Southwest Airlines Co. can be an American low-cost air travel. Southwest is the most significant airline on the planet by range of passengers transported per season (by 2009). Southwest sustains the third-largest traveler fleet of airplane among all the world's commercial air companies. By May 3, 2009, Southwest manages roughly 3, 510 plane tickets daily. Southwest has its headquarters on the grounds of Love Field in Dallas, Tx.
Southwest Airlines has taken more customers than other U. S. flight since August 2006 for merged domestic and international travellers according to the U. S. Division of Transportation's Bureau of Vehicles Reports. Southwest Airlines is one of the world's most profitable airlines, placing a earnings for the 37th consecutive yr in January 2010.
Southwest's successful business design involves soaring multiple short, quick trips into the secondary (more efficient and less costly) international airports of major markets, and using only one aeroplanes type, the Boeing 737.
The Southwest Effect
The success and profitability of Southwest's business model led to one common trend being named following the company, the Southwest Result. Since Southwest's original objective in Texas was to make it less costly than driving a vehicle between two details (in the early 1970s, through the first major energy cost problems in the U. S. ), it developed a template for entering market segments at rates that allowed the flight to be profitable, yet only on the basis of lean functions and high airplane use. The main element notion to the Southwest Impact is that whenever a low-fare carrier (or any aggressive and progressive company) enters market, the marketplace itself changes, and usually grows dramatically. For example, when fares drop by 15% from their historical averages, the number of new customers in that market may not just two times, but actually quadruple, or more.
Southwest has been a major ideas to other low-cost airlines, and its own business model has been repeated often round the world. Europe's EasyJet and Ryanair are two of the best known airlines to follow Southwest's business strategy for the reason that continent (though EasyJet functions two different plane models today). Other airlines with a business model based on Southwest's system include Canada's WestJet, Malaysia's AirAsia (the first and biggest LCC in Asia), Sir Richard Branson's and Australia's Virgin Blue (although Virgin Blue now runs two plane types), Qantas's Jetstar (although Jetstar now runs two aeroplanes types), Thailand's Nok Air, New Zealand's Liberty Air, Mexico's Volaris and Turkey's Pegasus Airlines. Although Southwest has been a major inspiration to numerous other airlines including Ryanair, AirAsia and Jetstar, the management strategies, for example, of Ryanair, AirAsia and Jetstar fluctuate significantly from those of Southwest.
Goals and Objectives
- Ensure highest quality Customer Service in the air or on the floor.
- Ready to help customers under any circumstances.
- Are there to ensure you make it from point A to point B safely
- To stay the most successful with low-fare, high consistency point-to-point carrier.
History of Southwest Airline
- On February 20, 1968 the Texan Aeronautical Commissions approved programs to fly in 3 state governments, the c5eators are Rollin Ruler and Supplement Kelleher
- Expanded through 1980's to 1990's by 1993 Southwest Airlines could fly in 34 says in 15 states
- They also expanded into new areas California, Northwest, Florida, East Coast
- The competitors could not keep up, "500 pound cockroach that was too big to stamp out:
- As the airfare was falling the traffic went up tremendously, in 1994 United started out a shuttle service, the large airline carriers were nourishing traffic into transpacific and transcontinental routes, they could not keep up
- In 2004 Southwest Airlines is fourth largest home carrier, customer boarded
- In 2002 they journeyed in 58 locations and 30 says, it's been 13 years in a row that they are profitable, even after Sept 11, 2001, net income dropped 52. 9 percent, Southwest was the only flight company that experienced a profit all the other companies were in the red
- Was the first flight to achieve the Triple Crown, they had five difference Triple Crown focused on the Employees of Southwest Airlines for his or her excellent achievements.
Southwest Airlines Mission and Eye-sight Statement
Mission
- The mission of Southwest Airlines is determination to the best quality of Customer Service delivered with a feeling of warmth, friendliness, individual take great pride in, and Company Heart. To give normal people the chance to fly.
