Southwest Airlines Case Analysis

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I. Executive Summary A. Problem Statement Southwest Arilines has been facing direct competition in 9 routes of the intra-Califonia market with United Airlines and their "Shuttle By United." Shuttle By United was designed to be a high-frequency, low fare, minimal amenity, short-haul flight operation initially serving destinations in California and adjacent states who's intent wsa to "match Southwest's strategy." In the four months since Shuttle By United's inception competition has been fierce resulteing in Southwest and United slashing prices and envoking a merkteting blitz in this 9 route area. Recent news highlighted that Shuttle By United intended to discontinue some service (perticularly the Oakland-Ontraio route) and raise fares $10.00 per ticket. Southwest's respons to this and the coninued threat of losing market share to United should be: o Continue targeted advertising to the 9-route Intra-California market and weatehr the initial storm by Unted and await their withdrawal (Continental airlines tried to directly compete with Southwest and lasted 16 months before completely pulling out of the "point-tp-point" market. United's recent actions could demonstrate an inability to compete long-term and they are only in their fourth month). o Match United's rate increase of $10.00 per ticket B. Summary Recommmendation: o Continue targeted advertising to the inra-California routes that are directly affected by the Shuttle By United and maintain current pricing strategy. I. Industry Analysis A. Description of Industry and Segments  Deregulation for 16 years (1978) has resulted in an icnrease of domestic carriers from 36 in 1978 to 100 in 1985.  Major carriers route system is either "point-to-point" (Southw... ... middle of paper ... ...ed's recent actions could demonstrate an inability to compete long-term and they are only in their fourth month). o Match United's rate increase of $10.00 per ticket A. Targeted Marketing  Dedicated 16% of total capacity to the Intra-California market with no negatiev impact on other markets to date.  Conitue to promote "The Low Fare Airline" slogan especially with the advent of raised ticket prices from Untied.  Walk-up fare of $69.00 has remained unchanged sine Q4 of 1993 to Q4 of 1994 enabling profitability to remain stable.  United's average passenger fare currently is 5% – 10% higher than Southwest and the recent $10 increase may price them out of the market.   Twenty-two consecutive years of profitable operations which is unmatched in the US airline industry. Eith largest airline carrier in US based on the number of revenue passenger mles fown.

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