Southwest Airlines

Southwest Airlines made its first voyage back in 1971 with service based in the cities of Dallas, Houston and San Antonio (Brief History, 2009). 38 years later, Southwest Airlines has more than 3300 flights a day and serves 66 cities in 33 states (Factsheet, 2009). Southwest Airlines has demonstrated a variety of strengths in its 38 year presence. Recent economic events have also caused a renewed focus on the company’s weaknesses. Aside from its weaknesses, Southwest Airlines has also been keeping track of opportunities that currently exist in the market. Like all other companies, however, they still have some ground to make up when analyzing possible threats to

Southwest offers some of the lowest airfares within the commercial flight industry and is the only airline that does not charge their customers add-on fees such as baggage, incidentals and transfers. Southwest is the only major U.S. airline to continue to offer each customer free check-in for their first two pieces of luggage.

Southwest was formed in Texas in 1971 by Rollin King and Herb Kelleher. The company started off with three Boeing 737 aircraft servicing Dallas, Houston and San Antonio. King and Kelleher started off with the simple notion that if you get your passengers to their destinations on time, at the lowest possible fares, and make sure they have a good time while doing it, people will fly your airline (Southwest, 2015). Focusing on low cost, reliable and friendly air service, the airline quickly grew to become the fourth largest in 2000 based on scheduled domestic passengers boarded (Carter et al., 2004). In 2014, the U.S. Department of Transportation ranked Southwest as America’s largest airline based on the same measure

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 proudly touts its "triple crown" status as the only major airline to top DOT listings for fewest consumer complaints and best on-time performance and baggage handling for a full as year. Southwest also lays claim to the industry's first frequent-flier bonus program, its first profit-sharing plan--through which employees own about 10% of the company--and first senior citizens' discounts (1994).”

In an industry that saw an entire industry literally destroyed by the events of 9/11, airlines were filing bankruptcies, most notably United Airlines. Southwest, on the other hand, has constantly made a

One of the major external factors that helped Southwest Airlines in it 's expansion in during the latest years, is the fact that the managers of the company took advantage on the decrease in fuel costs in 1998. Travel demand increased in 1998 and the Southwest Airlines among most of the other airline companies reported operating profits. The match of those two parameters, low oil prices and increase in traveling demand had a superior outcome for the company. On the other hand fuel may be an enemy for the Southwest Airlines in the future. Oil prices are surely not predictable and there is no safety provided for any downturns or upturns in the demand and correspondingly the price of it in the near or far future.

Southwest's main strategy is providing a differentiated product to airline industry customers. It does this by offering a low-cost, high-convenience, customer-friendly service to its main focus group, the business traveler. Southwest's business model has proven to be highly successful in providing the company a distinct competitive advantage over its competitors. Southwest's business model is based on several key activities that form the basis for its long-term and operational strategies.

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

Focusing primarily on efficiency as a critical component of the airline’s overall strategic focus enables Southwest Airlines to hold flight price points in a range which appeals to value minded consumers (Mouawad, 2010).

Product Positioning: Southwest portrays itself as the only low-fare, short-haul, high frequency, point-to-point airline in America which is fun to fly. Southwest Airline focuses mainly on families and casual business travelers who look for reliable, fast and convenient travel in an economical price. The Company doesn’t provide any first class, doesn’t serve any food, no assigned seats and doesn’t transfer baggage to other airlines. But in return the company emphasizes on ultra-low fair, customer service, no cancellation or rescheduling fee, quick turnaround for planes, on-time arrival and frequent non-stop flights, often from less congested airports not served by other airlines. A southwest plane can reach a terminal and leave within 25 min whereas the industry average is 60 min. On top of that Southwest has a product differentiation strategy of “bags fly free”, to allow two free

Competitors in the air travel business have to overcome several hurdles to maintain a market share and even more to increase it. Southwest Airlines has become a leader, with regards to ticketed seats, with the simple strategy: low-cost and no-frills combined with a crew that is well groomed in customer satisfaction. Southwest’s business strategy focuses on their record turnaround times at the gate, customer satisfaction, and employee satisfaction. Along with this focus, their frugal spending habits have built a highly profitable airline.

Within every industry, there will be threats. In the airline industry, there is the threat of terroristic violence, and technological issues. Also, governmental interference and social acceptance will continue to shape how the industry operates. Southwest Airlines will need to predict and adapt to all possible threats in the industry. Currently Southwest Airlines’ strengths in the industry are their ability to keep fares low due to the Airline Deregulation Act of 1978. However, their weaknesses are competitors trying to copy their model.

Southwest continues to have to fight for consumers against these airlines. There are a few strategies being implemented by competitors that Southwest Airlines needs to be concerned about. One major recent strategy is that large companies are merging to create even large conglomerates. These mergers have given those companies some extra advantage when it comes to certain regional markets. They don’t have a monopoly but their hold on consumers in an area rises tremendously. Also, it allows them to control the fare prices in regions where they are the majority. Southwest Airlines could lose consumers to some of these mega companies because they may offer more flight times on certain routes. Consumers may be willing to pay more if times work better for them. However, these mergers could be detrimental because consumers like to have options and the prices they offer may be too high.

Even though the airline industry is a one star industry, Southwest has found multiple ways to become very successful and stand out as an industry leader. Southwest has many opportunities to improve their business. Its greatest opportunity is to continue to develop its low cost business plan. It must continue to push for maintaining low-cost flying and brand association that has served Southwest very well in recent years. Southwest has always