Dallas, TX. The company’s main focus was interstate flights between the 3 major cities in Texas including Dallas, Houston, and San Antonio. (Southwest Airlines, n.d.)
The company’s cultural change, which is still ongoing, may lead to a decrease in employees’ morale. As AirTran’s employees continue to embrace Southwest Airline culture, the issues emerges from this organizational change remain priority.
Spirit Airlines has long been considered an unorthodox airline. They, of course, address all four P’s in their marketing strategy; however, they focus a large amount of their effort on price and promotion. They focus on cutting price through “unbundling”. They focus on promotion through taking advantage of social issues and breaking news. Many advertisements and deals promoted by Spirit have given the public a definite shock-factor. Spirit has made two objectives very clear: they are furious at getting the customer the lowest fare possible by any means necessary, and they will similarly use any means necessary to get those potential customers to notice those fares. Such a blatant marketing strategy works. Even going up against some big competition, Spirit finds ways to be competitive and successful in flagrant fashion.
“Our people are our single greatest strength and most enduring long-term competitive advantage,” reports CEO Gary Kelly on the Southwest Airline website (https://www.southwest.com/html/about-southwest). The company works hard to hire great individuals and then rewards and supports them to make satisfied, productive employees (Ross & Beath, 2007). In fact, Southwest Airlines has received repeated recognition as a great place to work (“Southwest Corporate Fact Sheet,” n.d.). As a result, Southwest Airlines is able to provide a low-cost, fun-cultured experience with excellent customer service (Ross & Beath, 2007). This has allowed the company to build its final strength in this evaluation: a strong brand
This is the historic background of an American Airline company called the Southwest Airlines Co. based in Dallas which still exists and operates with great success between 57 cities in 26 states of the US, by over 300 airplanes , providing primarily short-haul, high frequency, point to point, low fare service . Through this essay we will see an analysis of the company’s advantages and disadvantages through a SWOT Analysis. We will try to localize the problems of the company at the time and in the case of a future expansion, and we will try to give a number of alternative solutions and chose one of them. The Southwest Airlines is a company that has done its first movements in the airline world in 1971 after many efforts for its opening through legal battles with competitors that did not believe that there was any particular reason why the another airline company should exist among all the others already existing. The different things that the new airline company provided were many and very interesting. The idea started from two friends Rolling King, and investment advisor, and Herb Kelleher, his lawyer, who met in order to discuss the idea of Rolling King for a low-fare, no- frills airline to fly between three major cities in Texas. The outcome of this discussion was in reality the decision of the two men to go for something that they believed would work, even though they were not positive about that. After all the legal battles between the two men and the airline companies of Texas at the time who believed it was not necessary for another airline company to enter the market, battles that prevented the operation of the company for three whole years, Southwest Airlines Co. had become a reality. Other legal battles followed in the future that justified the Southwest Airlines but left the company broke, while during the first year of its operations made losses and the earnings for the next half a year were balancing with costs. Gladly the recovery came soon and by 1978 Southwest Airlines was one of the most profitable in the country. Later on, Southwest Airlines Co. managed to provide airline transportation in eight more cities in Texas and dominated the Texas market, with low prices and frequent departures. Today the Southwest Airlines Co. is a very big domestic airline company, the fourth in the US. We will now have a small analysis of the company’s environme...
Southwest Airlines strategy of focusing on short haul passenger and providing rates as low as one third of their competitors, they have seen tremendous growth in the last decade. Market share for top city pairs on Southwest's schedule has reached 80% to 85%. Maintaining the largest fleet of 737's in the world and utilizing point-to-point versus the hub-and-spoke method of connection philosophy allowed Southwest to provide their service to more people at a lower cost. By putting the employee first, Southwest has found the key to success in the airline business. A happy worker is a more productive one as well as a better service provider. Southwest will continue to reserve their growth in the future by entering select markets only after careful market research.
Southwest Airlines is also well-known for having a very productive and loyal workforce. Such loyalty and productivity among the employees were brought by the way Southwest’s management treats them. As they say, the employees are willing to work hard for the company because they feel appreciated by the top management. Southwest maintains good employee relations because what they believe in is that if employees are happy, satisfied, dedicated, and energetic, they'll take real good care of the customers.
