Case Study on Southwest Airlines
Million USED/year in terms of operating revenue with American Airlines, united and Delta being the biggest players. Southwest was the 6th largest player In the market.
Since 2001, the airline Industry on the whole has been suffering he losses annually. The seat-miles flown have Increased manifold over the long term (from 1989 to 2004) Indicating increase In adoption of alarm travel among the population while the revenue per mile has stayed almost constant over these years. The passenger load factor has also jumped from low ass to high ass for most airlines.
Ever since the deregulation of the airline industry in 1978, the US airline industry has seen the entry and exit of several players. The industry on the whole has the worst net profit margin of any industry owing to its high fixed costs. Southwest has always focused on being a “no frills” airline.
Southwest primarily depended on short haul, point to point flights rather than maintaining a hub and spoke model like most of its competitors. SW flew only mall planes and offered low costs. Operationally, SW extracted most from all Its resources. SW had the least turnaround times allowing them to operate more flights per day.
Also, they had a comparatively new fleet which resulted in lower maintenance costs. SW did not use computerized reservation system and depended mainly on travel agents.
Going further, they were the first to launch an Internet site which further reduced cost of booking tickets. They also introduced a frequent flyer program based on the number of flights a customer booked rather than the miles loon. Since, SW flew short haul flights, this was more beneficial for the airline. SW was a desired place of work in the airline industry owing to its engaging work culture. It had low employee turnover and employees were loyal to the company and its CEO.
Most of SSW employees were unionized but they were separate unions from those of other airline employees. The unions were encouraged to conduct surveys before going for contract renegotiation’s which resulted in higher employee satisfaction. Also SSW pilots were among the highest paid In the Industry as they flew longer hours. There were several Instances when hegemony between the management and employees helped the company cut costs by renegotiating salaries for both management and employees. Southwest Airlines entered the US airline market after a lot of struggle operating its first flight in Jan 1971.
However it took the market with surprise by providing lowest prices. Only three airlines survived the after 2001, American , Delta and South West. As per the exhibits the load factor for southwest is 0% with highest domestic passengers carried among the best three airlines I. E. American, Delta and southwest. Southwest airlines established its market share by catering to the needs of the customers.
It provided not only a low cost carrier option but also provided various point of differences. Some of this point of differentiation Is no hub and spoke model which resulted In convenience to time oriented customers.
The airlines provided the best customer service for e. G. It provided choice to the customers regarding the fares hey want to choose.
The frequencies of flights offered were the highest for the southwest allures. It was ten TLS one to provoke Internet Docking service wanly further reduced the operation costs of the airline along with providing convenience to the customers. Imitators were not able to repeat the success story of southwest. They had cost per seat per mile remained high for them even after imitating the model. * Booking through travel agents costing 7-8$ extra * Shuttle flights were operated in heavily congested markets