Airline Industry : Southwest Airlines

1925 Words Aug 22nd, 2016 8 Pages
Southwest Airlines, founded in 1967, entered the airline industry at a time when the interstate travel was heavily regulated by the Civil Aeronautics Board (CAB).10 Some of those regulations are airlines were not allowed to discount fares even when their planes were at half capacity, airlines were not able to add new routes or remove old routes, and new carriers were not allowed to enter the interstate airline travel.10
Due to these regulations on the interstate market and seeing the success of intrastate carriers such as Pan Southwest Airlines (PSA) and Air Cal, Southwest entered the intrastate market where CAB regulations did not apply.[10] [1] Southwest knew from early on that it had to provide considerably lower fares to stave off the competition from the interstate carriers and was planning “to charge fares that were at least 60% lower than the average coach fare”.1 From the words of Colleen Barrett, “We knew that we were going to have to have substantially lower fares on day one of our operation than were currently being charged because that was our only chance of winning a niche in the business”.1
Southwest not only incorporated the cost leadership strategy to keep the fares low but they also made sure, from their marketing and unique services provided, to differentiate itself from the rest of the competitors.1 Because of their strategy, Southwest generated consistent profits year after year, while many of it’s competitors were filing bankruptcy.1 Southwest Airlines…
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