Essay Case Analysis: Southwest Airlines

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At the onset of the airline industry in the United States, major network airlines were the sole providers of air travel. This multifaceted industry was a difficult industry to break into as a consequence of “sophisticated customer segmentation, hub-and spoke models and costly information systems for reservations, fare wars and intense competition” (Thompson 2008). Shrinkage in airline ticket prices augmented the demand for airline travel. Many markets were simply deserted or over-looked by major network airlines; this is a region a fresh “second tier of service providers” could enter into. This endeavor proved to provide a consumer savings of billions per year. Thus in June of 1971, after a tumultuous battle with other Texas-based…show more content…
The company outperformed every other US Airline in the amount of domestic passengers flown. Southwest airline relished in a first quarter revenue and passenger load factor that exceeded any preceding record. Load factor can be determined through a simple equation using the revenue passenger miles, or “the number of passengers carried multiplied by the distance flown”, divided by the available seat miles, or the number of seats available for sale multiplied by the distance flown”. Southwest continued only in the domestic United States markets as of 2008 (Inkpen 2008).
In the opinion of Dr. Grace S. Thomson, “a heterogeneous mix of long and short-haul in very thing segments, passenger, density, and per capita income at end points gives [Southwest Airlines] competitive advantage. The way to establish a company in such a market as the airline industry would be to strategically expand in to airports with less competition. Southwest Airline capitalized on this fact to become a national airline (Keller 2008). Southwest Airlines satisfies what were once negligible markets. Southwest serves “64 cities in 411 non-stop city pairs” (Thompson 2008). Saturating these markets has allowed Southwest Airlines to expand without putting a strain on its pocket book (Keller
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