Table of Contents
- History of the Southwest Carrier
- Price for a
- Southwest Airlines Competitors
- Southwest Airlines Competitive Advantage
- Single Plane Fleet with Blended Winglets
- Fuel Hedging and Weight Reduction Measures
- High-Level Automation
- Choice of Operation Bases
- Competencies of Southwest Airlines
- Strengths (Internal)
- Weaknesses (Internal)
- Opportunities for the Carrier (External)
- Threats to the Airlines (External)
- Specific Environment
- General Environment
- Evaluation of the Southwest Strategies
- Related Free Business Essays
The airline industry in the United States is highly competitive as there are many carriers that compete for the travel market there. For airlines to grow, they must have large numbers of passengers as well as numerous travel destinations and routes. However, it is hard for the companies to maintain the numerous destinations, fleets of planes as well as the number of customers. Some companies, therefore, find themselves operating at a loss and they eventually run out of business through either closure or acquisition. This essay seeks to examine the Southwest Airlines and the way it operates. The work covers the company’s history, its competitors, its competencies, and competitive advantages. The strengths and weaknesses, opportunities and threats as well as the specific environment are also included.
History of the Southwest Carrier
The carrier began operations in 1967 and firstly was known as Air Southwest Company. It was cofounded by Rollin King and Herb Kelleher, and in 1971, it changed the name to Southwest Airlines (Southwest Airlines Company, 2009). By 1971, the company had only three planes that flew between Houston, Dallas, and San Antonio in the Texas State. By the time of the company’s formation, the other carriers were charging high prices for fares and were characterized by complicated ticket processing and inconvenient flight schedules. The Air Southwest Company carefully considered these issues and, therefore, reached tremendous success: by 2011, it had employed 46,000 people and operated a total of 3,300 flights in a day with 72 destinations across 40 states as well as Puerto Rico and abroad; moreover, its fleet consists of Boeing 737 planes (Coulter, 2013). However, in 2008, the company’s management was on the spot for improper servicing of planes that led to the grounding of 8% of the fleet to facilitate repairs, and in 2009, the issue was finally resolved (Coulter, 2013).
Southwest Airlines Competitors
Spirit Airlines and the Jet Blue Airways are the major competitors of Southwest Airlines because the two are low-cost carriers that have embraced innovativeness (Coulter, 2013). There are also the company’s minor competitors such as the American Carriers, the United Carriers, and the Delta Carriers that seem to be forming unions/mergers to increase operational efficiency. However, according to Bamber et.al (2009), this group does not pose a major threat to Southwest Airlines.
Southwest Airlines Competitive Advantage
The Southwest Airlines have a low-cost advantage compared to the other carriers and this predominantly results from the strategy employed by the management to keep costs at the minimum level while increasing operational efficiency. Exactly this approach enables the firm to charge low fares to the customers (Coulter, 2013).
Single Plane Fleet with Blended Winglets
In contrast to rival airlines, the company operates only one type of planes – the Boeing 737. The strategy promotes simplicity of operations, scheduling, and proper maintenance of the fleet as well as regular training of the crew. The identical configuration of the fleet makes it easy for the crew to operate planes and hence increases the crew’s efficiency (Coulter, 2013). Additionally, the planes are equipped with blended winglets that enhance fuel saving and increase the flight range.
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Fuel Hedging and Weight Reduction Measures
The company does fuel hedging – the upfront payment for the right to purchase fuel at specific prices/lower rates compared to other companies. The hedging enables the firm to cut fuel costs hence keeping fares lower compared to other carriers (Coulter, 2013). Moreover, the workers of Southwest Airlines regularly wash plane engines to remove grime that increases fuel consumption. Additionally, the company reduced the amount of water for toilets and replaced the planes’ seats with lighter ones to reduce the overall plane weight hence reducing fuel consumption.