- To the employees
- We are focused on provide our Employees a well balanced work environment with equal chance of learning and personal progress. Creativity and innovation are prompted for improving the effectiveness of Southwest Airlines. Above all, Employees will be provided the same concern, respect, and caring attitude within the organization they are expected to share externally with every Southwest Customer.
Vision
- To have a conservative increase growth, capitalize and cutback schedules of other airlines. To continue growing conservatively in long-haul success.
New Quest Statement
Southwest Airlines is a company that is for anyone and every that needs to get from point A to point B by flying. Our service and idea is to fly safe, with high regularity, low-cost plane tickets that can get individuals to their locations on time and sometimes closer to their vacation spot. They fly in 58 cities and 30 claims and will be the world's largest short-haul carrier and we ensure that it is run successfully and within an economical way. Their technology is current such as our check-ins process is faster. Striving to develop and grow in a traditional manner is key, and being economically secure by keeping quality high and cost low. Their brilliance is controlling cost by our rapid twenty-minute gate turnaround, a non-stop airfare with our airplanes, and a more productive workforce which keeps above our challengers. They treat our employees like customers, family and motivate and compensate them for doing a job done well. They continue being in the Bundle of money Magazine's most admired companies (2nd in 2002) 100 best companies to help. Since 1972 we've positioned first in Money Journals highlighted in "The 30 Best Stocks. " Within their neighborhoods they make donations to charities to organizations and people with time of need.
New Perspective Statement
- Their eye-sight is to extend our locations both local and overseas when you are the largest and most profitable flight company to accomplish both brief and long-haul carriers effectively and with low cost. Also to be an flight carrier that has the most productive labor force to guarantee the best journey possible for each and every and every traveler.
Acquisitions
Morris Air
One airline inspired by Southwest was Morris Air, founded in 1984 by June Morris and David Neeleman, located in Utah and functioning in the northwestern U. S. Southwest Airlines purchased Morris Air and utilized the capital and routes into its inventory and service. David Neeleman worked with Southwest for a brief period. When his non-compete agreement expired, Neeleman founded JetBlue Airways, a competing airline that also incorporates (and in a few ways, improves upon) many key points and procedures pioneered by Southwest, including building a positive, warm worker culture and working a simple fleet.
Muse Air
Southwest Airlines has mainly pursued a strategy of internal progress, rather than by acquisition of other airlines as commonly occurs. However, in addition to acquisition of Morris Air Transport (see above), Southwest does acquire rival Muse Air in 1985, which managed McDonnell Douglas MD-80s. Muse Air was renamed TranStar Airlines. TranStar Airlines was then closed down in August 1987.
ATA Airlines
Towards the finish of November 2008, Southwest released it was buying the operating certificate and the rest of the assets of ATA Airlines. This acquisition transferred to Southwest Airlines ownership of NY LaGuardia slots formerly controlled by ATA. The deal did not include any plane, facilities or employees of ATA.
Political: -
- Deregulation in 1978 1st big political gain for southwest airlines.
- Government helped two major airlines escape financial trouble after 9/11 assault.
Economic: - When monetary conditions are unfavorable:
- Airliners very susceptible/vulnerable
- Discount airlines see profits
- People look for cheaper travel options
Social: -
- Flying on planes to get to where you need to be has been typical going back 30 years and will continue being the norm later on.
- As increasingly more Spanish speakers come to reside and travel in america there is certainly more dependence on airlines to be bi-lingual.
Technological: -
- Some airlines have converted to e-tickets, and also have a self-checking machine.
- Many people use the internet to compare prices to find the best option for his or her trip.
Environmental: -
- Airlines have slice prices and offered expensive recurrent flyer programs just to grab customers from other airlines
- The regular airlines are beginning to get away from the hub system and swap to the point to point system that southwest airlines uses.
Legal: -
- Legal issues have hindered airlines from making a complete 9/11 recovery.
