Southwest Airlines Q\'s PDF

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Southwest Airlines Q's...

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Southwest Airlines 1. Describe the structure of the airline industry. Is it an attractive industry? I. Prior to Southwest, the industry was not an attractive industry to enter. It was a difficult market to compete in, and most “start-up” airlines failed, and still do. Most of the operating costs are fixed or semi-variable, and a lot of the operating costs, such as fuel costs, are beyond the control of the airline. Profit margins in the airline business are low, and costs are high, causing high rates. 2. How has Southwest positioned itself in the industry; what is Southwest’s strategy? I. Southwest has positioned itself in the industry to appeal to the commuter individual, or the family who wants to be able to fly for a low cost. They appeal to the average American who was in the category of “not able to afford” flying prior to their existence. By positioning themselves as the low cost, high quality, consistent airline, they basically undercut all other airlines in terms of performance, customer satisfaction, price, and profitability. 3. What are the key strengths and capabilities accounting for Southwest’s success? Why are the factors you cite strengths? I. I think that Southwest management team did a lot of things right regarding their strategy when entering the Airline market, but I think that the common denominator is the fact that they did not follow the “norms” of the airline industry. Instead, they created a new, revolutionary product that the airline industry lacked: short commuter flights for low fare. In addition to that, even when they expanded, they maintained their low costs and eliminated the notion that flying was a luxury that most American citizens could not afford. They eliminated the idea that an airline must operate by a certain set of ideas, for example, the hub-and-spoke network. They reinvented the way flights could be networked and maximized their profit for the routes done by reducing turnaround time. Overall, Southwest owes its success to their ability to successfully challenge accepted norms within the industry. 4. Will Southwest be able to sustain their success given the current restructuring in the airline industry and threats from new and existing competitors? I. Yes, Southwest will definitely be able to sustain their success given the market restructuring and new and existing competitor threats. They have outlasted many other new threats, and gone completely against the norms of their existing competitors and been able to not only maintain a profit and grow exponentially, they became so successful that the other large airlines that were in the market prior to them were seeking to emulate their strategy and failed. 5. Is Southwest’s acquisition of AirTran wise? I. I do believe that Southwest’s acquisition of AirTran was wise based on expansion ability. Southwest had grown into all markets possible in the United States and had done exceedingly well, and was even one of the only airlines to maintain a profit since it was founded. The only thing that might hinder their ability to make the merger successful is training the employees to provide the level of service their customers expect (Southwest spirit), the fact that AirTran’s fleet was not their standard Boeing 747, and they no longer offer only short, commuter-type flights. Like the article noted, Southwest did not expand unnecessarily, and

avoided growing at a faster rate than it could handle. I believe that Southwest will be able to handle the merger. 6. Does Southwest have or can it develop a competitive advantage in the long haul market? I. Southwest definitely has the competitive advantage currently. They have had it since they were founded, and have been able to maintain that advantage since. They revolutionized the Airline industry and challenged the norms, and regardless of the CEO or mergers, I think the “Southwest Spirit” is so deeply engrained within the company values that it will continue to revolutionize the market, therefore maintaining their competitive advantage long-term....