Southwest Airlines operates in the American domestic market. It is well known for its growth over the years. Its mission is the dedication to the customer service of the highest quality that is delivered with a sense of friendliness, company spirit, personal pride and warmth, (Inkpen & Degroot, 2). The airline industry had general environmental factors that do impact it is several ways within the market.
The first one includes the political and legal factors. These include the intervention of the government in the economic operations of the industry. The government intervention is necessary since it protects the interests of the passengers as well as the safety measures of the airline operations, (Inkpen & Degroot, 12). Economic factors are
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This has rattled the global financial markets. The stocks of the airline industry have been hit very hard whereby fears of the demand for traveling are slackening. It is expressed by the International Air Transport Association, there are expectations for the passenger market of the U.K. to shrink by 2020 in the band of 3—5% due to the Brexit materializing, (Inkpen & Degroot, 14). The strategy of the Southwest Airlines is to focus on a short-haul passenger and to provide rates that are as low as a third of the competitors. Its HRM strategy is to be using the business model that is very straightforward and rather than having a hub-and-spoke service, they have a point-to-point …show more content…
It is a problem that will affect the profitability of SWA. This would be by lowering it since it will be experiencing an increased cost. But so as to hedge its exposure to the fuel price fluctuations, SWA will have to make use of the fuel swap. This is an agreement between parties that makes sure that the floating (market) price can be traded over a specific timeframe for a fixed price. The marketing tool by SWA in the “Bags Fly Free” program is made specifically so as to show its clients that they care for them. The first and the second checked bags are not paid for as well as skis and golf bags. This is a tool that favors many passengers and therefore many like SWA for this. Since it is a strategy that benefits them, SWA will hold on to it even in the future.
Despite the challenge with the fuel price fluctuation, SWA has a growth rate that would see it far economically in the future. The acquisition of AirTran clearly explains that SWA will have great heights in the future. This is because the AirTran has helped very much in entering into the international markets. It also assisted in adding 21 cities into the network of the airline whereby 7 of them are lying in the international market. The international presence has led to the expansion of the Southwest to Northern and Central America. The AirTran has also made SWA the largest domestic
Despite Southwest’s long standing reputation as an employer who makes their employees and customers happy, there have been storms brewing in the company’s labor relations and customer relations sector. As was mentioned before, Southwest recently acquired AirTran Airways and revealed plans to take its already successful domestic business international with flights to Mexico and the Caribbean (Martin, 2014). This organizational restructuring is causing Southwest to have what Time Magazine’s Brad Tuttle calls an “identity crisis” for the airline whose new advertisements have removed the humor they are famous for and the messages of “bags fly free” from commercials. Bob Jordan, a Southwest executive, explained the change as a new era for Southwest and chance for consumers to see them in a brand new light. Some speculate that this “new light” will not be positive for the airline; after all, one of the reasons Americans love Southwest is because it has always differed from other large and impersonal airlines, such as American Airlines and Delta. Southwest has always seemed like the underdog taking on the giant, overpriced competitors; now they seem to have hopped on board with the “big boys” of the airline industry. Another disturbing trend is that studies show Southwest’s fares have risen 39% over the last five years compared to a 10% rise in the rest of the industry, while Southwest still lets bags fly for free. There is some debate if that will be one of the items swept away in the airline’s big restructure. Time will tell if Southwest’s top-notch customer service will still be enough to set them apart from other airlines or if their new, “stiff” image will leave them with shaking heads and deficits on the balance sh...
SWA is known for their “low fares” advertisement on tv, ads on the internet and through direct marketing, such as email. SWA does not have interline fares or contract with other airlines or use of commuter feeder relationships. Ads that are marketed, encourage individuals to go online to their website to get a lower fare. Their frequent flyer program is based on “number of trips taken” versus how many miles they have flown and other airlines have copied this program. SWA promotes casual but professional work environment to give customers a ‘home’ feel.
Another internal challenge for Southwest Airlines is the conflicting management style and business operation with AirTran. On top of that, the external challenges such as the increase of competitions and gas prices are some of issues f...
Despite its growing domestic network, the company didn’t offer international flights until July 2014, and even then, it only offered limited destinations (“Southwest Corporate Fact Sheet,” n.d.). Furthermore, the company’s reliance on a single aircraft is cause for concern. Southwest Airlines was also weak with technology utilization initially but has since turned this into an asset, as described later. Finally, the company has a limitation with providing customer perks due to its low-cost operations (Ross & Beath,
Southwest Airlines strategy of focusing on short haul passenger and providing rates as low as one third of their competitors, they have seen tremendous growth in the last decade. Market share for top city pairs on Southwest's schedule has reached 80% to 85%. Maintaining the largest fleet of 737's in the world and utilizing point-to-point versus the hub-and-spoke method of connection philosophy allowed Southwest to provide their service to more people at a lower cost. By putting the employee first, Southwest has found the key to success in the airline business. A happy worker is a more productive one as well as a better service provider. Southwest will continue to reserve their growth in the future by entering select markets only after careful market research.
Having a low amount of cost in their operations is one of the contributing factors in Southwest Airlines’ financial success. Such low cost model of the corporation is brought about by an effective strategy. Southwest uses only one type of aircraft – the fuel-efficient Boeing 737. This tactic keeps training and maintenance costs down. Moreover, the no-frills approach to customer service contributed to the low cost of operations for Southwest. The airline does not serve meals on board, and there are no luxurious or first class seats offered. Services like these have been seen by the airline as unnecessary for an airline that provides a short-haul trip from city to city. By these, Southwest were able to offer low price tickets to customers, which was good for the company because most people would prefer to fly without those services mentioned if it meant for cheaper ticket price.
