Southwest Airlines was incorporated on June 18, 1971, serving three cities, Dallas, Houston, and San Antonio. It has been a successful business that has grown into a powerful force in the airline industry. The reason Southwest has remained financially viable is their commitment through point-to-point service with a quick turnaround time. The more planes in the air and the less time on the ground is a profitably business model. Although, there are some areas where Southwest struggled and could improve upon (Kruggel, 2001).
In a large competitive Airline industry that has a strong entry barrier, Southwest Airline succeeded on their customer service and quality differentiation distinct any other Airline contributor. The company set them self up for any breakdown what might would happen in the future. Nevertheless, September 11, 2001 attack happened and the Airline could have been better prepared for that event (Anthony & Govindarajan, 2007, p. 114). After 9/11 attack struggling airlines had changed their business strategies and offer lower pricing.
Almost every aspect that differentiated Southwest airline from other companies were cut because of having to adapt to new security protocols. These strategies caused Southwest not staying in competitive advantage position, and therefore, they had to slash their pricing lower than average. Of course, loyal customers would continue using Southwest over other airline industries. Analysis: Southwest competitive advantage strategies are as follow: Southwest implemented the first and most simplistic frequent-flier program: purchase eight flights and get one free.
Other are their point-to-point services, which are generally targeting the frequent business traveler. With several regular flights per day, if a passenger happens to miss their flight, they will be automatically booked onto another flight. Secondly, secured routes through secondary airports which generally had lower fixed costs for the airlines and less overcrowding of travelers ease? (Koke, 2011). Southwest focal point on fast, dependable turnaround time utilizing only one type of aircraft, make available for staff and passenger to be familiar with the effectiveness of the service.
Passengers are not allocating seats, which let the passenger to be guided more efficiently. In addition, Southwest’s point to point system is more dependable because it does not depend on the time arrival of an earlier flight for departure. After Porter’s five competitive forces model, Southwest airline utilizing the differentiation from competition by allowing a friendly, warm flying experience for the travelers with low cost flights undercut the competition, which would fit under the threat of substitutes.
Other aspect of preventing the threat of substitutes is the reliability of the airline (Porter, 1987, pp. 28-35). The Southwest airline is determined not only to take care of their stakeholders, but to protect our planet and its natural resources as well. Conserving fuel and water, employing green purchasing practices that meet the leadership in energy and environmental design standards for new construction and building are some of the practices they are determine to retrofit.
Gary C. Kelly Southwest president and chief executive officer said,” Looking Forward As we look to our future in building Southwest Airline, our priority is to maintain the excellence we have built over the past four decades with our brand, culture, customer service, operational excellence, and consecutive annual profits. I am enthusiastic about our 2013 plan and believe our transformation efforts will make us better, stronger, and more competitive. And, the outstanding efforts, commitment, and dedication of our people give me confidence in our ability to successfully execute our plan.
We are committed to our purpose to connect people to what’s important in their lives through friendly, reliable, and low-cost air travel. That purpose will guide us to go forward on our journey in pursuit of our vision to become the World’s most loved, most flown, and most profitable airline” (Movawad, 2010). The founder of the Southwest Airline Herb Kelleher in his recent interview mentioned, “We don’t know everything about everything. We know about one thing. I have seen other airlines make mistakes, buying radio stations, hotel chains, rental car businesses, and so forth and so on. And I thought, We do not want to get into thinking that we’re massive and great because we’ve done pretty well. And that is still the policy today” (Reingold, 2013). One of the Southwest airline competitor’s was United airline in terms of new services and prices. It started a program called “Shuttle by United”. The disadvantage Southwest airline had, was how to deal to access the program at hand.
The next one was to figure out how to respond to the initiatives. Specify the decision factors while approaching the circumstance, there were some unpredictable conditions that Southwest airline had to deal with (Freiberg & Freiberg, 2006, pp. 65-70). First, it was the determination of the profitability of the flights they were profiting from and losing from competitors such as United airlines. The concern was how many round trips each airline made, how many miles each flight was, and load factor of each flight.
Daily profit calculation for each flight showed how much profit they made each city and finally state wide. After some calculation “Shuttle by United” program was forecasted that it would put the United airline into debt if they do not gain more profit from it. As of now the program costs more to run than it will pay off (Anthony & Govindarajan, 2007, p. 115-116). Conclusion: While the airline industry in the United States has not made flourishing financial headlines, one small company has been able to fulfill its customers and gain a place in Fortune 500 companies in a short period of time.
Southwest has adapted to the business traveler who is looking for reliability and less hassles. In addition, it has a fast reward system that is easy to comprehend and helps retain customer loyalty. In addition, Southwest hires the best people and rewards them accordingly, in a fun, enjoyable environment. Management-employee relation, organizational training and strong leadership are identified as the source of employee motivation. Finally, Southwest negotiates fuel prices for their airlines years in advance allowing the company to keep their pricing consistent (Lunsford, 2008).