Spirit Airlines Case Study

Southwest Airlines has been making changes over the past few years that helped them become the largest low-cost carrier in the United States. Most other airlines have been struggling to make it through this economy, but Southwest has found a way to thrive. The airline has dropped their prices and eliminated fees for extras that have allowed them to fill up most flights. One cost they continue to struggle with is offsetting the increasing fuel prices. This has caused some airlines to merge or sell the company to competitors.

The airlines do not focus on the combination of quality and good service at a fair price; its focus is instead only on providing ultra low cost. It also charges customers for value added features and services. Thus the pricing is value added pricing. When compared to the competitors of Spirit for operating costs per seat mile; it is lower compared to other major airlines. The important points like encouragement to demand stimulation and preference for its low-cost model makes it successful for its low-cost pricing strategy.

Flight Centre offers a very competitive price. The prices are usually are lower than its competitors when it comes to domestic and international flights. It provides the option of different prices ranges. These price ranges depend on the services that a customer requests. It provides economy class, business class, premium class, and first class price ranges. Due to its affordable prices and good services, it has grown to become a 13.5$ billion business comprising of more than 30 brands. It works had to keep up with the competition by providing best possible prices while ensuring customer loyalty (Flight Centre the Airfare Expert).

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,

Operating under an intensely competitive environment, Southwest Airlines carefully projects its image so customers can differentiate its product from its competitors. Southwest positions itself in all its marketing communications as the only low-fare, short-haul, high-frequency, point-to-point carrier in America that is fun to fly (Cheng, 2010). Its low-priced fares are a brand equity which it "owns" in the mathematical sense of being the only major airline with a strong score on this attribute based on consumer research. Southwest’s brand exudes an element of fun: a down-home attitude which it leverages to present the consequences of low fares in a positive light. This is great

• Offer low fares and still maintain a high-quality distinguished product that offers friendly service and a comfortable and entertaining flight experience.

Almost three decades late in 1992, the company officially changed its name to the ultra-low cost passenger carrier company we all know today as Spirit Airlines, which is based in Fort Lauderdale-Hollywood International Airport, under CEO Ben Baldanza. These series of changes in industry, in combination with the fact that I am an avid “Spirit flyer,” definitely sparked my interest in further investigating the financial stance of the company.

Spirit Airlines is an ultra low-cost, low-fare airline that offers affordable travel to its price-conscious customers. The all-Airbus fleet currently operates more than 250 daily flights to over 50 destinations in the United States, Caribbean and Latin America. As this company continues to provide low ticket cost to its customers it will continue to increase revenue despite the ticket revenue for the fourth quarter of

Jerome Simelane, the airline's Commercial GM, “By using what we have learned over the years about international airline best practice‚ we have also created a cost structure which allows us to offer competitive fares without cutting any corners on quality‚ safety and reliability."

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.

fares to establish profitability and loyalty. However, they are not always the cheapest, so their

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

What would Ryanair do? How would easyJet respond? If easyJet assumes that Ryanair is going to increase its frequency of flights from London Heathrow to Hamburg, its best solution would be to raise its frequency as well; so both would earn a profit of £1000. If easyJet would in this case remain with its current flights, Ryanair would make £1000 more profit. If Ryanair chooses its second available strategy namely to continue its current flight rate, easyJets best response would be to raise its frequency as well. On this occasion easyJet would make a profit of £1500 and Ryanair only a profit of £500. This leads to the conclusion that no matter what Ryanairs preferred strategy is, easyJet will do better in increasing its flight frequency. As this game is perfectly symmetric the same solution is given for Ryanair. Their dominant strategy is to increase its flight frequency as well. With having two dominant strategies, there is a Nash equilibrium given for increasing the frequency of flights. The payoffs for each player would be £1000 and there would not be any incentive for them to deviate from this result. It shows that the best strategic decision in this game is given by a solution where no competitor has the incentive to change his strategy given the other competitors’ strategy, here to increase the flight frequency.

This proposal addresses the needed steps to be taken in order for Southwest Airlines to see continued growth in the airline industry. Southwest Airlines has been able to remain one of the most profitable airlines in the industry for an extended period of time. Even with the hindrance of the 2001 terrorist attacks involving airplanes and the U.S recession of 2008, Southwest has continued to see strong revenue growth. Meanwhile, other companies were experiencing major losses and in some cases folding. Southwest Airlines has capitalized on the company’s strength of being the top low cost

(Generic Business Strategies, 2010) Southwest Airlines, Wal-Mart and Nucor Corporation are some companies who use the low-cost strategy. Here are some of Southwest’s key characteristics of its low-cost strategy: