Southwest Airline - Distribution Strategy

Over 35 years ago, Rollin King and Herb Kelleher decided to create a different type of airline. They began with the simple notion: If you get your passengers to their destinations when they want to get there, on time and at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline. They were right (Southwest Airlines, 2004)!

carrier; the worst all-around carrier charges for every ancillary product. Established under Airline Segmentation, Spirit targets price sensitive, business-class, middle-class, students and solo travelers within psychographics (Zigu, 2017). Consequently, this paper will discuss the carrier; ticket distribution channels, pricing strategy, and product promotion.

Social cultural forces are a double-edged sword for the company. Southwest used advertisements that targeted the cultural values and common buyer behavior of upper-middle class to upper-lower class consumers. Ads such as “bags fly free” and “Why do they hate your bags” resonated with consumers that believe airfare should be all-inclusive. The negative effect of this competitive advertising is reduced fee revenue compared to competitors like United Airlines. The demand of niche airlines will change as the demographics change, such as an increase in millennials flying versus baby boomers.

The domestic airlines in the US market is the broader context in which Southwest Airlines conducts its business. As a domestic airline, Southwest Airlines provides air transportation for cargo and passengers along scheduled routes and on routine intervals. The airline industry is a service industry comprised of the following services: coach class passenger transportation, first class passenger transportation, business class passenger transportation, and cargo. However, Southwest Airlines is unique from many of its competitors in the airline industry because it does not provide any distinctive classes of transportation. The single class of transportation it provides may be considered coach. Therefore, the two services that Southwest

As I reside in Dallas, Texas, I chose to examine the major initiative planned by Southwest airlines over the next five years and their legal impact. Southwest is a low cost carrier or budget airline that adopts the low cost strategies in all of business, such as the opening airlines, choice of secondary airport, ways of selling tickets and on-board service. Any type of airplane, any simple fare different scheme, direct sales of tickets, no reserved seating, without many national or international passengers services, use of any airport and short-out flights very quickly time ,simple routes with time -to-time transportation, low employment cost with multiple roles and etc. Such a strategy will reduce the price to a lower-level and then the cost they have saved will benefit the passenger, and it will help them. Lowest carrier had change the customary idea of air travelling, is a high level of expenditure into a speed and economic air travelling. The concept original in the United States, follow by Europe and consequently to Asia.

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.

Southwest Airlines also had only a limited participation in computerized reservation systems, channeling travel agents and customers to book flights through its reservation center. Taking advantage of technology Southwest was the first national carrier to sell seats from a home page on the Internet, reaching 81% online bookings via southwest.com in 2010.

Southwest uses a strategy that keeps their costs low, while maintaining similar value. Southwest’s strategy greatly helped them gain a competitive advantage in the U.S. domestic flights market because at the time, most other airlines offered flights at higher prices and with three different classes of airfare. This allowed Southwest to be the first movers into the idea of cost friendly flights. And because no one else could compete with Southwest’s low cost, their innovative idea allowed them to be cost leaders in this market. Southwest’s main policy is providing the cheapest flights with only one class of flight. They kept costs low through their use of cost drivers. And by keeping the costs low, Southwest created a competitive disadvantage

Southwest Airlines is the world’s largest low-cost carrier and has been in service 43 years. Southwest originated in Texas in 1971 and was to initially only serve Houston, Dallas, and San Antonio. In 1989 the airline had grown tremendously by exceeding the billion-dollar revenue mark. Southwest prides itself in differentiation by delivering exemplary customer service. The superior customer service is carried out by approximately 46,000 employees to over 100 million flyers annually. Southwest Airlines operates more than 3,600 flights daily on what is considered the largest fleet of Boeing aircrafts. People prefer flying with Southwest because of the customer friendly touches. Southwest offers great service, affordable rates, pet friendly

The recent economical and financial downturn severely impacted the airline industry in 2009 and brought only small increases in 2010. The recession negatively influenced the discretional income of travellers. More precisely, the leisure travellers’ and business travellers’ budget changes resulted with a sudden decrease in their demand. Therefore, corporate policies tightened and generally the demand for travelling decreased. On the other hand, demand for substitute products, such as video conferences and surface travel, has increased. As a result, many airlines, including Southwest Airlines, responded with capacity cuts and fare discounting. On the other hand, Southwest used the opportunity also to further expand and because of its low-fare services, it could enter new markets as well.

Southwest Airlines has proven itself as an industry leader in low-fare air transportation. Southwest serves 64 airports in multiple states across the country. Although the airline industry suffered a major blow from instances such as the Airline Deregulation Act and the multiple economic crisis’s, Southwest remains strong, while competitors of Southwest were suffering from problems such as bankruptcy. One of the major reasons Southwest was able to remain successful seemed to be due to their effective low-cost model that has been key to their business image. Another aspect that aided Southwest was the fact that their competitors were fully aware that they could not compete on a price level with Southwest. Southwest gave itself a reputation

Customers are part of the process and taking their roles willingly. For distribution of tickets, initially commission was given to travel agents but later Southwest implemented a “ticketless” (paperless) travel program and later the development of Southwest.com as a means of using the internet to sell travel directly to customers. Southwest was a true pioneer in utilizing the internet, first establishing a website in 1995. This lowered distribution cost.

Southwest Airlines, founded in 1971, is trademarked as the original low-cost carrier (LCC) airline (Eroglu, 2015). The inspiration to originate a LCC airline was derived from founder Herb Kelleher, who was able to determine that there was a widespread consumer desire to travel by air. However, due to the cost of flying at the time, many were barred from the experience, as it was considered a luxury. As a result, Kelleher set out to construct an airline experience that was more accessible to the average consumer or, the middle class, by providing customizability and low-fares. However, Kelleher recognized that this low-fare, cost cutting airline model could be easily replicated. Therefore, to drive consumer loyalty and to shield Southwest from replication, Kelleher adopted the philosophy of “people first; profits second (“Southwest Airlines,” n.d.).” Consequently, positive employee, employer relations were established thus, driving morale, which provided individualized quality customer service to be delivered; all of which have aided Southwest in achieving consumer brand loyalty and differentiation on an intangible front.

It was surprising for most customers that airlines currently decide to increase fares for U.S. domestic flights even though their expected costs decrease due to lower fuel prices. The prices are generally a process of revenue management that reacts on demand and competition, though domestic flight fares aren’t directly connected with the costs trends (Koenig, 2014). Airlines rely heavily on the brand loyalty of their customers in order not to be forced to offer the lowest prices. A common approach of a competitive edge is the implementation of improved in-flight services. One example in the past was the shift of

Recently, major United States airlines has made radical changes in market’s distribution channels, and one of the changes is controlling airline tickets distribution. The control of ticket distribution has brought about many advantages to major airline companies across the globe by coming up with internet ticketing websites that are less expensive, bypasses global distribution system as well as the associated booking fees (United States General Accounting Office, 2003).