Southwest Airlines Strategic Analysis
On the basis of the critical factors identified in Task 1. a) Draw conclusions concerning the company’s overall situation. b) Suggest actions for improving the company’s strategy. Task 3 – 30 Marks Answer (in essay form) the following: It has been said that “talented people in possession of superior intellectual capacity are not only a resource that enable proficient strategy execution but also a prime source of competitive advantage”.
Identify the various Human Resource practices of Southwest Airlines that collectively show the company’s focus on its employees.
State whether or not these practices have contributed to proficient execution of the company’s business strategy, right up to the present day. (Note: you will have to do some research to find out the company’s latest state of affairs). Do you consider the staff and management of Southwest Airlines to be a “prime source of competitive advantage”? Give your reasons for or against this point of view. Task 4 – 20 Marks The Southwest Airline’s business model has been copied by regional airlines in other parts of the globe.
Identify one other successful regional airline (outside the United States of America) and examine the way that company operates. It can be a company in your own region, or elsewhere e. g. easyJet in the UK and Europe. Answer (in essay form) the following: a) In what ways is that company’s market similar or dissimilar to Southwest Airline’s market? b) What aspects of the regional airline’s business model are similar or dissimilar to the way Southwest Airlines operates? Task 5 – 10 Marks Assemble your work into one business report-style document, with: • Table of Contents • Reference List • Appendices and Bibliography where relevant.
Task 1 Introduction Low-cost carrier, is so-called no-frills airline or budget airline is an airline that adopts the low cost strategies in all respects of business, such as the opening of airlines, choice of secondary airport, ways of selling tickets, and on-board service. For instance, single type of airplane, simple fare scheme, direct sales of tickets, unreserved seating, without many traditional passenger services, use secondary airport, short flights, fast turnaround times, simplified routes with point-to-point transit, low labor cost with multiple roles and etc.
Such a strategy will cut down the price to a lower level and then the cost they have saved will benefit the passenger, and it will help to achieve the win-win aspect. Low-cost carrier had changed the traditional idea of air travel, is a high level of consumption, into a speedy and economic air travel. The concept originated in the United States, follow by Europe and subsequently to Asia. Not every low-cost carrier implements all of the above strategy.
Some try to differentiate themselves with allocated seating, while others operate more than one aircraft type, still others will have relatively high operating costs but lower fares.
Nonetheless these are general characteristics, most of which apply to any given low-cost carrier. Most successful low-cost carriers try to offer a modicum of additional benefits, such as better on-time performance or more legroom. AirTran Airways has been very successful with its low-fare Business Class, while Frontier and JetBlue offer live in-flight television. US Airways offers a first class product, and a very extensive route network including international destinations.
The first successful low-cost carrier was Pacific Southwest Airlines in the United States, which pioneered the concept when their first flight took place on May 6, 1949.
However, Southwest Airlines that began service in 1971 and has been profitable every year since 1973. With the advent of aviation deregulation, the model spread to Europe as well, the most notable successes being Ireland’s Ryanair, which began low-fares operations in 1991, and easyJet, formed in 1995. Low cost carriers developed in Asia and Oceania from 2000 led by operators such as Malaysia’s Airasia, and Australia’s Virgin Blue. The low-cost carrier model is applicable worldwide, although deregulated markets are most suited for its rapid spread.
In 2006, new low-cost carriers were announced in Saudi Arabia and Mexico. Low-cost carriers pose a serious threat to traditional “full service” airlines, since the high cost structure of full-service carriers prevents them from competing effectively on price – the most important factor among most consumers when selecting a carrier. From 2001 to 2003, when the aviation industry was rocked by terrorism, war and SARS, the large majority of traditional airlines suffered heavy losses while low-cost carriers generally stayed profitable.
Many carriers opted to launch their own no-frills airlines, such as KLM’s Buzz, British Airways’ Go, Air India’s Air India-Express and United’s Ted, but have found it difficult to avoid cannibalizing their core business. Exceptions to this have been bmi’s bmibaby, germanwings which is controlled 49% by Lufthansa and Qantas’s Jetstar all of which successfully operate alongside their full-service counterparts.
For holiday destinations, low cost airlines also compete with seat-only charter sales. However, the inflexibility of charters (particularly as regards length of stay) makes them unpopular with many travelers.