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Strengths and weaknesses of southwest airlines
Strengths and weaknesses of southwest airlines
Strengths and weaknesses of southwest airlines
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Introduction:
Southwest Air was founded in 1966 when a group of Texas investors, including Rollin King, M. Lamar Muse, and Herbert D. Kelleher, pooled $560,000 to form the Air Southwest Company. Incorporated in 1967, the company was envisioned as a commuter airline serving three cities within Texas: Dallas, Houston, and San Antonio. However, its operation were delayed nearly four years due to entry barrier from competitors. Since its first flight in 1971, it has literally changed the rules of operating airlines while becoming the airline with most consistent profits. Southwest begin with the low cost strategy to penetrate the competition and achieve a competitive advantage.
Success Strategies Adapted:
With the goal of being the low cost
Establish international partnerships: According to the USA Today 2014 article; Southwest, which grew to carry more domestic passengers than any U.S. airline, began selling tickets Monday for international flights, the start of a significant shift for the low-cost domestic carrier.
Starting July 1, travelers will for the first time be able to fly southwest to Aruba, Jamaica and the Bahamas, setting up stiff competition with larger carriers that serve those areas. However, their expansion is slow. To speed up their international expansion, they should adapt partnership, code sharing or joint venture with international airlines. A multi-country contract with a single international airline can save them research and time for many partnerships.
Provide attractive loyalty or rewards programs: Although Southwest offers a reward program, it has some cons2 that can removed to make attractive and create customer loyalty to brand. The biggest cons of their reward program includes the area of network covered and because they serve very limited market it can cannot be corrected unless otherwise expanding to the new markets. According to the USA Travel News; The Southwest Rapid Rewards program is most beneficial for travelers based in the southwest United States who frequently fly to major cities around the U.S., Mexico and
• Less frequent flights: for instance, if two airlines separately fly three and two times a day respectively on a shared route, their alliance might fly less than 5 (3+2) times a day on the same route. This might be especially true between hub cities for each airline.
In an interview question in an article from center of Aviation; For GOL’s Mr. Camargo, the only LCC represented on the panel, the answer is clear. “Yes,” he says, “alliances have value for those migrating to the hybrid world, for example GOL, Southwest Airlines, Air Asia. It is good to have access to global corporate accounts. There are lots of high yield passengers crossing South America.”
Conclusion: By weighing the above analyzed pros and cons of forming alliance in form of either partnership or code sharing, it looks logical to use this strategy to speed up the expansion process for gaining differentiation from competitors that are already offering relatable cheap prices compare to southwest. The alliances can help maintain low cost leadership throughout the industry while helping in global expansion.
Southwest Airlines is one of the biggest United States airlines which prides itself in its low-cost strategy to attract and keep up more clients. On a given day, Southwest Airlines operates over 3,400 flights. It has a more than of 46,000 employees. To reduce maintenance and training costs, Southwest Airlines use only Boeing 737s. As of today the company operates 647 Boeing 737s, which fly to 93 destinations across the US. Southwest Airlines have been able to survive even when faced with stiff competition because of its low cost approach. However, this success has also been attributed to the high level of care and appreciation on its clients and employees.
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,
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...
The short haul traveler is the backbone in which Southwest was built upon. The market for short distance airline flights was large enough to allow Southwest to maintain a profit for over 30 consecutive years. Shorter flight times allowed for more flights to take place per day. With the industry average sitting at one or two flights per day, Southwest set itself leaps apart by averaging 10 to 12. Maximizing utilization and minimizing ground time were the key elements to Southwest's profitability.
Having a low cost of operations is one of the contributing factors to Southwest Airlines’ financial success. Such low cost model of the corporation is brought about by an effective strategy. Southwest uses only one type of aircraft – the fuel-efficient Boeing 737. This tactic keeps training and maintenance costs down. Moreover, the no-frills approach to customer service contributed to the low cost of operations for Southwest.
More than 37 years ago, Rollin King and Herb Kelleher got together and decided to start a different kind of airline. They began with one simple notion: If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline. And you know what? They were right. What began as a small Texas airline has grown to become one of the largest airlines in America. Today, Southwest Airlines flies over 104 million passengers a year to 64 great cities all across the country, and we do it more than 3,400 times a day.
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...
Since CEO Gary Kelly took the reins of the company back in 2004, Southwest has maintained and enhanced the company’s ability to offer customers a great flying experience for low fares. This effort start early in Mr. Kelly’s tenure when he identified four success factors
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.
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...
This concept was challenged by Southwest Airlines by marketing itself as a cost leader. Their entire growth curve in the industry has been attributed to its cost effective strategies which has made it more efficient and successful than traditional airlines.
Gittell, J. H. (2003). The Southwest Airlines Way: Using the Power of Relationships to Achieve High Performance. New York: McGraw-Hill.
Additionally, deregulation and liberalization has accompanied the globalization of the airline industry, so that companies have had to compete against each other in new markets, as well as to gain entry into new territories. The rise of low cost local and regional airlines has made the competitive environment difficult to maneuver for large, formerly-state-subsidized national carriers. This has resulted in the need for strategic alliances between airlines in order to attempt to protect market shares and profits (Friehe and Curti, n.d.).