Southwest Airlines is the industry leader in low cost airfare. They began its operation in 1971 with three Texas based routes and began interstate routes in 1978. When Southwest entered the market in 1971 they employed a market penetration pricing approach. They wanted to provide the best service for the lowest possible price. They saw that if they cut out certain unnecessary benefits they could lower their ticket price to a level far below that of the competition. They do not have in flight movies, meals, or first class sections. This strategy has been very cost effective and Southwest passes the savings on to the customer. They chose to focus on pleasure travelers and low-income travelers opposed to business travelers. This allowed them to take advantage of a market, which was often ignored by other airlines.
Southwest is not concerned with the prices of other airlines. They do not engage in pricing to meet competition, or pricing below competition. CEO Herb Kelleher stated, “We’re not competing with other airlines. We’re competing with ground transportation.” This philosophy has led them to be very successful because they are priced below the competition, but don’t raise their prices when the competition does.
Cost controlling is very important in the airline industry. Southwest is very good at controlling their costs. They offer a no frills service for people who want to get to their destination for as little as possible, and are not concerned about the bells and whistles like in-flight movies. Southwest also realized that when their planes are on the ground, they aren’t making money. They decided to keep their planes in the air as much as possible and have worked hard to keep a low turnaround time. They manage to unload passengers and load new passengers for the next flight within twenty minutes, which is shorter than the industry average. Southwest also uses only one kind of plane, the Boeing 737, in order to reduce costs of parts and training employees to use different types of planes. All of these methods have lowered the cost of operations for Southwest and allowed them to have a profit of $4.7 billion, which is twice that of United Airlines. And because they are so efficient they can pass the savings on to customers.
There is no first class at Southwest and therefore all the customers are treated the same. They all receive the same level of atte...
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...ly buy Southwest’s inexpensive tickets. College students also aren’t concerned about in-flight movies, meals, or other perks. Southwest would crush the competition in that route and make a large profit. Even families going on vacation would fly Southwest Airlines to Mexico. It is cheaper than other major airlines and it is a respected airline, unlike some no name airlines that run flights to Mexico.
Advertising would be best done on television because America has become lazy and watches too much TV. They should advertise their great customer service by having customer testimonials and pictures of smiling customers and employees. They should also advertise during family oriented shows, because they are a form of inexpensive travel that a family could take advantage of.
In conclusion, I feel that Southwest has taken advantage of its inexpensive flights and family oriented atmosphere to prevail despite the September 11th tragedy. Southwest has been a profitable business for 26 consecutive years and has twice the profits of United Airlines. They have been doing a great job providing customer service and will continue to be successful as long as they continue with their current plan.
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 restructuring. 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 sheet (Tuttle, 2013).
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,
Also, Southwest is renowned in the airline industry for its short turnaround time on arrivals and departures. And since people's biggest concern nowadays is money and time, having low price airline tickets to cater their traveling needs in a shorter period of time will surely satisfy them. Moreover, aside from the low prices offered, what attracts customers is Southwest’s way of dealing with them. The employees of the airline treat their customers well and really listen to their needs. Southwest Airlines is also well-known for having a very productive and loyal workforce.
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.
Southwest Airlines is competing with "Shuttle by United" head to head in about 9 routes. United has just announced that it is discontinuing its Oakland - Ontario route and hiking the fares in all the 14 routes by $10, which calculated to be 14.5% increase in the fare. Southwest has to respond effectively to these unexpected developments and has to act accordingly while maintaining their current low fare image and increasing their daily operating profits. We have considered the elasticity of the market to be 1.15.
Pricing. Their pricing strategy is based off their market position as a budget airline. Positioning their company as a budget airline, Southwest can maintain and keep their lower price points compared to their competitors. For Southwest to maintain sustainability as a market leader, they must effectively utilize their resources to reduce their cost of operations. By only operating one type of aircraft, short non-stop flights, point to point routes, and flying into less crowded secondary airports, this has allowed Southwest Airlines to keep their price points down while simultaneously reducing their planes turnaround time.
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 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:
This is why they have become a company with high retention rates. Southwest Airlines is voted “the best place to work” for a simple reason. The company invests in their employees and is committed to their values and vision through training and development.
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 faced many barriers to entry from the fierce competition of other airlines in the industry. Though competition was fierce, Southwest Airlines managed to succeed by doing things differently. Their mission was to provide affordable air travel to those who would not normally fly. Contradictory to the rest of the airline industry, Southwest maintained a profit while keeping its fares low. Southwest was unique to the industry in two ways. They focused on the short haul traveler and used a point-to-point method of flight connections.
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.
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.
The company’s cultural change, which is still ongoing, may lead to a decrease in employees’ morale. As AirTran’s employees continue to embrace Southwest Airline culture, the issues emerges from this organizational change remain priority.
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.