SkyWest, Inc.
SkyWest Inc. was founded as SkyWest Airlines in 1972 in St. George, Utah. In 2005 the company acquired Atlantic Southeast Airlines and in 2009 was operating as two separate companies connecting over 2400 scheduled passenger flights to 208 cities in the US, Canada, Mexico and the Caribbean. In 2009 SkyWest Inc. was the largest independently owned company in the regional airline subgroup in the airline industry.
Revenues ending in fiscal year December 2008 were $3,496 million for an increase of 3.61% as compared to $3,374 million for fiscal year 2007 while recorded revenues for 2012 were $3,534.4 million for the fiscal year ending December 2012 for a decrease of 3.3% as compared to 2011.
SWOT Analysis
SkyWest’s strong communication and transportation network enables the company to gain entry into critical markets. However, extreme competition and other factors threaten the company’s profitability.
Opportunities
1. New partnership contracts provide for potential growth opportunities
SkyWest strategy is to secure contracts with major airline companies to provide opportunity for sales and growth. SkyWest partnered with United and Delta and operated under flights of Delta connection, United Express and Midwest Connections. In 2012 SkyWest entered into an agreement with American Airlines and operates under the flights of US Airways Express, American eagle or Alaska under code-share partnership arrangements. Additional strategic agreements with major airlines could provide the SkyWest with growth opportunities to expand in the future and expand operational network
2. Growth in the US airlines industry
The US airline industry is highly sensitive to fluctuations in the economy and the 2007 recession left so...
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...redictable and cause reduced revenues for SkyWest.
Contracts with major airlines-Although contracts with major airlines are largely an opportunity for SkyWest, they may also be a threat. SkyWest suffered a $5 million reduction in revenues with Delta when negotiating for compensation expenses. This reduction in revenue affects the company’s operational expenses and may place competitors in a more profitable situation.
Overall, SkyWest’s partnerships with United and Delta are the company’s life line for its revenues and profits. Delta and United provide the organizational structure for SkyWest’s regional operation’s by providing airport facilities, IT systems, ticket and reservations systems, scheduling and dispatching operations, fuel purchasing and ground handling services. Without their operational support systems SkyWest would have hard time generating revenue.
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,
Delta Air Lines operates in a competitive industry. Amongst its competitors, its two largest were American Airlines and United. To survive in the industry it was necessary to employ and maintain technologically efficient and cutting edge systems. However, Delta systems of operations were mainly paper based; they still used pneumatic tubes to move information and they made little use of the internet. As a result, the company lacked a competitive edge. The technology it had was based on various departments independently purchasing the technology they needed and hiring their own IT staff. In 1996, Delta was still known for its expensive airfares, poor service, limited leg room on flights and use of out-dated inefficient processing systems.
Having a low cost of operations is one of the contributing factors to 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.
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.
Many elements of Delta Airlines are described in detail, within this paper. There is a breakdown of the external and internal factors, using external and internal analysis. Porter’s Five forces are used to create the external analysis, and the key factors for Delta are power of buyers, and rivalry. Delta’s competitive advantages are identified as customer service, sustainability, brand image, strong strategic alliances, and corporate travel. Delta’s main issues are the low expansion in international markets, continuous changing of incentive program, and glitches within technology. Delta should expand more into the Chinese and African markets in order to gain market share within the airline industry.
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.
In the airline industry, Southwest Airlines is considered a true innovator. By shaking up the rules of flying and improving upon inefficient industry norms, Southwest has quickly grown by leaps and bounds. From the very start, Southwest Airlines' goals were to make a profit, achieve job security for every employee, and make flying affordable for more people (Southwest,2007). Southwest has not strayed from these goals. It does not buy huge aircrafts, fly international routes or try to go head to head with the major carriers; and thanks to a great planning, Southwest airlines has become the most successful airline company in the U.S., if not the world.
Northwest Airlines is one of the pioneers in the airline transportation industry and is ranked at the fourth largest air carrier in the United States today. The success of the carrier depends on the quality and reliability of the service at a reasonable price. Close competitors force Northwest to innovate their services by increasing efficiency. This essay will try to examine different perspectives in the services needed to successfully complete the company’s objectives. The analysis will explain historical and financial perspectives that may give a better understanding of the current market trend of the organization.
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.
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.
Gittell, J. H. (2003). The Southwest Airlines Way: Using the Power of Relationships to Achieve High Performance. New York: McGraw-Hill.
Southwest has comprehensive strategy and they work with harmony. They are low cost airlines which make the customer feel like royalty. Southwest have a winning strategy is proven by their profit year after year even thought they had economy crisis. Since 1973 Southwest reported a profit each year even when they lost billions of dollars from the year 1980 to 2009 because of the low operating cost strategy, low fares and customer service. Since the start of Southwest they have stay faithful of keeping low cost across the industry. Their value in corporate culture reflected through their prices and customer service.
Since its first grand opening in 1971, Southwest Airlines has shown steady growth, and now carries more passengers than any other low-cost carrier in the world (Wharton, 2010). To expand the business operations, Southwest Airlines took over AirTran in 2010 as a strategy to gain more market share for the Southeast region and international flights. However, the acquisition of AirTran brought upcoming challenges both internally and externally for Southwest Airlines. In this case analysis, the objectives are to focus on the change process post the merger with AirTran, and to evaluate alternatives to address the impacts of the merger. II.
Additionally, deregulation and liberalization has accompanied the globalization of the airline industry, so that companies have had to compete against each other in new markets, as well as to gain entry into new territories. The rise of low cost local and regional airlines has made the competitive environment difficult to maneuver for large, formerly-state-subsidized national carriers. This has resulted in the need for strategic alliances between airlines in order to attempt to protect market shares and profits (Friehe and Curti, n.d.).
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.