Southwest Airlines And The Airline Industry

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Southwest Airlines, a cost leader in the airline industry, was faced with an important decision on whether or not to enter LaGuardia Airport’s expensive, heavily regulated and congested market. How does a leader airline in discount airfare, continue to expand into high traffic markets without compromising its core strategies and disrupting its existing network?
Founded in 1967, Southwest entered the airline industry at a time when interstate travel was heavily regulated by the Civil Aeronautics Board (CAB).10 Some of those regulations imposed by CAB include: airlines were not allowed to discount fares even when their planes were at half capacity, airlines were not able to add new routes or remove old routes, and new carriers were not allowed to enter the interstate airline travel.10
Due to these regulations on the interstate market and seeing the success of intrastate carriers, such as Pan Southwest Airlines (PSA) and Air Cal, Southwest entered the intrastate market where CAB regulations did not apply.[10] [1] Southwest knew from early on that it had to provide considerably lower fares to stave off the competition from other airlines and was planning “to charge fares that were at least 60% lower than the average coach fare”.1 From the words of Colleen Barrett, “We knew that we were going to have to have substantially lower fares on day one of our operation than were currently being charged because that was our only chance of winning a niche in the business”.1
Southwest not
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