Porter's 5 forces Model
Rivalry among competition: - There is certainly high competition for Southwest airlines because other airlines are also there in US that happen to be providing same services to the customers. Its main rivals are United airlines, Alaska airlines etc.
Rivalry among competitors sets the price-Southwest Airlines is a discount airliner. Rivalry is increasing, as the marketplace decreases, and competition downsize, the opponents become more or less similar in proportions and capacity. Which means that as financial conditions worsen, opponents downsize and then compete for the same left over market.
Threats of new entrance: - The risk of new entrants is low, the demand is not high. In addition, there are hurdles, definitely not the greatest; the FAA. Federal government regulations and limitations imposed on those involved with this industry. Such would be government sanctions consequent of international issues.
Threats of substitutes: - Risks of substitutes is high because a great many other form of transport such as high speed trains, video tutorial conferencing, buses etc. While these alternates cannot provide speed of travel, almost all of Southwest Airlines' customers are drawn to the low price.
Bargaining vitality of Clients: - The bargaining electric power of clients is high because a great many other airlines can be found for which passengers can select for rather than Southwest airlines.
Suppliers include those who provide service/products necessary for Southwest Airlines to their business function. For Southwest Airlines, suppliers include mechanics (and other maintenance people), providers of gas, food (the goodies that are offered). The suppliers don't have much bargaining vitality. Customers include both domestic and commercial areas. There is absolutely no bargaining ability for customers, as there is no threat of backward integration; it is unlikely that customers of Southwest Airlines are going to build their own airplanes and fly themselves.
Bargaining electric power of suppliers: - The supplier's power is low for Southwest airlines because they need to charge the superior according to the strategy of competition otherwise the individuals can turn off to the other airlines where he can have maximum benefits in conditions of quality of service and the value.
BCG Matrix
The Boston Consulting Group (BCG) Matrix is a straightforward tool to examine a company's position in terms of its product range. It helps a company consider its products and services and make decisions about which it will keep which it will release and which it will invest in further.
In 1970's, BCG experience curve work resulted in inside which has a significant impact on business thinking i. e. of rapid development in market talk about was the important as the curve suggested then the regular approach resource allocation where each business device funded in on growth appears to be recipe because of its failure.
Business with low market talk about but high potential would never create enough cash to gain the competition down the knowledge curve. People that have the high market show but few changes of progress would generate far more cash than those would use efficiency.
The BCG matrix can be diagrammatically displayed as follow
Question Marks
Question grades are products that develop rapidly and consequently consume huge amounts of cash, but because they have got low market shares they don't create much cash. The result is large net cash use. A question make has the to get market share and be a star, and finally a cash cow when the marketplace development slows. If it doesn't become a market leader it'll become a dog when market expansion declines. Question marks need to be analysed carefully to determine if they are worthwhile the investment necessary to grow market show.
Dogs
Dogs have a minimal market show and a minimal development rate and neither generates nor consumes a big sum of money. However, dogs are cash traps because of the money tangled up in a company that has little probable. Such companies are applicants for divestiture.
Stars
Stars make large amounts of cash because of t heir strong relative market talk about, but also ingest huge amounts of cash because of their high growth rate. So the cash being put in and brought in roughly nets out. In case a star can maintain steadily its large market show it will turn into a cash cow when the marketplace progress rate declines.
Cash Cows
As leaders in an adult market, cash cows show a come back on assets that is higher than the market expansion rate ± so they create more cash than they take in. These devices should be milked extracting the profits and investing less than possible. They provide the cash necessary to turn question marks into market market leaders.
Strategies for Southwest airlines
Ansoff Matrix
Market Penetration Strategy
- Encouraging existing Customer to buy more Teaching benefits for using more (associating freebies/extra service/regular membership with major offering).
- Try to look for overseas entrant's weakness.
Product Development
- Seek additional distribution channels (More tie ups & collaboration: Try seeking collaboration with international companies, Bilateral conversations over seats and code-sharing between the companies).
- New product development.
Market Development Strategy
- Try to determine new customer group (Old-retired folks).