The company adopted the use of technology and automation of the processes such as booking and boarding the flights. These changes significantly reduced operation costs: for instance, ticketless booking reduced printing costs as well as costs needed for the maintenance of printers. The company also uses DING – a desktop and phone application for the customers to access services (Coulter, 2013). Finally, the use of automated boarding passes and luggage tags reduced the number of employees needed hence reducing the costs associated with salaries and allowances.
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Choice of Operation Bases
Southwest Airlines unlike other carriers that chose large and busy airports opted to choose downtown and less congested airports that are located near city centers (Coulter, 2013). The small airports enable the firm to fully utilize planes due to the ease of landing and taking off. In particular, the firm uses each plane for about six flights in a day hence increasing the utilization of its assets as well as eliminating the necessity of additional planes.
Competencies of Southwest Airlines
The management of Southwest Airlines is highly competent in terms of customer relations. Consider an example, the American Customer Satisfaction Index has ranked the firm as the first for over one and a half decade. According to the ranking, which is based on the number of complaints and positive feedbacks, in 2012, the carrier had the lowest number of complaints (Bowen & Headley, 2013). Moreover, the company’s management formulated a Customer Service Commitment aimed at improving luggage handling, customer’s safety, plane delays, cancellation, and refunds. The company also has a manager whose work is handling communication with customers, looking for flaws that annoyed them, and sending the customers prompt apologies to protect the image of the firm (Coulter, 2013). In essence, these competencies make it easy for the company to please its clientele and thus maintain a large customer base.
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The use of a single fleet plane Boeing 737 is one of the major strengths of the Southwest Airlines as this makes operation, servicing, and maintenance simpler as compared to other carriers that use different types of planes. In other words, the firm is able to maintain smooth operations due to the identical configurations of the planes and hence it has a competitive edge over the other carriers. The company’s management also goes a step ahead to enhance fuel economy by equipping the planes with winglets that lower fuel consumption (Coulter, 2013). Additionally, the engine power wash and weight reduction measures increase fuel economy as it makes the planes consume less fuel and thus increasing operational efficiency.
Another strength of Southwest Airlines is that it does fuel hedging – the process of making upfront payments for the rights to purchase fuel at low prices (Coulter, 2013). The mentioned hedge makes the company have a competitive edge over the rivals as it acquires fuel at low prices thus making it possible to charge lower fares compared to the other companies.
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Another competitive advantage of the company is that it adopted intensive automation of processes such as ticketing and boarding the flights. The use of ticketless booking allows saving printing costs as well as increasing the speed of booking (Coulter, 2013). Additionally, the automation reduces the number of employees needed that, in turn, reduces costs associated with salaries, allowances, and other employee benefits. All mentioned approaches allow lowering the overall operation costs and, therefore, charging low fares.
The analyzed airlines also opted to operate from downtown airports as opposed to the large and busy ones. This is another company’s strength because low congestion increases the speed of traveling as well as enables the firm to utilize the planes fully: they are capable of landing and taking off easily hence increasing the number of flights (Coulter, 2013). Thus, the choice of airports enables the jets to have about six flights in a day and hence increasing the operational efficiency of the carrier by eliminating the necessity for many planes.
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The quick turnaround is harmful to the company’s planes as it keeps them in constant motion (Coulter, 2013). Moreover, the turnaround makes it hard for the firm to properly service the fleet and this may be the main reason of the problem that arose in 2008 regarding poor servicing of the carrier’s planes. Additionally, the overutilization of planes makes the firm over rely on a small fleet: in case one plane is grounded, it might lead to a serious problem of disrupting the flow of flights.
Opportunities for the Carrier (External)
The company has a low-cost advantage: it maintains low costs of operation, therefore, enabling the offer of low-cost flights. The firm can take this advantage to spread the operations on various destinations locally and globally, and this will widen its revenue base as well as increase the economies of scale. On the whole, the low-cost advantage and the quick turnaround are extremely important as they enable the firm to spread the operations.
