Comprehensive Case Analysis
Southwest Airlines:
What¡¦s Next? April 11, 2000 They Took a Great Idea and Made It Fly
Southwest Airlines Company is a domestic airline that provides primarily short-haul, high-frequency, point-point, low-fare service to 53 airports in 52 cities in26 states throughout the United States. Southwest focuses primarily on point-to-point service, providing more direct nonstop routes for short-haul customers and, therefore, minimizing connections, delays and total trip time. The company¡¦s average trip length is 441 miles with an average flight time of approximately one-hour.
It was Rollin King¡¦s and Herb Kelleher¡¦s vision to start an airline that with a mission to get its passengers to their
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Southwest Airlines is looking to expand its services into more eastern markets and adding more long-haul routes.
EXTERNAL OPPORTUNITIES AND THREATS
The external audit focuses on identifying and evaluating trends and events beyond the control of a single firm. An external audit reveals essential opportunities and threats confronting an organization so that managers can formulate strategies to take advantage of the opportunities and avoid or reduce the impact of threats. Opportunities
h The point-to-point niche market remains a growth market
h Adding more long-haul routes
h International expansion into Canada, Mexico, or the Caribbean
h Expanding Eastern U.S. short haul-routes
h Stable economy
Threats
h Competitive fare wars and customer incentive plans
h Economic recessions
h High fuel prices
h Corporate cost-saving measures
h Airline Alliances¡Xcode sharing agreements, scheduling and marketing agreements
COMPETITIVE PROFILE MATRIX
This Competitive Profile Matrix identifies Southwest Airlines major competitors and their particular strengths and weaknesses in relation to Southwest¡¦s position.
SOUTHWEST
Southwest Airlines original name was Air Southwest in 1967 in Dallas, Texas, before the change of the name to Southwest Airlines in 1971. They were faced with battles due to legal issues with Dallas and Love field, because of the Wright Amendment, but the come to an agreement to allow 4 states to connect to Texas. Southwest bought 129 new planes, because of the expansion of the company growth, which currently have 141 planes that enhance the growth of the company because of shorter flights (Gimbel, 2005). Southwest was started in 1971, by Rollin King and Herb Kelleher, which released it first flight from Dallas Love Field that is located in Houston and San Antonio Texas. The passengers look for an airline services that can get them to their destination at a cheap price. Majority of the passenger are looking for an airline service that will eliminate layovers and multiple stops as possible.
Over 35 years ago, Rollin King and Herb Kelleher decided to create a different type of airline. They began with the simple notion: If you get your passengers to their destinations when they want to get there, on time and at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline. They were right (Southwest Airlines, 2004)!
Southwest Airlines is a major US airline established in 1967 that services a multitude of cities in all 50 states and beyond. The company is known for its outstanding quality in providing services and it 's cost effective ticket prices to its many passengers throughout the nation. This airline is based in the southwestern United States, in the city of Dallas Texas, and due to the tremendous number of airplanes that it has and the timely service that it provides to its passengers, this airline services more US passengers than any other airline. This airline also has the largest fleet of planes of any economical or low-cost airline service in the world and employees more than 45,000.
Southwest Airlines Co., established in 1971 by Rollin King and Herb Kelleher, began its operations with only three Boeing 737 aircrafts. It is headquartered in Dallas, Texas(Hawkins, Misra, & Tang, 2012). Southwest is well known as one of the largest low-cost carriers. With this strategy, the company has dramatically grown up and deeply rooted in the US airline industry. Now, Southwest Airlines Co. operates 633 aircrafts to 93 domestic cities and the highest number of passengers used Southwest Airlines to fly around U.S in Jan 2014 (Hawkins, Misra, & Tang, 2012). To accomplish more than 40th consecutive years of both profitability and competitiveness, Southwest Airlines Company is constantly trying to find the routes to differentiate itself from other domestic carriers (Hawkins, Misra, & Tang, 2012).
Southwest Airlines is globalizing their company in order to reach a bigger market, and become competition for other companies. Southwest Airlines has already conquered the domestic market beating American Airlines, United, and Delta according to Fortune. Access to a new market is what motivated Southwest to globalize, they are expanding to the south of North America, with their new assets found in their acquired airline AirTran Airways (LeBeau, 4) . Southwest Airlines has brought low rates and a great experience to the domestic market, which was warmly received, they now plan to dip into global market to bring better service to all.
