Southwest Airlines - Distribution Strategy Essay

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.

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

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.

Spirit Airlines, the leading ultra-low-cost, no-frills carrier; the worst all round Carrier charges for every service besides the basic fare. For this purpose, this paper will discuss the Carrier ticket distribution channels, pricing strategy and product promotion.

In 2010, Southwest Airlines purchased AirTran Airlines and received all the issues that come along with enormous overnight growth. This came in the form of inconsistent price and seat availability, confusing reward systems, delayed flights and very upset customers (McCartney, 2013). This

Southwest Airlines is excellent in planning out their long-term goals. The above SWOT analysis proved that the company is successfully carrying out the cost leadership strategy to manipulate their competitors and boost up their company. Their mission in providing Low Fare cost is one of the best strategy that they can have to increase their market share, but not just that it also put a significant increase in the demand of air travel. Southwest Airline rapid rewards program is brilliant, so they should continue and expand it even more.

Southwest’s primary competitors are JetBlue and Spirit Airlines. These two airlines, like Southwest, focus on innovation and low airfare costs. Among the largest airlines are American, Delta, and United. However, these mainline carriers are far from posing any major threat to Southwest. (Coulter, pg 253)

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

Air Southwest was incorporated on “March 15, 1967” (1966 to 1971, 2016), at a time when “price competition from interstate competitors was ferocious” (Heskett & Sasser, 2013, p. 3). However, Rollin King one of Southwest original founders had an idea that would shake things up. While having a couple of drinks with his friend Herb Kelleher, he scribbled is point-to-point triangular service idea

Firstly, Spirit’s lowest-cost distribution channel and lowest fares are on WWW.Spirit.com; predominantly, 78% of ticket sales came through this channel (Tnooz, 2011). Ordinarily, the advantages of this channel eliminate; markups and commissions to intermediaries, foster customer relationships, and prevents market leverage or play one airline off against another. Likewise, the channel offers the carrier with full control on ticket

Since the late of last century, the business model of low cost airline represented by Southwest Airlines has been spreading all over the world, has influence and changed the framework and development of the world airline industry.

Notwithstanding, the sales contract permits the carrier to offer higher fares through GDSs than on spirit website to cover their incremental costs of distribution. Similarly, the airline date released fares to OTAs, if allowed to withhold the lowest fares from this

This is done by developing services and products that are viewed to be unique by the customers, and thus the customers are willing to pay premium prices for them (Porter 1985). Airline using this strategy can place a high price for their services and products. The other advantage is that the customers are also willing to pay a high price based on the uniqueness of the product or service. They also tend to be more loyal since the purchasing decision is more related to the quality rather than on the price (Mazzeo

In order to make up for increasing expenses Southwest needs to expand. My recommended strategy for Southwest to pursue, is to merge with Air-Tran and expand into areas where Air-Tran has a heavy presence and Southwest has none. With Southwest having a weak presence in the southeastern U.S., a key area to expand would be Atlanta’s Hartsfield-Jackson International, which is the busiest airport in the U.S. There is obviously a need for the low air-fare company at this site. Southwest’s unique approach of no extra charge for luggage and extra friendly service should help Southwest. The merger is estimated to cost Southwest $1.4 billion dollars; Air-Trans income for 2010 was around $128 million, and along with the 138 new

Based on my analysis of the case, I discover that one of the biggest problems facing by the Southwest is the dilemma that whether they should maintain their focus on short-haul flight or they should alter their strategy to generate more revenue. To be more specific, can Southwest continue to be profitable under stiff competition if they stick with their initial focus. Southwest usually flies mainly to uncongested airports with less competitions; nevertheless, as they gradually expand to more busy areas, they are confronting with more competitors. If they provide short-haul flight service only, there is not much room for them to earn profits. Besides, another problem that Southwest facing is how they can reduce cost since their operating costs continue to rise. Labor and fuel are inevitable for Southwest’s operation. However, as the cost of both continues to grow, Southwest’s cost advantage comparing with other airlines will get narrower,