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The company has won numerous awards due to the high quality of service and a low number of incidents and customer complaints. The awards made the company famous and created it a good reputation that is useful for attracting and maintaining customers. Moreover, because of having the lowest number of complaints, the firm is rated among the best ones in the USA (Bowen & Headley, 2013). Such a rating provides a good opportunity for expansion as many people have confidence in the firm. Additionally, the company has the largest travel site (Southwest.com) and this facilitates the process of numerous clients’ handling. Overall, the firm can combine all these advantages and expand the operations by increasing the number of flights to already existing destinations and even new ones.
Threats to the Airlines (External)
The firm faces a threat of the rise of fuel costs and the lack of alternatives: these issues may reduce the company’s profitability and ruin the whole low-cost strategy. For instance, in 2008, the firm purchased fuel at $2.44 per gallon but in 2011, the same amount of fuel cost $3.25 (Coulter, 2013). With this trend, the low-cost strategy is not guaranteed as the rise in fuel prices may necessitate the rise of fares. The firm, therefore, may lose part of its customers and start running inefficiently that, in turn, may trim the fleet and operations.
The company also faces uncertainty regarding the demand, as it may not be guaranteed of maintaining the customers in the future. Additionally, the emergence of competitors such as Jet Blue and Spirit Airlines that have also embraced innovativeness and the low-cost strategy poses a threat to Southwest Airlines: the competitors may slice a share of its customers or outdo the firm in the low-cost strategy hence pushing it out of business (Coulter, 2013). Lastly, the firm also faces security threats: the wake of terrorism has led to the hijacking of planes by terror gangs. This potential problem may rob the carrier of its customers hence making it operate at a loss.
Southwest Airlines face competition from Jet Blue Airways and Spirit Airlines as the latter ones have adopted innovativeness and the low-cost strategy (Coulter, 2013). The potential competitors also include the American Carrier, United Carrier, and the Delta Carrier as these companies are forming mergers to increase efficiency. Moreover, the large numbers of people who opt to travel using planes increase the bargaining power of travelers, and thus, Southwest Airlines must seek to provide them with high-quality service at low cost. The bargaining power of suppliers is also evident as the prices of oil keep rising as witnessed between 2008 and 2011 (Coulter 2013). Finally, the Southwest Airlines face the threat of a substitute with the high-speed trains that may rob the firm some of its customers. The company, therefore, needs to remain alerted or face the consequences.
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Southwest Carrier exists in a competitive economic environment because there are several airline industries in the United States and other carriers like Jet Blue and Spirit Airlines have adopted the low-cost strategy (Coulter 2013). The company also operates in a well-populated area where people have a commercial culture characterized by numerous travels. Furthermore, the country’s political environment is good because the United States does not experience civil wars. Lastly, the technological environment is also appealing as the United States’ society is characterized by innovativeness.
Evaluation of the Southwest Strategies
In regard to the environment, the company is on the right track as it has adopted the low-cost strategy characterized by fuel hedging, fitting of winglets on planes, and automation of processes – everything is aimed at lowering costs. Despite the emergence of competitors, with the innovativeness embraced, the Southwest Carrier stands to have a successful business in the future. However, the company needs to improve on the routine maintenance and servicing of the fleet to avoid a repeat of the controversy that occurred in 2008.
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In conclusion, Southwest Airlines is a low-cost carrier that is in operation since 1971. The company has registered success across decades despite the emergence of competitors such as Jet Blue and Spirit Airlines. The use of a single plane flight is one of its competitive advantages while high-quality customer service is its competency. Moreover, while the single plane flight is a point of strength for the firm, its weakness is the overreliance on few planes. The above-mentioned comparative advantages and the strengths provide an opportunity for the firm to spread its operations as well as attract new customers. However, the company also faces the threat of increased fuel prices, the rise of low-cost competitors such as Jet Blue, and the rise of terrorism in the country.