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Southwest airlines, strategically positioned for long-term success
Economic factors for southwest airlines
Economic factors for southwest airlines
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Southwest Airlines Case Study Marketing. Marketing savvy also plays a key role in Southwest's strategy. Since Southwest's inception, the major elements of the product offering have been price, convenience and service. As a Texas native serving mostly Texas markets, it has played the role of the hometown underdog, fighting against the majors. Now, when Southwest enters a new market, they use a sophisticated combination of advertising, public relations, and promotions in the belief that once people fly Southwest they will be hooked. Growth. Despite its remarkable growth in what had been until recently a relatively moribund industry, Southwest has not emphasized growth as an objective. In fact, Herb Kelleher expresses a "go-slow" philosophy. For example, Southwest will not enter markets unless it perceives favorable conditions, which range from the wishes of the local community to the availability of an appropriate labor supply. Given its record of success and its reputation it is not surprising that there are many communities that want Southwest to serve their markets. After all, good air service is considered by most communities to be an essential aspect of economic development. However, Southwest's policy prohibits accepting monetary subsidies or other incentives that cities and airports offer to gain air service. Southwest has also demonstrated a remarkable ability to manage its growth, an essential commodity in an industry known for its complexity. The inability to manage rapid growth has been blamed for the failure of many carriers, including Braniff, PeopleExpress and ValuJet Technology. Like all airlines, Southwest is a very heavy user of computer-related technology. This technology supports all activities ... ... middle of paper ... ...ronment is changing, people are traveling again and with improving opportunities, it is looking for and jumping on opportunities as other airlines struggle to be simply profitable as fuel costs rise and fares shrink. Kelly also faces significant threats: low-cost carriers JetBlue and AirTran Airlines are also looking to expand in the same markets. To do so, he is asking for more productivity from already efficient employees and asking pilots to fly as many as 70 hours a week for less money than they could make at other carriers. KellyƳ strategy to link up with ATA stunned the market and the industry Moving into 2005, Southwest was facing many familiar challenges: rising oil prices, intense competition, cumbersome regulations. In the uncertain times that had legacy (traditional) carriers reeling, Southwest was still winging ahead with its ever-popular low-fare formula
Southwest Airlines is operating in an industry that is struggling to make profits. The slowing economic growth and raising fuel costs are lowering earnings while revenues remain the same. The macroeconomic factors affecting the airline industry include unemployment, the economic growth in the United States, and inflation. With low economic growth, consumers are finding luxury items more difficult to purchase and airline tickets for vacations fall into that category. Unemployment contributes to a lack of vacation travelers since individuals who are not employed do not have extra money for vacation or airline tickets. Inflation also causes operating costs of the airlines to be higher cutting into profits.
Another internal challenge for Southwest Airlines is the conflicting management style and business operation with AirTran. On top of that, the external challenges such as the increase of competitions and gas prices are some of issues f...
Despite its growing domestic network, the company didn’t offer international flights until July 2014, and even then, it only offered limited destinations (“Southwest Corporate Fact Sheet,” n.d.). Furthermore, the company’s reliance on a single aircraft is cause for concern. Southwest Airlines was also weak with technology utilization initially but has since turned this into an asset, as described later. Finally, the company has a limitation with providing customer perks due to its low-cost operations (Ross & Beath,
...ive expansion would probably mean Penetration in a new market has always obstacles, which need to be overcome. The many years experience of the managers of the Southwest Airlines and the fact that it’s situation at the moment is very competitive will help the company in expanding in every way. Though the slip in the new markets should take place slowly and of course efficiently, as the company does until today in order to avoid surprises in the future.
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.
Even though Southwest offers no-frills, there is still a high degree of customer satisfaction that continuously builds customer loyalty for the company. As mentioned, Southwest offers low prices on their airplane tickets. Also, Southwest is renowned in the airline industry for its short turnaround time on arrivals and departures. And since people's biggest concern nowadays is money and time, having low price airline tickets to cater their traveling needs in a shorter period of time will surely satisfy them. Moreover, aside from the low prices offered, what attracts to customers is Southwest’s way in dealing with them. The employees of the airline treat their customers well and really listen to their needs.
