Recommendations For Southwest Airlines To Remain Highly Competitive
Southwest Airlines (SWA) is the leader in the air transportation industry; the company has many loyal customers that are committed to the SWA brand. Their mission has always been simple and the same - to serve customers and continue to provide superior air transportation throughout. SWA knows that the competition in the airline industry is strong. SWA has many competitors that have over the years attempted to duplicate their business practices and the culture of the SWA organization. Competition is stiff in the airline industry; however, SWA continues to lead the industry with its low fares and incentive packages. Southwest Airlines had total operating revenue of 9.1 billion in 2006. With the ever-rising cost of fuel, the company tries to continue exercising various fuel-saving practices. In order to remain highly competitive and continue to lead in “value-based pricing”, SWA must ensure efficiency in operations and marketing in order to keep its cost and prices low. Some of the recommendations for the South west Airlines are presented below.
No Established Alliances
Certain major U.S. airlines have established promoting alliances with one another, together with Northwest Airlines/Continental Airlines, American Airlines/Alaska Airlines, and Continental Airlines/America West Airlines. In 2001, AMR Corp., parent of Yankee Airlines, completed its acquisition of the assets of Trans World Airlines. This puts huge strain on the corporate to take care of its position within the trade whereas running a smaller fleet.
Increase Carrying Capacity
As a general trend, and expedited by their acquisition of AirTran, Southwest has been moving into more congested and more expensive airports. In order to take care of their comparatively low operational prices (generally measured across the trade by price per average seat-mile, or CASM) they have to either raise costs or build the flights more profitable. Southwest’s board has already approved the acquisition of seventy three Boeing 737-800s to be delivered between the primary quarter of 2012 and year finish 201730, thus allowing an increased capacity on certain flights. Griffin recommends increasing this order, and expediting delivery if potential. Since slots at these larger, a lot of full airports have fastened prices despite plane size, operating larger aircraft can be more profitable if the demand can sustain it. By implementing the larger 737-800s in their fleet, Southwest conjointly improves the gain of long-haul flights. At present, Southwest offers some, but still relatively few long-haul flights. By increasing capability, they'll add longer routes at similar levels of gain to shorter ones. With larger planes, the marginal expense of additional customers is reduced while they bring in the same revenue, allowing for 24 more profitability. The risk here is that the demand should be property therefore on systematically fill the larger planes, or operational losses on these flights area unit doubtless. These 737-800s would give the continued growth they need, while not essentially coming into the foremost full markets, or at least only in limited slots.
Add Near International Destinations
The larger planes described above also allow for more flexibility with routes over water, such as the recently added Caribbean destinations. These near-international destinations provide vital growth opportunities for Southwest if they'll maintain a similar affordable structure that has created them therefore in. AirTran already has access to a number of these markets, that ought to facilitate Southwest transition to full service. Southwest is also in the process of revamping the technology behind their reservation system so as to facilitate reservation to international locations. Furthermore, aside from regulatory issues, Canadian markets could be accessible and profitable much as many of Southwest’s U.S. markets are. Finally, Southwest has had a code sharing agreement in Mexico with Volaris since 2008. This has allowed them to assess the feasibleness and market demand for variety of markets, and if the regulation and infrastructure costs are not prohibitive, Mexico could be another supply of significant growth, in addition to the already developing Caribbean service
Expand fuel Efficient Fleet
Another method of improving their CASM is by reducing the dependence on fuel. As seen on top of, fuel is the most significant contributor to their operating costs. As such, any reduction would facilitate their operational margin. Boeing in recent years has been developing lighter and a lot of fuel economical planes, such as the 737 MAX and the Next-Generation 737. Southwest are the primary clients of the 737 Georgia home boy, and has ordered 150 with the first to be delivered in 201731. The Next-Generation 737 may be a a lot of immediate modernization resolution, as Southwest continues replacing older aircraft. These new planes also will permit Southwest to end the Boeing 717s, which are essentially unnecessary in the point-to-point system they operate. Southwest should still get on the forefront of those developments, and though investing in the first of a technology carries an inherent risk, it is important that they take each chance to reduce fuel expenses and differentiate from the remainder of the trade.
Conclusion
If Southwest is ready to properly integrate AirTran into their methodology of operations, they will be well positioned for growth. Furthermore, by taking advantage of new fuel-efficient technologies, increasing the capacity of some long-haul flights, and expanding their discreet collection of ancillary fees, as Griffin Consulting Group has outlined, Southwest can still lead the airline trade for years to return.
References
- https://www.youtube.com/watch?v=FI6dT0zMRB4
- http://investors.southwest.com/our-company/company-overview
- http://economics-files.pomona.edu/jlikens/SeniorSeminars/Likens2012/reports/Southwest.pdf
- https://www.youtube.com/watch?v=FI6dT0zMRB4
