Jetblue Airways, And Spirit Airlines Inc.

Southwest Airlines (SWA) maintained a low-cost, low-price and no frills strategy. The small Texas carrier began as a concept, its business plan detailed on a cocktail napkin in 1971 and grew into the nation’s fourth largest airline. Known as an innovator with low operating costs, dominating smaller airports, with a humorous customer service, SWA saw its 40th profitable year in 2013. Like all companies, SWA underwent leadership changes in 2001, and said goodbye to the company’s founder in 2008. Unfortunately, the changes in leadership were not the only changes; the organization proceeded to alter their beliefs and activities.

Southwest Airlines is one of the most successful airlines in America today. Although it was established much later than other airlines, the airline experienced numerous challenges, which negatively affected its performance. Established in 1967, Southwest Airlines could not operate for four years. They had a rough start following legal battles that derailed the start of their operation. Since the beginning of their regular operation in 1971, this airline has had the most consistent profitable record in the world. Their success highly depended on the management’s decision to embrace advanced management and operational strategies. Over the years, the airline has come up with various measures that have made them the leading carriers in the United States (Gittell, 2003). Several other companies in the world have since adopted their model of operation to increase their productivity. Their flexibility and willingness to try new methods has transformed the airline into the most popular airline in America today.

Today Southwest Airlines is the biggest domestic passenger carrier in the United States of America operating more than 3,400 flights a day. They provide service to 93 cities and 5 countries internationally. Last year Southwest Airlines, “Enplaned approximately 136 million Customers (About Southwest). The airline has grown since it’s first years flying out of Love Field in Dallas, Texas. In the beginning, Southwest provided flight service to only three Texas cities in 1971. One of Southwest Airlines’ early advertisements was a double page ad that ran in Dallas newspapers during May announcing their first flight on June 18, 1971 (Lusk). This advertisement introducing a new airline would soon revolutionize the airline industry and create the new category, of low cost carrier, to the world.

This paper will give a historical overview of the company, discuss the ingredients to the company success, offer some financial strengths and present a final conclusion. Section I: Southwest's History Twenty-seven years ago, Rollin King, a San Antonio entrepreneur who owned a small commuter air service, and Kelleher, who was a lawyer at the time, 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 certain they have a good time doing it, people will fly your airline. And you know what? They were right. Within those 27 years, Southwest Airlines became the fifth largest major airline in America. Today, they have flown over 50 million passengers a year to 54 cities all over the southwest and beyond. They do it over 2,300 times a day with over 267 of the newest jets in the nation and fly only one type aircraft; the B-737. The average age of their fleet is only 8.4 years and they own over sixty percent of them. In May 1988, they were the first airline to win the coveted U.S. Department of Transportation Triple Crown for a month - Best On-time Record, Best Baggage Handling, and Fewest Customer Complaints. Since then, they've won it

If Southwest decided that they needed to increase their revenue they would have to start by raising the prices of their tickets. The need for increased revenue would need to be passed on to the consumers’. When a ticket price is higher with one airline than the other, the customer

Southwest Airlines shot out of the gates, much to the chagrin of their competitors as a short haul, low fare, and high frequency carrier. As SWA expanded and deregulation occurred, they had to decide what kind of airline they wanted to be and how they would adapt to the changing environment. The FAA reports that passenger numbers are expected to reach a billion passengers in 2023 (FAA, 2011). Most Airlines are responding to the increased demand by centralizing and consolidating their assets. This in turn creates a situation where capacity is maximized in some airports and congestion increases causing significant delay. Demand will continue to rise over the next few decades and these airlines must rely on regulators and policy makers to upgrade the very necessary infrastructure and technology. Southwest’s strategy is to remain a point to point carrier instead of the traditional hub and spoke carrier, satisfying their customer demand with lower congestion at underutilized airports with more flights. However Southwest continues to remain flexible looking forward as it adopts hub and spoke techniques, coordinates with the FAA and governing bodies, and invests heavily in its most important airports to stay ahead of the pack.