Since 1987, when the Department of Transportation began tracking Customer Satisfaction statistics, Southwest has consistently led the entire airline industry with the lowest ratio of complaints per passengers boarded. Many airlines have tried to copy Southwest’s business model, and the Culture of Southwest is admired and emulated by corporations and organizations in all walks of life. Always the innovator, Southwest pioneered Senior Fares, a same-day air freight delivery service, and Ticketless Travel. Southwest led the way with the first airline web page—southwest.com, DING, the first-ever direct link to Customer’s computer desktops that delivers live updates on the hottest deals, and the first airline corporate blog, Nuts About Southwest. Our Share the Spirit community programs make Southwest the hometown airline of every city we serve.
The marketing approach of Southwest Airlines is built upon their strong business model. They have successfully managed to target two specific market segments of the airline industry while remaining profitable. Their strategy is simple, to offer frequent non-stop flights with the lowest costs which appeal to both the business and budget travelers. By segmenting their target audience to specific demographics and ticket pricing, passengers know exactly what they are getting for the price they pay.
1. Issues 2. American Airlines’ objectives 3. The airline industry 4. Market 5. Consumer needs 6. Brand image 7. Distribution system 8. Pricing 9. Marketing related strategies 10. Assumptions and risks
Advertising: As one of the largest domestic airlines, Southwest Airlines has an enormous advertising budget to sustain its presence and increase its market share through focusing on the benefits of flying Southwest over its competitors. Southwest recognizes that flying is no longer a pleasurable experience for many customers, even on Southwest, historically a budget airline. Even though Southwest is often regarded as a no-frills airline, it still attempts to build goodwill from its customers based on its advertising. Of the $249 million it spent on advertising in 2011, Southwest Airlines is unique in that it does not sell additional ad space on the exterior of its aircraft. Many domestic airlines have begun selling aircraft exterior space as a way to increase revenue, but Southwest Airlines insists that it wants to keep its product and advertisi...
Southwest Airlines is operating in an industry that is struggling to make profits. The slowing economic growth and raising fuel costs are lowering earnings while revenues remain the same. The macroeconomic factors affecting the airline industry include unemployment, the economic growth in the United States, and inflation. With low economic growth, consumers are finding luxury items more difficult to purchase and airline tickets for vacations fall into that category. Unemployment contributes to a lack of vacation travelers since individuals who are not employed do not have extra money for vacation or airline tickets. Inflation also causes operating costs of the airlines to be higher cutting into profits.
The mission of Southwest Airlines is a dedication to the highest quality of service delivered with warmth, friendliness, individual pride, and company spirit (Mission…, 2007). The company also provides opportunities for learning and personal growth to each employee. Creativity and innovation is very important and highly encouraged, for the purposes of improving effectiveness. Employees are to be provided the same concern, respect, and caring attitude within the organization that the employees are expected to share with the customer. Southwest Airlines was initially created to be a low-cost alternative to high price of intra-Texas air carriers (Freiberg, 1996). Southwest’s fares were originally supposed to compete with car and bus transportation. It was a little airline, and it would withstand the test of time. As a discount, no-frills airline, it would provide stiff competition for larger airlines. Their strategy was to operate at low cost, offering no food, no movies, no first class, and no reserved seats. They created their own market and provided increased turnaround times at the gate, by avoiding hub-and-spoke airports and opting for short-haul, direct flights. Through this market approach, Southwest has a majority of market share in the markets they serve.
There are few things that are impressive about Southwest Airlines first one is how they treat the employees. For Southwest Airlines employees are first and customers are second. If the employees are treated well that will bring in happy customers. Next is that Southwest is not only with their low prices but is able to create a competitive advantage by offering a fun and humorous experience when flying. Finally another impressive fact is when Herb Kelleher’s retire from CEO position yet remained a Southwest employee till July 2014. Even after the retirement he was still active with the Southwest Airlines that reflected his enthusiasm and dedication for the
It all started in 1971, when Rolling King and Herb Kelleher decided to challenge the existing rut of charging high prices for air travels. They considered the railways and roadways their competitors and decided to offer cheaper travel for smaller routes. The company was incorporated in 1967, apart from initial entry troubles, Southwest has been the only US airline to have earned profits since 1973. The eccentric company’s outlandish way of conducting themselves has been the sole reason for Southwest Airlines to succeed in a highly competitive and packed industry.
Before to select the proper alternative, three alternatives were analysed and evaluated under four decisions criteria: customer experience, cost, growth rate / market penetration and ease to implementation (See Exhibit 2: Factor Analysis). Between all the alternatives, it was suggested that Southwest Airlines enters to New York City by bidding the slots and gates at the LGA (See Exhibit 3: Alternatives Analysis). This alternative sustains the challenge of changing the customer experience which means adding more flights from and to the East; furthermore, entering to new markets will reinforce “the power of the network” through LGA. At the same time, this decision will allow signing more code-sharing agreements with other airlines flying to international destinations and offer new products and services to LUV customers as loyalty rewards, in-flight internet, onboard duty-free purchases, etc.; as a result of this, it will increase passenger’s insights and experiences by flying with Southwest Airlines. Nevertheless, there is potential risk by selecting this alternative, in the recent years the energy prices has had a huge increase affecting costs, fares and even capacity needed, however Southwest Airlines has been able to hedge fuel for decad...