Since 1987, when the Department of Transportation began tracking Customer Satisfaction statistics, Southwest has consistently led the entire airline industry with the lowest ratio of complaints per passengers boarded. Many airlines have tried to copy Southwest’s business model, and the Culture of Southwest is admired and emulated by corporations and organizations in all walks of life. Always the innovator, Southwest pioneered Senior Fares, a same-day air freight delivery service, and Ticketless Travel. Southwest led the way with the first airline web page—southwest.com, DING, the first-ever direct link to Customer’s computer desktops that delivers live updates on the hottest deals, and the first airline corporate blog, Nuts About Southwest. Our Share the Spirit community programs make Southwest the hometown airline of every city we serve.
The marketing approach of Southwest Airlines is built upon their strong business model. They have successfully managed to target two specific market segments of the airline industry while remaining profitable. Their strategy is simple, to offer frequent non-stop flights with the lowest costs which appeal to both the business and budget travelers. By segmenting their target audience to specific demographics and ticket pricing, passengers know exactly what they are getting for the price they pay.
Advertising: As one of the largest domestic airlines, Southwest Airlines has an enormous advertising budget to sustain its presence and increase its market share through focusing on the benefits of flying Southwest over its competitors. Southwest recognizes that flying is no longer a pleasurable experience for many customers, even on Southwest, historically a budget airline. Even though Southwest is often regarded as a no-frills airline, it still attempts to build goodwill from its customers based on its advertising. Of the $249 million it spent on advertising in 2011, Southwest Airlines is unique in that it does not sell additional ad space on the exterior of its aircraft. Many domestic airlines have begun selling aircraft exterior space as a way to increase revenue, but Southwest Airlines insists that it wants to keep its product and advertisi...
The low cost and no frills strategy is make travel affordable at low cost. The company only operates one type of aircraft which is Boeing 737 to help maintenance cost low. Southwest was the first airline to use E-ticketing in this way customer can reserve spot and buy ticket on their web and allow less expense in printing tickets. Medium measured airports which allowed them to produce better time performance and less fuel costs so plane do not have to wait in the line at the runway. The core value of the company of “LUV and fun” makes the company great place to work that gives customer with a great experience.
Before to select the proper alternative, three alternatives were analysed and evaluated under four decisions criteria: customer experience, cost, growth rate / market penetration and ease to implementation (See Exhibit 2: Factor Analysis). Between all the alternatives, it was suggested that Southwest Airlines enters to New York City by bidding the slots and gates at the LGA (See Exhibit 3: Alternatives Analysis). This alternative sustains the challenge of changing the customer experience which means adding more flights from and to the East; furthermore, entering to new markets will reinforce “the power of the network” through LGA. At the same time, this decision will allow signing more code-sharing agreements with other airlines flying to international destinations and offer new products and services to LUV customers as loyalty rewards, in-flight internet, onboard duty-free purchases, etc.; as a result of this, it will increase passenger’s insights and experiences by flying with Southwest Airlines. Nevertheless, there is potential risk by selecting this alternative, in the recent years the energy prices has had a huge increase affecting costs, fares and even capacity needed, however Southwest Airlines has been able to hedge fuel for decad...
The company’s cost leadership strategy of keeping their fares low to ensure frequent and convenient travel along with its playful, fun poking advertising, exciting promotional ways, and various vibrant ways of operation enabled the company to expand exuded its effect on both customer and competitors, thus lowering the prices in the new market. This is the ‘Southwest
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.
The Airline industry is a capitally intensive industry, and because of this companies within the Airline industry focus greatly upon cost, as well as revenue generation. If costs increase beyond control, profitability will soon decrease. Southwest were quick to learn that if they were going to run their company in a profitable manner they had to first establish their market, and then make every effort to keep costs low. In the early 1970’s soon after their inception, Southwest established the ten-minute turn. This was the ability to unload and reload passengers, refill the plane with gasoline, and make all the necessary checks, all within a ten-minute window. They had to keep their planes in the air as much as possible, because of their low price, high frequency market niche. “Part of the great strength they’ve had, is that they have consistently followed a pattern of keeping costs low in every place they have gone.” (Freiberg, 1996, p35)
Examine the causes of the problem: The problem is that JetBlue focused on expansion during its’ initial success. Profits realized at this time were used to acquire a larger fleet, expand routes, enlarge staff and increase terminal space. Seemingly, the primary focus was rapid growth, with an assumption that it would be rewarded with future profits. When profits began to decline, JetBlue chose to focus on competition making changes that would allow them to compete more directly with larger airlines. JetBlue became vulnerable to its competition when management made the choice to shift focus from customer service to expansion.