Southwest has been projected as a low-cost airline and has been a source of inspiration to other low-cost airlines because of its successful pricing strategies. The company has targeted middle-class society as its potential customers and has adopted variable-price as another pricing strategy. The company has also introduced innovative programs and offer incentives along with discounts to attract a larger customer base under its variable cost pricing strategy (Bhasin,

Southwest Airline is an American based firm which offer passengers services in United States and neighboring countries. Southwest Airline was once the largest in the world, based on passengers capacity. Despite, the airline facing terrible times such as terror attacks, energy crises, and recession, the company has consistently made a profit for an extended period. Due to the company leadership, in the past decades, southwest significantly expanded to a new destination as well as improving their passenger’s services. However, recent years, the airline has experiencing obvious problems due to market competition such as Northwest and US Airways in among others.

Southwest Airlines has faced many tribulations in its short history. From beating out the competition of well established airlines to creating one of the most successful airlines in U.S. aviation history, Southwest has always had a roadblock. Its first major roadblock was airline regulation. Southwest particularly wanted to deregulate the airline industry so that it could expand, and participate in interstate commerce. Regulation of the airline industry, in its plainest sense, was against the most basic American business principle: capitalism. Southwest fought for deregulation and through the work of many other parties, the Airline Deregulation Act of 1978 was signed into law by President Carter. Southwest’s first major hurdle was behind them, but little did they know that its next was right around the corner.

Although our company is currently in a good financial position we always need to be one step ahead of our competition. With our economy still in a poor financial state, our customers are looking to us for their vacations and receiving the best bang for their buck. What do I mean by this you might ask? Many people don’t want to spend as much on their flight as they are for their actual vacation and therefore are looking for the cheapest flight. However, when it comes to flying they want to receive the best service and don’t want to feel like their quality of their flight is being set on the back burner just because they have paid less. With that being said the first thing that we need to do is expand our flights from departing out of 37 states to departing out of all 50 states and even expanding into other countries. If we aren’t able to travel to the same airports as our competitors than we will never be able to compete with them. Therefore, this is the most crucial change and expansion that we need to make within Southwest.

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

In 2007, while the airline industry responded to a hike in fuel costs and a decline in commercial air travel with leaner domestic flight schedules, SWA optimized their flight schedules and routes to offer a preferred, more robust network for customers despite no year-over-year growth in available seat miles (Southwest

This proposal addresses the needed steps to be taken in order for Southwest Airlines to see continued growth in the airline industry. Southwest Airlines has been able to remain one of the most profitable airlines in the industry for an extended period of time. Even with the hindrance of the 2001 terrorist attacks involving airplanes and the U.S recession of 2008, Southwest has continued to see strong revenue growth. Meanwhile, other companies were experiencing major losses and in some cases folding. Southwest Airlines has capitalized on the company’s strength of being the top low cost

Amid Crippled Rivals, Southwest Again Tries To Spread Its Wings; Low-Fare Airline Maintains Service, Mulls Expansion In Risky Bid for Traffic — Front Page Headline, The Wall Street Journal, October 11, 2001 The Age of “Wal-Mart” Airlines Crunches the Biggest Carriers; Low-Cost Rivals Win Converts As Business Travelers Seek Alternatives to Lofty Fares — Front Page Headline, The Wall Street Journal, June 18, 2002 Vaunted Southwest Slips In On-Time Performance; Airline Famous for Reliability Now Ranks Next-to-Last — Page D1 Headline, The Wall Street Journal, September 25, 2002 Having weathered an unimaginable series of events during the

Southwest Airlines was created in the late 1960’s by a businessperson Rolling King, and law school graduate Herb Kelleher, who sought a faster travel time between Houston, Dallas, and San Antonio, Texas (Dess, et al., 2014, p. C137). After overcoming all of the antagonism and legal problems of many major airlines, Southwest was able to take its first flight in 1971 (Dess, et al., 2014, p.C137). With a dedication and will power to grow the company, King and Kelleher sought out ways to increase growth.