Southwest Airline

Overall, the five forces model suggests that the overall intensity of competition in the airline industry is likely to be severe. Back in the early 1980 's competition was very intense. During the late 1980 's the monopolization of major routes by a few major carriers, the limited availability of free landing spots at major hubs and the emergence of limited brand loyalty and tacit price agreements have all helped reduce the intensity of competition. However, as already mentioned, slumping demand in the early 1990 's plunged the industry once more into a severe price war. Airline travel is a commodity-type product, with limited potential for differentiation.

High capital requirements, high cost of aircrafts and fuel locks out a lot of new entrants.

The risk of entry into the airline industry by potential competitors is low due to the “liberalization of market access, a result of globalization. According to the IATA (International Air Transport Association), about 1,300 new airlines were established in the last 40 years,” (Cederholm, 2016). The cost structure of businesses in an industry is a determinant of rivalry. In the Airlines Industry, fixed costs are high, because before the organization can make any sales, they must invest in air crafts, fuel and service employees. These items come attached with hefty price tags. Industries that require such enormous amounts of start-up capital as predicted by many analysts

With low operating margins and high initial investment, a high market share is needed to ensure full flights (maximizing profits on each flight). This would be difficult for a new entrant. The mature airline industry is not attractive to new entrants as distribution channels are focused on current competitors.

"The Southwest Effect," which consists of lower fares and increase in passenger traffic wherever the carrier serves. They have 42 consecutive years of profitability under their belt. Southwest is one of the most honored airlines in the world, they are well known for their triple bottom line approach. This approach greatly contributes to the carrier 's performance and productivity. The stress the importance of their people and the communities they serve, as well as their dedication and commitment to greater efficiency and keeping our planet healthy.

U.S. airline industry rivalry is extremely fierce, driven by changes that have increased buyer power and the threat of new entrants. While the threat of substitutes is low and the power of suppliers has remained largely unchanged, these forces have been offset to changes in buyer power

These are some of the strategies that “traditional” airlines use to eliminate the unnecessary costs and “frills”.

Significant barriers to entry such as high regulatory and capital cost requirements and a fiercely competitive industry along with barriers to exit and the recent failure of airlines such as XL

Since the merger of U.S. Airways and American Airlines, most people would now agree we are living in the age of airline oligopoly. Oligopolies form when there’s a state of restricted competition, and new companies cannot break into the industry for reasons like high-entry costs or government restrictions. This is the condition of the airline industry, today. In order to breach the oligopolistic nature of the airline industry, airlines must be able to break through high barriers to entry such as: retaining substantial capital requirements, having the need for technical and technological ingenuity and jurisdiction of patent rights. In addition, airplanes must be purchased, employees must be trained and facilities must be procured. Even after all these expenditures, some airlines still experience substantial financial losses. As a result, most of these airlines experiencing a financial hardship are subject to an airline merger. For this reason, the major airlines in the United States now consist of four competing large carriers: American Airlines, Delta Airlines, United Airlines and Southwest Airlines. These companies have survived the deregulation of the airline industry and sustained their places at the top of the industry. In an effort to stand out in an oligopolistic industry, airlines must experience: economy of scale, growth through merger, mutual dependence and price rigidity and non-price competition.

Oligopoly Behavior in the Airline Industry. Case Analysis This case illustrates the pricing behavior of firms that are oligopoly whose market is characterized by the relative few participating firms offering differentiated or standardized products or services. Such firms in an oligopoly have market power derived from barriers of entry that wards off potential participants. As seen in the case, it is clear that because there are a small number of US Airlines firms competing with each other, their behavior is mutually interdependent – thus, the strategies and decisions by one airline management affect managements of the other airlines whose subsequent decisions then affect the first airline. In the airline industry, such oligopolistic

Positive factors that are within the company are that they have low costs, as they are very thrifty in their operations. The fact they use the same airplane being the Boeing 737, helps lower costs dramatically. They are the least expensive airline in the market, as larger carriers cannot match the offers on fares that they are selling at. Southwest 's belief that employees come first as the employee retention policy has contributed to employees of Southwest feeling a great sense of loyalty to the company as

The airline industry has always been a fiercely competitive sector. Since the invention of low-cost carriers, also known as no-frills or

Intensity of rivalry among competitors is the major determinant that analyzes the concept of competition in the industry. Normally, in the intensity of rivalry competitors, company will examine about the factors that will lead the competition of a company in the industry in term of; (1) frequent price wars, (2) proliferation of new product, (3) intense advertising campaigns, and (4) high-cost competitive reactions and actions. In this Porter forces, we will know about the number of competitors, how large the number of firms and the level of capacity utilization. Normally, industry with high competition will earn low return maybe in term of the company’s profit. As we know, airline company in this industry in local market and global market is more than enough, which this shows that in order the airline company to compete with others airline company, they should know in term of what they can compete to make sure that they can survive in this industry. The airlines compete for the same targeted customer. Airlines company can only compete with others airline company in term of the quality of services provided, the level of technology they used to attract the customer, and the price. With the technology provided, such as internet make it easier for the customer to compare the airline company, which these will affect the airline company to compete with others company by attracting the customer to use their service and satisfy the customer or they should the brand loyalty, so that customer will stay loyal with their airline

their schedules to accommodate issues that arise and help to keep the flights on schedule and

The volume of people who choose aviation as a transport has considerably grown. The aviation industry is in full bloom and so are the problems