Southwest Airlines Co. began its operations in 1971 and has been serving the industry for the past 43 years now (Southwest Airlines, n.d.). It is the major domestic airline, and ranked number one in 2014 by the Bureau of Transportation Statistics (United States Department of Transportation, 2014). Back in 1971 the airline began its services in Texas in the cities of Houston, San Antonio, and Dallas. The company has been ranked as the nation's largest low cost carrier (Mergent, 2012). It offers the lowest fares, and has the lowest cost structure in the industry.
In the opinion of Dr. Grace S. Thomson, “a heterogeneous mix of long and short-haul in very thing segments, passenger, density, and per capita income at end points gives [Southwest Airlines] competitive advantage. The way to establish a company in such a market as the airline industry would be to strategically expand in to airports with less competition. Southwest Airline capitalized on this fact to become a national airline (Keller 2008). Southwest Airlines satisfies what were once negligible markets. Southwest serves “64 cities in 411 non-stop city pairs” (Thompson 2008). Saturating these markets has allowed Southwest Airlines to expand without putting a strain on its pocket book (Keller
Currently, Southwest does not serve any destinations outside the United States, but it is planning to begin international services or ticket international flights in 2009 (Wikipedia, 2008). The company has established a code sharing partnership with just a single airline on the USA market – ATA Airlines, and the plans of international expansion were partially based on this partnership. However, in March 2008, ATA Airlines declared bankruptcy and filed for Chapter 11 protection after it lost a key military charter contract in the middle of skyrocketing fuel prices, leaving Southwest Airlines alone (Dance, 2008).
Southwest Airlines Co. is an airline company that offers air transportation services within the United States and in international markets. The company operates within the airline industry that is highly regulated, technology intensive, labor intensive, and highly competitive (Southwest Airlines, 2017). Southwest Airlines operates a service business whereby the company offers a point to point air transport service to its passengers. Other than passenger transport, the company offers transportation services for pets and unaccompanied minors. The flights offered include short haul and long haul between various destinations within the United States and internationally. In 2016, the company’s operating revenues from international operations amounted to $383 million. A unique feature of the Southwest Airlines is its cost structure whereby the company focuses on cost discipline and uses one aircraft type to minimize costs.
Southwest Airlines was originally named Air Southwest. It was started on March 15, 1967, by Rollin King and Herb Kelleher. Southwest Airlines is an American low fare airline based in Dallas, Texas. It is also the largest airline in the United States by number of passengers carried domestically in a year and the third largest airline in the world by number of passengers carried. Southwest is also one the most profitable airlines in the world posting a profit for 34 consecutive years.
“The U.S. airline industry had lost money in 14 of the 28 years from 1980 through 2007, with combined annual losses exceeding combined annual profits by $15 billion. Yet in July 2008, Southwest reported record quarterly revenues, its 69th consecutive quarter of profitability, rising passenger traffic on its flights, and a record load factor.”5 With a brilliant strategy of ‘low cost/low fare/no frills’ Rollin King, along with Herb Kelleher, launched the most surprising success story in airline history. In 1966, King had an idea. “His business concept for the airline was simple: attract passengers by flying convenient schedules, get passengers to their destination on time, make sure they have a
On October, 2016 Southwest Airline has scheduled flights to 98 destinations in 41 states, Puerto Rico, Mexico, Central American and the Caribbean. Southwest has done an “A” rated job of implementing and following the initial company strategy, and a phenomenal job of growing and sustaining through highly competitive market demands.
Southwest has experienced remarkable growth by continuing to convert cities to Southwest service by purchasing four Air Tran cities for $1.4 billion in 2011. Although this was a smart choice to continue to grow, spending over a billion dollars hurt them financially. They predicted around election time that consumer demand would improve having them gain more revenue, but there predictions were wrong causing them to still be financially tight. In April, Charlotte, N.C., Flint, Michigan; Portland, Maine; and Rochester, N.Y. will be converting to Southwest service.
Bargaining Power of Customers (high)- Customers has several options when it comes to flying. But the main attraction to customers are low prices and Southwest makes it known that they have some of the lowest airfares. The only way Southwest can take back the power is by offering direct flights to cities that other airliners do not offer. Besides the small occurrence of having a direct flight to a city that no other airline has, Southwest
Completing such as task will require cultivation of talents and to preserve its business culture. Expanding Southwest Airlines to accommodate AirTran means discussing the strengths, weakness, opportunities, and threats regarding the expansion of such a sizable merger. Lastly, a merger of this magnitude will require recruiting and hiring to address the expansion level impact and minimize error.