Skywest Case Analysis
West, Inc. SkyWest is one of the most successful companies of its time primarily due to its remarkable turnaround of the recent acquisition it made of Atlantic Southeast Airlines (ASA) in late 2005. SkyWest takes on a low-cost carrier (LCC) business model. Despite becoming a leading regional carrier in the industry, SkyWest has faced many critical issues causing the company to constantly participate in active strategic management and planning in order to maintain a sustainable competitive advantage within the industry.
The entire industry took a major blow from the stock market crash of 2008. The economy was heading into a recession, which had a high correlation with the poor financial performance of SkyWest. The stock market This recession in 2009 led to a conflict between Delta and SkyWest that weakened their partnership. SkyWest was hesitant to sue its major partner because they believed it would discourage Delta from sending future business their way. “SkyWest claimed that Delta owed them nearly $25 million in payments” (Lohman, Pg. 16).
SkyWest should have been more aggressive in this case and followed through with suing Delta. They could have used the money won in court to become more attractive to other major networking carriers by purchasing larger jets. This would have allowed them to partner with more majors to obtain a larger customer base between multiple networking companies. Another important strategic issue SkyWest faced was the wind down of their partnership with Midwest Airlines. Republic Airway Holdings, a direct competitor of SkyWest, purchased Midwest.
SkyWest Inc. , suffered from increased fuel costs as well.
This heightened fuel cost was a big issue for SkyWest because in 2009 fuel costs ranged from 35-50 percent of an airline’s operating costs. SkyWest could have turned the fuel increases into a sustainable competitive advantage among the other carriers. They could have implemented a health rewards program that would encourage customers to remain beneath a certain BMI index and reward them with points that add up to earn free miles.
By lowering the BMI index of their customers they would be promoting good health and reducing fuel costs at the same time.
This program would actively engage customers and promote a stronger brand loyalty with SkyWest and its customers. Ongoing negotiations regarding compensation of expenses with partner Delta Airlines created another issue for SkyWest, which resulted in an additional loss of five million dollars in revenue. As announced above, SkyWest should have gotten out of their partnership with Delta earlier when they were shorted $25 million dollars and began to partner up with another major carrier.
Having done this early on would have saved them the additional loss of $5 million dollars in regards to this problem. SkyWest along with the rest of the industry suffered financial revenue losses soon after the terrorist attacks of 9/11.
This event heightened customers concern for safety and dramatically changed the entire industry overnight. One of Sky West’s strengths was the safety of their aircrafts and the extensive procedures they took part in to ensure safe flights.
Customers had the perception that smaller aircrafts (more common in regional carriers such as SkyWest) were more risky. In reality, they had a lower accidental rate and increased safety standards in recent years. SkyWest should have leveraged this strongpoint and used it to gain new customers by educating them on this safety benefit within their corporation.
They should have made known this valuable fact. This would have allowed SkyWest to steal customers from competitors and deliver the quality service and safety that SkyWest will continue to offer for years to come.