Pricing. Their pricing strategy is based off their market position as a budget airline. Positioning their company as a budget airline, Southwest can maintain and keep their lower price points compared to their competitors. For Southwest to maintain sustainability as a market leader, they must effectively utilize their resources to reduce their cost of operations. By only operating one type of aircraft, short non-stop flights, point to point routes, and flying into less crowded secondary airports, this has allowed Southwest Airlines to keep their price points down while simultaneously reducing their planes turnaround time.
Southwest's philosophy of "Service for Smiles and Profits" encourages employees to treat customer service as the most important aspect of their job. It appears that when employees strive for this high level of service, the rest takes care of itself and success is inevitable (Amanor-Boadu, 2007). Southwest Airline's management structure is designed to carefully direct the activities of employees while still maintaining the spirit of "fun" that is the cornerstone of the airlines' customer service success (Lancaster, 1999). The fundamental concept of management at Southwest is the notion of a "loose-tight" design. Within the context of tight rules of conduct, employees are encouraged to take a wide degree of leeway. For example, the company encourages employees to make their own customer service decisions. Employees are encouraged to try new things, knowing that they will not be punished for innovation as long as they do not violate safety standards, endanger crew or passengers, or keep a plane from taking off or landing on time; this allowed not only to increase the speed of service but it allowed to increase the quality of it too.
Southwest has done what others in its industry seem to struggle to do, which is to make flying fun. This has been the cornerstone for how the Southwest operates, thinks, and plans. Many of the policies, procedures, and practices Southwest has used are aimed directly at providing patrons with a unique, fun, and enjoyable experience. This value and the effort Southwest has made to place customers at the forefront of its plans and strategy, has paid off as the company is one of the most popular and well-respected in the transportation industry.
Southwest Arilines has been facing direct competition in 9 routes of the intra-Califonia market with United Airlines and their "Shuttle By United." Shuttle By United was designed to be a high-frequency, low fare, minimal amenity, short-haul flight operation initially serving destinations in California and adjacent states who's intent wsa to "match Southwest's strategy." In the four months since Shuttle By United's inception competition has been fierce resulteing in Southwest and United slashing prices and envoking a merkteting blitz in this 9 route area. Recent news highlighted that Shuttle By United intended to discontinue some service (perticularly the Oakland-Ontraio route) and raise fares $10.00 per ticket. Southwest's respons to this and the coninued threat of losing market share to United should be:
Southwest has comprehensive strategy and they work with harmony. They are low cost airlines which make the customer feel like royalty. Southwest have a winning strategy is proven by their profit year after year even thought they had economy crisis. Since 1973 Southwest reported a profit each year even when they lost billions of dollars from the year 1980 to 2009 because of the low operating cost strategy, low fares and customer service. Since the start of Southwest they have stay faithful of keeping low cost across the industry. Their value in corporate culture reflected through their prices and customer service.
It all started in 1971, when Rolling King and Herb Kelleher decided to challenge the existing rut of charging high prices for air travels. They considered the railways and roadways their competitors and decided to offer cheaper travel for smaller routes. The company was incorporated in 1967, apart from initial entry troubles, Southwest has been the only US airline to have earned profits since 1973. The eccentric company’s outlandish way of conducting themselves has been the sole reason for Southwest Airlines to succeed in a highly competitive and packed industry.
The mission of Southwest Airlines is a dedication to the highest quality of service delivered with warmth, friendliness, individual pride, and company spirit (Mission…, 2007). The company also provides opportunities for learning and personal growth to each employee. Creativity and innovation is very important and highly encouraged, for the purposes of improving effectiveness. Employees are to be provided the same concern, respect, and caring attitude within the organization that the employees are expected to share with the customer. Southwest Airlines was initially created to be a low-cost alternative to high price of intra-Texas air carriers (Freiberg, 1996). Southwest’s fares were originally supposed to compete with car and bus transportation. It was a little airline, and it would withstand the test of time. As a discount, no-frills airline, it would provide stiff competition for larger airlines. Their strategy was to operate at low cost, offering no food, no movies, no first class, and no reserved seats. They created their own market and provided increased turnaround times at the gate, by avoiding hub-and-spoke airports and opting for short-haul, direct flights. Through this market approach, Southwest has a majority of market share in the markets they serve.