Southwest airline management was preparing to conduct a weekly Tuesday meeting. This informal gathering provides the different departments a platform to communicate between the different functional areas and excel the team spirit which is valuable factor for the success of the southwest airline corporate culture. Scheduled meeting is arranged to discuss the latest information and to enhance the effective coordination among the integral departments of the organization in order to evaluate the present scenarios and the progress of marketing and sales, advertising and promotion, revenue and management and the planning department in order to gear up the performance of each department to achieve the organizational goals and objectives. Southwest airline is one of the major market share holders for U.S Carriers based on the passenger revenue due to a simple reason of their low cost model. The passenger airline industry after the de-regulation from the Federal Government department of Civil Aeronautics Board was supposed to face more competition and as an outcome of this competition healthy services to the customers will be available. Due to this initiating of the competition two companies the Continental Airline and the United Airline were trying to compete and get the market share of the Southwest Airlines. The Continental Airline failed to achieve this landmark in the passenger airline industry of the United State due to the heavy operating losses and scaled back from the industry.
United Airline was operating in the 14 routes in the California and the nearby states out of which 9 were in direct competition with the Southwest Airline. The CEO of the United Airline announced that their target is to match the prices of the Southwest Airline and exceed over the services in this specific area of market. This statement is viewed by the chairman of the Southwest Airline Herb Kelleher as “United shuttle is like an international ballistic missile targeted directly at Southwest Airline.” Problem for the Southwest Airline is what implication would result if the United Airline shuttle matches the Southwest strategy of low prices and compatible or better services. How might Southwest react to these changes if at all? What might be the profit impact of United’s action and Southwest reaction, if any? Southwest consolidated yield and load factor for fourth quarter January 1995 were tracking lower than the consolidated yield and the load factor for fourth quarter January 1994 and if this pattern continued, Southwest’s consolidated yield and load factor would be about five points lower in the January 1995 compared to January 1994. Another important development is the summary presented in the meeting by the staff member of the southwest company is that a few days earlier shuttle by United had reduced its one way walk-up coach fare on the San Francisco-Burbank route to $ 69.00. This Fare was identical to one charged on the Oakland-Burbank route by the both airlines.
Southwest Airlines SWOT Analysis
a) Southwest Airline is enjoying the competitive advantage of High capacity usage
b) Southwest Airline is the holder of the top position ranking presented by the U.S. Department of the Transportation of major Air-Carrier for 1994 for the airline top quality On-Time Performance, Baggage Handling, and Customer Satisfaction
c) Southwest is leader in low fare and better quality plus spiritual attitude of the employee is unmatched strength.
d) Experience of 22 consecutive years of profitable operation
e) Diversity in upper management to achieve objectives and goals set during the planning.
f) Holder of the Triple Crown award for the three consecutive years which other competitors could not have only for one month.
g) Fourth largest domestic airline holding 11.8 % of the market share.
h) Dominates the short haul segment of airline industry
i) Consistently ranked among world safest air carriers.
j) According to the number of passengers, Southwest has been termed as the largest airline in the world
k) Southwest Airline follows the simplest most fare structure to its customer.
l) The facility it provides to the customer to change reservations without paying any additional costs is attractive to customers.
m) Matching the colors of the crafts according to the state liking symbols like whales and flag of the state.
n) The planes have 20 minutes elapsed time which is least in the industry.
o) Successfully implemented concept of airline within airline.
p) Low turn over ratio of the employee.
a) Low fare does not have margin to manage the elite class passengers this segment of the market need luxurious facilities that can not be provided in low fare strategy.
b) Southwest provides peanuts which are not necessarily liked by every passenger as liking varies so there is no choice in this matter.
c) There is limitation of the flights to the nationwide only and no international flights offered by the Southwest Airline.
d) Lack of the technology communication such as e-mail service.
e) There is less focus on the amount of the freight and cargo.
f) The Southwest Airline lack morning flights facility.
g) There is no facility of online reservation system.
h) Most of the employees have associated with the worker unions.
i) Less focus on the segmentation of the seats.
j) Southwest Airline is dependent on the single producer.
a) Southwest Airline has strong opportunity to enter into international market with the past experience of the low price model.
b) Southwest Airline can include new planes as presently it is using the Boeing 737 as its aircraft
c) Southwest Airline should focus on the growth of the aged passengers.
d) It can expand its long rout flights by coordinating with short haul.
e) Southwest Airline should implement more strong marketing campaign to pursue its potential customer in this way it can get more market share.
f) It should implement the new technological development such as information technology to enhance the quality of the service.
g) It can also offer elite class separate service to get the market share of the business class segment.
a) The threat of the increasing fuel prices will force the Southwest Airline to increase fare.
b) Competitors that are strongly copying the low price model will exert pressure on the Southwest Airline to offer more services or to reduce temporarily fare to eliminate the competitors from the market as the new competitor can not afford the low level fare offered by the Southwest Airline. When the competitor once eliminated it can return to original fare.
c) The threat of increasingly technological changes such as online reservation system.
d) Increase in the expenditure incurred for the ensuring the safety of the passenger.
e) To fulfill the legislative requirement in order to operate in the industry.
f) Threat of the terrorism is faced equally as the whole industry is facing it.
Do Nothing Alternative
It is one perspective that Southwest Airline feels comfortable and don’t get panic. As it should believe that the services they are providing and the price they are charging is unachievable by any other Airline. This will lead into serious disaster as now a day’s statistical analysis and data available to formulate the combination of the resources invested and receiving the benefits from them is scaled with the help of business mathematical models .These tools assist the Research and development department of the competitors to achieve the economies of the scale. The competitor such as United Shuttle can find breakeven point and could take the risk of operating on no profit in the beginning and then afterwards when getting handsome share of the market can increase fare to become profitable in the long term basis. So Southwest Airline must look deeply into the market development and respond them with absolutely right strategy.
Increase Flight frequencies on competitive routes
Southwest Airline can vigorously increase the flight frequencies over the competitive routes to face the head to head competition with the United Airline. The concept of airline within the air line resulted in tremendous achievements as supported by the data in the exhibit 9 provided in the case study note.
Achieving the customer life time value
The most successful marketing approach that Southwest Airline can adopt is to achieve the Customer life time value achievement. Once a passenger chooses your service you should provide him or her with the best available service. Convenience of the passenger is directly associated with their level of the satisfaction.
Targeting the United Airline market share by providing elite services
As the united Airline is shifting its strategy to follow the low price model of the Southwest Airline so there is a chance that the elite customer of the united Airline will look into an alternate choice that match their need . So Southwest Airline can start separate business unit to explore this opportunity.
Final Recommendation and reasons for it
The Southwest Airline should provide more variety of the beverage and eatables to give the passenger a little more choice this will please the passenger and hence increase their locality with the Airline Customer choose it on the basis of the services and price leadership quality they offer. Besides holding the present success the Southwest Airline must manage to the changing taking place in the market. Southwest Airline should adopt the composite of the above alternatives.
Price battles are stiff and fierce. New trends’ development and changes in needs and wants of the customers must be assessed in properly organized and structured studies by the team of expert marketing force. Innovation and changes occurring in the new word demand the challenging situations. So the fittest is to survive and the rest are eliminated from the competition so in these conclusive message point out to the Southwest Airline success is hidden in matching the needs and wants of the largest market segment at the price they can afford.