Southwest's Long Term Strategy

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).

Thus, Before the merging of AirTran, Southwest’s main objectives consisted of various business strategies. For example, Southwest Airlines first strategy focused on point-to-point routes because it eliminated the need for connections, resulted in more direct routes, reduced delays and overall travel time. Southwest Airlines lands at small airports to steer clear of the congestion, to achieve high asset utilization, and to provide maximum convenience for passengers. In addition, Southwest has a workforce that is motivated in providing quick aircraft

The strategy of Southwest Airlines (SWA) has remained the same, which is to give customers low-cost, point-to-point airfare, with excellent customer service. This simple strategy has resulted in SWA posting profits for 30 consecutive years. While other airlines are downsizing, SWA is showing slow steady growth. This performance is evident throughout their SEC Filings.

As I reside in Dallas, Texas, I chose to examine the major initiative planned by Southwest airlines over the next five years and their legal impact. Southwest is a low cost carrier or budget airline that adopts the low cost strategies in all of business, such as the opening airlines, choice of secondary airport, ways of selling tickets and on-board service. Any type of airplane, any simple fare different scheme, direct sales of tickets, no reserved seating, without many national or international passengers services, use of any airport and short-out flights very quickly time ,simple routes with time -to-time transportation, low employment cost with multiple roles and etc. Such a strategy will reduce the price to a lower-level and then the cost they have saved will benefit the passenger, and it will help them. Lowest carrier had change the customary idea of air travelling, is a high level of expenditure into a speed and economic air travelling. The concept original in the United States, follow by Europe and consequently to Asia.

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

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 Airlines is an airline company that has set industry benchmarks of having the best turnaround ratios, in an industry where lead time during different operations is very time consuming. Southwest currently boasts a rapid gate-turnaround of 25 minutes or less, and it demonstrates how attention to activities pertaining to ground operations (including cleaning of the aircraft, fuelling and flight preparation) can help the company in being so operationally efficient. Customers rave about low fares, exceptional customer service, and the biggest competitive advantage that Southwest has

Southwest Airlines sells its tickets as an air traffic liability, meaning passenger revenue is only recognized once travel has been provided, though the majority of tickets purchased are non-refundable. The aviation transportation industry is one of the most competitive in the market. Southwest has made a number of recent changes to its business approach, allowing it to become even more competitive and its success more apparent than ever. One reason Southwest has an edge on its competitors is that it only flies one type of airline to transport its passengers—the Boeing 737. Using only one type of aircraft decreases maintenance costs and equipment needed the same throughout the company. It also means that the employed flight crews

Southwest Airlines is the world’s largest low-cost carrier and has been in service 43 years. Southwest originated in Texas in 1971 and was to initially only serve Houston, Dallas, and San Antonio. In 1989 the airline had grown tremendously by exceeding the billion-dollar revenue mark. Southwest prides itself in differentiation by delivering exemplary customer service. The superior customer service is carried out by approximately 46,000 employees to over 100 million flyers annually. Southwest Airlines operates more than 3,600 flights daily on what is considered the largest fleet of Boeing aircrafts. People prefer flying with Southwest because of the customer friendly touches. Southwest offers great service, affordable rates, pet friendly

From an operational standpoint, Southwest will need to adjust their plan in order to achieve the most effective and least costly daily processes to gain revenue. Management needs to assure that employees are fulfilling their role of increasing customer satisfaction to maintaining Southwest’s reputation of good customer service. Good customer service keeps customer’s returning and keeps revenue coming in.

Southwest Airlines Co. was established in 1967 when it was started with only three Boeing 737 aircraft that serve three largest Texas cities namely Dallas, Houston and San Antonio. In 1989, Southwest Airlines became a major airline when it surpassed the billion dollar revenue mark. Each year, millions of people fly with Southwest Airlines making them the nation’s largest carrier of domestic passengers. With 43 years of exceptional service Southwest Airlines continues to expand and serve 93 destinations in 40 states with more than 3,600 flights a day. This year Southwest launched their international flight service to five nearby countries by Air Tran Airways, a wholly owned subsidiary which was acquired in May 2011.

Q1. What is Southwest’s strategy? What is the basis on which Southwest builds its competitive advantage?

Comparative services have been providing for decades that have brought Southwest closer to its customers. According to the Southwest case study (Strategic Management Text and Case, p.627), SWA offers strong fleet operation with “548 Boeing 737 craft providing service to 69 cities in 35 states throughout the U.S by the end of 2010”, and fly nonstop to 438 cities within the nation. Instead of spending money on hiring and training employees working on

This case study on South West Airlines portrays how the company operates differently compared to the other companies within the U.S.A aviation industry. Southwest airline has indulged in activities that can only be. The strategies or tactics used by Southwest airline have challenged the big companies and enveloped on their market share. It is evident that Southwest airline has decided to try a different approach and models that have worked to their advantage (Gittell (2003), p.17). For instance, the company has deliberately foregone the commonly used ‘hub and spoke’ model and instead adopted the ‘point to point’ model. More importantly, the company deliberately aims in attracting commuters from other forms of transport such as road and railway, seeing them major competitors as well.

Southwest Airlines has been a cost leader in the airline industry with continuous growth and profits for the past 35 years. It has been the fourth largest domestic carrier with low priced routes and a no frills policy - free of in-flight meals and baggage transfers. The low cost fares, almost comparable to automobile transportation costs, have created both an unprecedented growth and new markets for this airline. Southwest was able to achieve this cost leadership by sticking to its strategy of exclusively selecting point-to-point high consumer demand routes as opposed to a traditional hub-and-spoke model of routing used by most large carriers. Also its routes operate