Executive Summary: SkyWest
SkyWest Inc. (SkyWest) primarily competes as a domestic regional carrier. In this capacity SkyWest provides service from small cities using regional jets to support the network carriers’ hub-and-spoke system (Northwest, Delta, United, etc.). Regional airlines feed the large national carriers by bringing customers from small airports to major hubs to catch connecting flights. Most of the flights operated by regional carriers are in partnership with the major carriers. SkyWest has partnerships with Delta, United, and Midwest Airlines.
SkyWest’s growth and strategic planning has relied on the expansion of current partnerships and geographic growth. SkyWest operated as a west coast regional carrier but expanded
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Strategic Issues
Through internal and external analysis, we have discovered three strategic issues which merit front burner attention.
The first of these issues is the fact that SkyWest has all of its eggs in a few baskets. It’s either feast of famine depending on the success of Delta, United, and Midwest Airlines. In a declining airline industry, it is vital for SkyWest to lower its risk.
The second area which demands attention is operational efficiency. SkyWest Airlines has been above average with benchmarks like cost per seat mile, airplane turnaround, etc. but ASA has been well below average. In order to retain customers SkyWest must improve operational efficiency.
The final strategic issue is customer service. With such low switching costs, customers can easily find other airlines with which to do business. In today’s economic climate consumers are hunting for the cheapest price, unless loyalty can be developed through quality customer service. These areas for attention include on-time arrivals, safety image, and bag handling.
Strategic Options
1. Expand and diversify through the identification of new contracts
2. Improve operational efficiency
3. Improve customer service
4. Compete with hub and spoke network carriers
5. Acquire (an)other regional airline(s)
Recommendations
1. Expand and diversify through identification of new contracts: Market
Southwest Airlines is a major US airline established in 1967 that services a multitude of cities in all 50 states and beyond. The company is known for its outstanding quality in providing services and it 's cost effective ticket prices to its many passengers throughout the nation. This airline is based in the southwestern United States, in the city of Dallas Texas, and due to the tremendous number of airplanes that it has and the timely service that it provides to its passengers, this airline services more US passengers than any other airline. This airline also has the largest fleet of planes of any economical or low-cost airline service in the world and employees more than 45,000.
Customer service is a valuable influence on quality. Qantas delivers the expectations of customers by representing civil and accommodating staff members. Qantas has implemented a series of operational strategies to enhance the speed of their service. These vary from booking flights online, online check in, check in kiosks and Q Bag Tags. Dependability at Qantas is based on the consistency of on-time departures and arrivals. Flexibility is relevant to Qantas’ responses to the changes in market demand. Flexibility is demonstrated through Jetstar’s variable fare. Qantas offers customisation through its participation in the Oneworld Alliance, where it can provide its services to over 680 destinations in 134 countries. Qantas has worked on developing less costly and more efficient opportunities for its consumers by launching new discount airlines: Jetstar and Jetstar
However, some of the clients argue that low cost airlines are able to deliver good quality services as ordinary airlines do. (Snyder, 2014) Besides, many low cost airlines are always willing to find ways to show to their customers that it offers low prices but not low quality. (Snyder, 2014) Customers are expecting better services at low fee and other low cost airlines are trying to enhance service quality without raising their price. As a result, there is a substantial challenge for Jetstar. If Jetstar is not able to improve its service quality to meet the customers’ want, it may result in customer dissatisfaction, which may affect its reputation and market share
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.
According to Tully (2015), Southwest plans to expand into a newer market of making longer haul trips in order to capitalize on business travelers. Kelly is quoted as saying that, “Southwest service levels are the best in the business, their costs are the lowest of the major airlines, and their brand puts us in a prime position to grow faster than they will” (Tully, 2015). This change in direction or strategy could prove to be a great decision for Southwest or could derail them causing decreased revenue and profits.
The strategy of Southwest Airlines (SWA) has remained the same, which is to give customers low-cost, point-to-point airfare, with excellent customer service. This simple strategy has resulted in SWA posting profits for 30 consecutive years. While other airlines are downsizing, SWA is showing slow steady growth. This performance is evident throughout their SEC Filings.
Founded in 1971, Southwest Airlines is a low cost carrier that last year celebrated 41 consecutive years of profitability by posting record earnings in 2014 (PRNewswire, 2014). While its main competitive advantage is being able to provide service at a lower cost than other airlines, it also is able to differentiate itself from competitors through excellent customer service and through response in the form of rapid airport turn-around times and a larger number of flight options than its competitors. There are two main constants that have been critical to its success. From a corporate culture standpoint, the company values and empowers employees at all levels, creating a favorable labor relations climate. From an operations standpoint, the company has maintained the same strategic focus in four key areas that have kept the profits rolling in despite external upheavals, such as spikes in fuel prices, mega-mergers that solidified competition, and even the financial meltdown of 2008 and the 9/11 terrorist attacks, which saw drastic cutbacks in both business and leisure discretionary travel (Mutzabaugh, 2014). This paper will provide an overview of the company’s operating philosophy and explain how those four key areas relate to its overall strategy.
Southwest Airlines began from a modest humble beginning, a small airline company servicing mainly secondary airports rather than high-traffic airports. Southwest Airlines made its mark like the common worker climbing from the bottom of the industry through the ranks to become a major competitive force in the domestic segment of the U.S. airline industry. It had weathered industry downturns, dramatic increases in the prices of jet fuel, cataclysmic falloffs in airline traffic due to terrorist attacks and economy- wide recessions, and fare wars and other attempts by rivals to undercut its business, all the while adding more and more flights to more and more airports. (coursehero 2016) Since 2000, the number of passengers flying Southwest Airlines had increased by more than about 42 million annually, whereas the number of passenger traffic on domestic routes declined for carriers like Delta, American Airlines, Continental, United, and US Airways.
Before discussing Southwest Airlines’ current position within the industry, a review of their strengths, weaknesses, opportunities, and threats (SWOT) analysis has been conducted.
Southwest Airlines made a constant and steady growth since 40 years. During 1980’s, in another turning event it acquired Morris Air and Muse Air to provide low fare and frequent point-to-point service in domestic market. (Pearlson & Saunders,2001)
SkyWest Airlines (SkyWest) was a rare breed in the ultra-competitive regional airline industry. As the overall airline industry suffered through terrorist attacks, rising fuel costs, and increased competition, SkyWest was able to grow its business and sustain profitability. The aforementioned events that impacted the airline industry had a severe effect on the structure of the industry as a whole. Several major airlines were in the process of emerging from bankruptcy while mergers among the largest airlines seemed inevitable. SkyWest, like most regional carriers, relied on contracts with the major airlines for its customer base and revenues. With industry consolidation underway, SkyWest’s recent history of
Notwithstanding the overwhelmingly steady growth and success of Southwest, the company has, and will face multiple issues that play significant roles to its continued profitability. Based on a conservative growth strategy, Southwest 's top concern is expansion. Southwest must
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
With the economy on such a slow rise, many of the smaller regional airlines will find it difficult to turn enough profit to continue business. When the aviation was booming, there was incentive to enter the market based on rising profits. Many of the smaller regional companies that entered the market did so by accepting contracts that in times of economic difficulties would not cover costs. SkyWest has been known to be at the top of the industry in regards to running their business. By continuing to keep successful business practices at the forefront of their operations, there will be opportunities to acquire those companies that are struggling now. As they expand into more markets, SkyWest can ensure that their
Mr. Lawrence Kellner, Chairman and CEO, since December 2004, have been with Continental for over 14 years.