Case Analysis: Southwest Airlines

1330 words 6 pages
At the onset of the airline industry in the United States, major network airlines were the sole providers of air travel. This multifaceted industry was a difficult industry to break into as a consequence of “sophisticated customer segmentation, hub-and spoke models and costly information systems for reservations, fare wars and intense competition” (Thompson 2008). Shrinkage in airline ticket prices augmented the demand for airline travel. Many markets were simply deserted or over-looked by major network airlines; this is a region a fresh “second tier of service providers” could enter into. This endeavor proved to provide a consumer savings of billions per year. Thus in June of 1971, after a tumultuous battle with other Texas-based …show more content…
Southwest Airlines has a predisposition to to be ahead of the curve. This company turned a blind of to the industry trend of profit loss. Southwest has netted a profit for 36 consecutive years. Southwest Airlines has an investment grade credit rating; a feet only accomplished by a few other airlines in the world (Inkpen 2008). This company has established strategies and efficient management (Keller 2008). At Southwest Airlines top executives “generated ten times more revenue per dollar of compensation than did C-suite types at some of the network carriers”. In 2008, hardline fuel-hedging left Southwest Airlines “70 percent hedged at $51 a barrel through the end of the year and 55 percent hedged at the same price” in 2009. This approach accumulated a savings for Southwest Airlines at a projected $3.5 billion dollars (Brancatelli 2008). Southwest Airlines makes use of an abridged price structure based on “low unrestricted, unlimited, everyday coach fares” (Thompson 2008). The company conserves money using this simple system in relationship to a complex fare structure that is costly to manage (Brancatelli 2008). The average short-haul ticket fare for Southwest Airlines reached $106.60 in 2007. Long haul fares only reached $399 (Thompson 2008). The accepted average plane turn-around time for major networked carriers is ninety minutes. Through the company’s basic approach, Southwest is able to

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