Southwest Airlines in 2010: Culture, Values, and Operating Practices

1249 Words May 5th, 2013 5 Pages
Southwest Airlines in 2010: Culture, Values, and Operating Practices * Problem statement:
Southwest Airlines has high growth and high profitability. However, its cost advantage is not as big as in prior years. * Scenario:
Southwest Airlines based in Dallas was founded in 1967 by Rollin King and Herb Kelleher. It is one of the major domestic airliners which provides carrier and transportation service. Southwest primarily provides short haul, high frequency, point- to point, low fare service.

* Analyses: * Fuel crisis and fuel price become threats to Southwest Airlines Company * The expected growth of oil is suspected to increase 4.3% from now until 2017. With this elastic demand, consumers will stop traveling
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Each year, airline companies (such as Delta and Northwest in 2006) are declaring bankruptcy leaving more cities existing allowing more airlines to fly to
12. Decline of 11 percent in airline companies with funding leading to experienced workers being laid off. * Threats: * Jet Blue Airline
1. Specialization expertise of Jet Blue using one plane model allows them to provide less expensive mechanics to maintain planes.
2. Jet Blue is the only airline to carry satellite televisions on planes. * Southwest's ability to hold the line on costs will impact its cost leadership position.
3. The largest cost component (36.9% of expenses) is labor. This cost could be impacted by union actions, which cover 84% of Southwest's workforce.
4. The second largest cost component is fuel (11.2%), which could be negatively impacted by economic or political events, high cost of fuel leads to increase in ticket prices * Other threats
5. New tax system, higher ticket taxes.
6. Increase in airport security due to possible terrorism, terrorists’ attacks
7. Many companies such as AirTran Airways are offering a business class in their B717 jet.
8. Competing airlines offer satellite radio in their passenger jets, newer and more technologically advanced jets with luxury items and some of competitors offer inflight meals adding luxury
9. Alternative forms of transportation, such as a high-speed railway, could weaken demand for air