Southwest Airlines : Strategic Issue

Business Strategy – BAD 4013 – SUMMER 1999 Case Study Southwest Airlines I. Strategic Profile and Case Analysis Purpose The mission of Southwest Airlines is dedication to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride, and company spirit. Twenty-seven years ago, Rolling King, owner of floundering commuter airline, and Herb Kelleher, King’s lawyer, got together and decided to start a different kind of airline that would provide a short-haul, low-fair, high-frequency, point-to-point service in the United States. The company began service on June 18, 1971 with flights between Dallas, Houston, and San Antonio (“The Golden Triangle” as Herb called it). Southwest Airlines is the fourth

Southwest Airlines Co., established in 1971 by Rollin King and Herb Kelleher, began its operations with only three Boeing 737 aircrafts. It is headquartered in Dallas, Texas(Hawkins, Misra, & Tang, 2012). Southwest is well known as one of the largest low-cost carriers. With this strategy, the company has dramatically grown up and deeply rooted in the US airline industry. Now, Southwest Airlines Co. operates 633 aircrafts to 93 domestic cities and the highest number of passengers used Southwest Airlines to fly around U.S in Jan 2014 (Hawkins, Misra, & Tang, 2012). To accomplish more than 40th consecutive years of both profitability and competitiveness, Southwest Airlines Company is constantly trying to find the routes to differentiate itself from other domestic carriers (Hawkins, Misra, & Tang, 2012).

Bargaining Power of Customers (high)- Customers has several options when it comes to flying. But the main attraction to customers are low prices and Southwest makes it known that they have some of the lowest airfares. The only way Southwest can take back the power is by offering direct flights to cities that other airliners do not offer. Besides the small occurrence of having a direct flight to a city that no other airline has, Southwest

The five universal competitive plans include overall low-cost provider strategy, broad differentiation strategy, focused low-cost strategy, focused differentiation strategy and best cost provider strategy (Bethel, 2017). Southwest Airlines popular competitive strategy is keeping customers happy by being low cost, employee driven, future-minded, and differentiated. The overall low-cost provider strategy that is being used at Southwest is a low-cost airline that focuses on no-frills service (Investopedia, 2015). Southwest Airlines diligently follows the strategy of a differentiated low-cost carrier. [They do this by providing the lowest possible fare in the industry, and do so by focusing on consistent service, reliable operations,

The five universal competitive plans include overall low-cost provider strategy, broad differentiation strategy, focused low-cost strategy, focused differentiation strategy and best cost provider strategy (Bethel, 2017). Southwest Airlines popular competitive strategy is keeping customers happy by being low cost, employee driven, future-minded, and differentiated. The overall low-cost provider strategy that is being used at Southwest is a low-cost airline that focuses on no-frills service (Investopedia, 2015). Southwest prides itself on being a people-oriented airline that operates with warm and helpful employees and team members. The most valuable competitive interest has been being its intense focus on hiring the right people (Investopedia, 2015).

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.

How would you describe the competitive priorities of Southwest? How does this differ from other airlines?

The domestic airline industry transports 711 million souls a year. That translates into a staggering $709 billion a year revenue flow (statista.com). One firm, named Southwest Airlines, accounts for 18.3 percent of that market. That 18.3 percent market share places Southwest at the number two spot, behind American Airlines. How does Southwest Airlines successfully compete and thrive in this environment? How do they differentiate themselves from the hoards of legacy carriers? Southwest Airlines encapsulates its strategy in a simple statement: “Meet customers’ short-haul travel needs at fares competitive with the cost of automobile travel (Grant, p.23). As a pioneer in low cost air travel, Southwest has successfully brought down airfares through its short route point-to-point business model, “no-frills” service, single flight strategy, and highly productive employees (Cederholm, 2014). In the following analysis we will investigate Southwest Airlines standing within the industry as a whole and their differentiation models driving success. We will also identify the firm’s competitive advantages as they relate to similar firms in the industry.

Firstly, one of the company’s weaknesses are the negative comments about Southwest on Social Media due to overbooking of flights. This past year, there were multiple incidents about overbooking, and some of them were worse than others. Gary Kelly, the CEO of Southwest Airlines revealed that Southwest will no longer overbook its flights, because this tactic sometimes leaves travelers without a seat, "The last thing that we want to do is deny a customer their flight" Kelly said on CNBC. Competitors had negative incidents earlier this month and it resulted to a chaotic disaster. More specific, a United customer was pulled up the aisle and off the aircraft by the staff in Chicago, when he declined to give up his seat. The airline wanted seats for a United employer, who was on the way to work in another flight. This situation got worse and it turned to a nightmare. Months later, “United is still working to clean up the mess”. (Southwest Airlines: We won't overbook anymore, 2017). United offered 10,000 dollars to people who were willing to give up their seat, when there is an overbooked flight, but that does not hide the negative behavior of the United employees. Another competitor who has the same tactic is Delta. This is the reason that Southwest decided to stop overbooking because the company does not need a United situation on its hands. In general, it is typical for airlines to sell more tickets than the number of seats because people who work in this industry expect people to cancel last minute. Although, when a flight is overfilled, state rules force the airlines to first check whether people are willing to give their seats voluntarily, and then try to sell more

While Southwest Airlines has increased their global distribution system network in recent years, there are still areas

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

This case analysis is an overview of Southwest Airlines which will explore its history in brief and timeline. Southwest Airlines is currently a major airline in the United States domestic market, looking for growth and expansion opportunities. The focus of this paper is to review many aspects of strategic analysis that have an impact on Southwest Airlines; utilizing the SWOT, PESTEL, Porter’s Five Forces and Business Model Strategies methods of analysis. Lastly a recommendation will be presented for the firm on for the problem statement of expansion.

Low-cost carriers pose a serious threat to traditional "full service" airlines, since the high cost structure of full-service carriers prevents them from competing

Southwest Airlines faced many barriers to entry from the fierce competition of other airlines in the industry. Though competition was fierce, Southwest Airlines managed to succeed by doing things differently. Their mission was to provide affordable air travel to those who would not normally fly. Contradictory to the rest of the airline industry, Southwest maintained a profit while keeping its fares low. Southwest was unique to the industry in two ways. They focused on the short haul traveler and used a point-to-point method of flight connections.

Southwest Airlines Company (Southwest Airlines or ‘the Company’ SWA) is a passenger airline that provides scheduled passenger and freight transportation services. The Company primarily provides scheduled services throughout the US and near-international markets. It is headquartered in Dallas, Texas and employs 48,000 people and serves over one hundred million customers annually (“Southwest,” 2015). Southwest Airlines has accumulated over forty years of revenue and is one of the supremely flown airlines in the United States of America (Dess, et al, 2014, p. C137). Recognized for dominating the national or domestic airline market, Southwest Airlines’ diligence has built an