- Special offering for first-time fliers.
Diversification strategy
- May go for other services like international plane tickets etc. (concentric diversification).
- May go for design fashion shows (horizontal diversification).
- May go for other activities, which can lure the junior.
SWOT Examination of Southwest Airlines
Strengths
Southwest has successfully adopted a cost command strategy.
- Southwest keeps operating expenditures per available seat mile at 15-20% below average.
- The company has no baggage handling, no dishes, no central reservations, and no designated seats.
- Because most of its planes are Boeing 737s, maintenance, turnaround, and training costs are comprised.
- The company has embraced technology that will reduce costs (e. g. , ticketless travel).
The company has a reputation for great customer service.
- 28 years of safe, reliable operations
- 5 consecutive many years of Triple Crown Customer Service
- 5 consecutive years of record revenue and 24 consecutive years of profitability
- Top position in the Flight Quality study conducted from the Country wide Institute for Aviation Research for just two of the previous three years
- A way system that is continuing to grow to 52 airport terminal in 25 expresses, taking more than 50 million customers on 243 Boeing 737 plane, etc.
The company has a strong, fun-loving, employee-oriented culture. The business's mission statement targets these areas of the business enterprise.
The company's progress has been steady and organized. Southwest gets into new markets only when they can achieve frequent flights.
The company's marketing focuses on its low prices, convenience service and advanced combo of advertising, open public relation and marketing promotions.
Weaknesses
- Gap between Southwest and the rest of the majors has narrowed as other service providers have attempted to emulate Southwest formula.
- Southwest's competitors are offering shuttle services that contend directly with the company. Also, they are operating, buying, and forming alliances with local carriers.
- As the result of its steady, organized growth strategy, there are numerous untapped home markets
- Pilot and Journey Attendant Unions have increased salary and advantage plans to be the best in the industry. Continued boosts in Seat cost per Mile will not allow southwest to remain a minimal fare carrier.
External Opportunities and Threats
Opportunities
There are opportunities for extension to new marketplaces.
The new Boeing 737-700 has the capacity to fly longer distances nonstop, which may change the definition of "short haul".
Demographic trends look favourable to a airline focusing on price and trustworthiness.
The consumer carries on to seek convenience and time personal savings. Flying, somewhat than traveling, will meet that require if the price is right and the air travel is reliable.
The competition is looking to international, rather than domestic markets, for expansion opportunities.
Improved computer technology will allow more ticketless trades and reservations created by PC.
Threats
Southwest's ability to hold the brand on costs will impact its cost leadership position.
- The largest cost component is labour. This cost could be influenced by union actions, which cover 85% of Southwest's labor force.
- The second major cost component is fuel, that could be negatively influenced by economic or politics events.
Government rules could hinder Southwest's ability to control costs, control fares, or go into new markets.
- Recent federal crackdown on safeness (e. g. , insulation, cargo hearth recognition) means costly retrofits.
- Proposed re-regulation would limit existing firm's capacity to react to under-pricing by new companies.
- Prior to deregulation in 1978, companies were limited in their capability to enter into new markets.
- The government just lately proposed a rise in facility duty rates, which could have resulted in higher costs.
Improved telecommunications may lower demand for air travel, or may lower demand for "discount" airlines.
- E-mail and teleconferencing can lead to less need to visit.
- Consumers may demand "personal" technology on planes, such as videos, phones, games, etc.
Alternative types of transportation, such as a high-speed railway, could weaken demand for flights. Also, if the current economic climate weakens, people may choose to drive alternatively than take a flight.
Southwest would be harm if the general public notion were that low price equates to low quality.
Competitive Benefit for Southwest airlines
- Focus on Customer Service.
- Embracing the "New overall economy" through the use of internet seat tickets sales.
- Focus on lowest cost fares.
- Internal demand
- Keeping fares lower through cost lowering methods
- Lowest cost credited to no allocated seating
- No dishes on flights
- Lower over head expenditures
- Use "Hubless" system to reduce costs
