Southwest airlines case PDF

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SOUTH WEST AIRLINE CASE ...

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Company Background and Statement of Issues Southwest Airlines Co. is a giant United States airline, that is headquartered in Dallas, Texas. Southwest is famously known as being the largest low-cost model carrier. SW was founded in 1967 by entrepreneur Rollin King, in an attempt to create a low-cost airline to shuttle passengers between Dallas, Houston, and San Antonio. King’s original vision for SW was to: attract passengers with the strategic advantage of convenient schedules, consistently get passengers to their destinations on time, provide an overall positive experience for the customer, and to charge fares competitive with travel by car. King and his business partner, lawyer Kelleher, were met with opposition by competitors in the Texas airline industry. This led to a four year legal battle where they eventually prevailed in cases in the Texas and United States respective Supreme courts. After this period had ended SW still struggled to gain a foothold in the market. In 1971 SW hired Lamar Muse as CEO. Under Muse SW pursued several tactics to gain market visibility and attract more customers. These tactics included: 

Southwest decided to have flight hostesses dress in colorful pants that showed off their legs and white high-heel boots. The company went out of their way to hire long-legged beauties with “sparkling personalities”. Over three quarters of SW’s first graduating class of flight attendants consisted of young ladies who were cheerleaders and majorettes in high school.

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Another attention-seeking scheme they came up with was to give free alcoholic drinks during daytime flights.

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An efficient off-boarding process became a part of their differentiation strategy. This included SW being able to off-load passengers and baggage, refuel the plane, restock the galley, on-load new passengers and baggage, file the necessary paperwork, and leave the gate in 10 minutes. This 10 minute turnaround was one of Southwest’s

signatures in the 1970’s and 1980’s. More recently this turnaround has been extended to about 30 minutes due to the increase in volume. 

In 1972 ,CEO Lamar Muse, implemented a differentiated pricing model. This two-tiered pricing structure included on-peak and off-peak prices.

Southwest’s Strategy in 2014 By 2014, Southwest had evolved specific elements of its strategy over the years, but three strategic concepts had remained constant. These strategies include: 1. Charging fares that were price-competitive, and at strategically selected times, attractively lower than what competing airlines were charging. 2. Create and sustain a low-cost operating structure 3. Keep Southwest flights “fun” by providing customers with a top notch flying experience.

In 2014, Southwest’s fares were grouped into four separate strategies: (“Wanna Get Away”, “Anytime”, “Business Select”, and “Senior Citizen”). The ‘Wanna Get Away’ structure always included the lowest fares and required to purchase tickets a certain amount of time in advance. These tickets were non-refundable but could be credited to another flight with SW. The ‘Anytime’ fares were refundable, and included a higher frequent-flyer point multiplier than the ‘Wanna Get Away’ flights. “Business Select” included additional perks including: priority boarding, double the frequent-flyer point multiplier as “Wanna Get Away”, priority security and ticket counter access, and one complimentary adult beverage. Lastly, the “Senior Citizen” fares offered lower rates to passengers over the age of 65. SWOT Analysis Strengths: Southwest is known for its phenomenal service and flexibility. Which has made it a trusted brand amongst consumers. In addition to the customer loyalty Southwest offers more departures than any other US airline. These flights also have a high capacity and usually filled

mostly to all of their seats. Also, the company focuses on international travel, which has allowed them capitalize from low-cost and efficient operations. Overall, creating a platform to offer customers low fares and competitive discounts. Lastly, Southwest has become one of the most profitable airlines in the industry and world for that matter. Weaknesses: Even as a primer airline, Southwest still has room for improvement. They flights often do not service international customers. They also do not have luxury amenities for high paying customers such as airport lounges and private seating arrangements. Another downfall is their dependency on the Boeing 737 aircraft. This gives their supplier a lot of power, and the lack of diversification creates risk as a company. Lastly, customers can only purchase tickets through the Southwest website, which offers traffic to their site but may limit their market potential. Opportunities: Today’s age of technology has created a plethora of opportunities and markets for southwest to capitalize. If Southwest can find a way to appeal to the elderly generation by using their safe and trustworthy statistics and brand, they can maximize their profits. Also they should find a way to incorporate international flights, which includes longer air travel and potentially higher revenues. Considering the airline industry is expected to see rapid growth within this decade, Southwest should increase its marketing tactics and make flying with them a standard. Lastly, Southwest could incorporate more technology on their aircrafts to occupy customers during their travel. Threats: Some threats Southwest should be mindful of are government regulation, terrorist activity, a potential bearish economy, and the fuel increase. Government regulations always have played a major part in the success of airline companies. These regulations in addition to fuel price and supplier demand could increase the costs of goods sold. Also, an increase of

terrorism and harmful activity on any airplane could affect southwest in a negative manner. However, if Southwest can implement strategic measures that prevent the threats early on. Final Recommendation Considering all of the aspects of the trusted airline described above, we believe it would be in their best interest to continue to cut cost in every avenue posible. Also, they should provide luxury amenities for customers who prefer differential treatment. In addition, to making customers a priority, they should initiate marketing campaigns that target the women, hispanic, and elderly markets. Finally, Southwest should find a way to incorporate international travel into its business structure. If that means acquiring a smaller airline as a subsidiary or even a joint venture. They should focus on international travel, because it is expected to grow tremendously in the next few years....