A. INTRODUCTION
Southwest Airlines Co. is a major U.S. airline that primarily provides short distance, high frequency, point-to-point, low fare service. Southwest was initially incorporated in Texas by its founders Rolland King and lawyer Herb Kelleher. King’s business concept was fairly simple: get passengers to their destination in a timely manner, make sure the customer has had a good experience, and charge fares competitive with travel by automobile. Before the airline took off, they were hit with a series of legal battles ensued by the competition. However, attorney Herb Kelleher was able to beat these cases. Southwest Airlines commenced operations on June 18, 1971 with three Boeing 737 aircrafts serving three Texas cities-Dallas, Houston, and San Antonio.
Southwest managed to penetrate the Texas air market by charging prices lower than the competition. The airline offered extremely low prices that were attractive for everyone. Additionally, they started to offer various PR gimmicks that would set them apart from their competitors. A good example of this is that they hired young, beautiful women as flight attendants, and made them dress up in colorful uniforms that’s showed off their legs. Flight attendants were then encouraged to be cheerful and outgoing with Southwest customers in order to offer a flight experience like no other. Southwest management then came up with another attention seeking gimmick by allowing daytime passengers to consume alcoholic beverages during their flight. This was a strategic decision, as management knew that most of these passengers were business executives who preferred not to take alcohol during working hours. Additionally, management encouraged the grounds crew to offload and on-load passengers from the aircrafts themselves in order to reduce the turnaround time, hence being able to save more costs.
Today, Southwest operates nearly 400 Boeing, 737 aircraft to over 59 U.S. cities. Southwest also currently has the lowest operating cost structure in the domestic airline industry and consistently offers the lowest and simplest fares. Southwest Airlines also has one of the best overall customer service records, when compared to their counterparts. In this paper, I will be analyzing company executive strategy styles, the Southwest Airlines external environment, conduct a Five Forces analysis, and end with my recommendations to the company.
B. Company Executive Strategy Style
C. External Environment: STEEP Analysis
Social
Demographic Trends that impact Southwest Airlines vary and are very broad in their targeted approach. Southwest Airlines has a very strong commitment towards customer service and stands out as a result of their care of staff and customer base. Southwest Airlines hires its staff, primarily upon their attitude, regardless of their experience in the airline industry.
Technological
Arrival of communication and information technology has allowed Southwest Airlines the ability to have a robust communication system and has provided customers with an alternative for frequently travel the nation. Southwest Airlines has also expanded its outreach to its customer base directly through e-commerce. Southwest Airlines we able to introduce ticketless travel thorough technological means.
Economic
Southwest Airline is and has been severely affected by fuel costs. Oil prices rising has had a major impact on the profitability that Southwest Airlines could have. The future costs and trends of oil prices are so ever changing, fuel costs account for 40% of airlines operational costs.
Environmental/Geographical
Aircraft emissions have a higher impact to the environment after years of study, as the toxic emissions rise and settle into our atmosphere. The noise levels of Aircraft have also been a major environmental concern. The noise levels of aircraft are not only a nuisance but can cause serious auditory health issues.
Political/Legal
Southwest Airlines domestic operations have been significantly affected on various occasions by government bodies. The Federal Aviation Administration (FAA) for example, in 1979 created an amendment entitled the “Wright Amendments” which prohibited the airline to fly non-stop or provide through plane services from Dallas Love Field to any other than 7 permitted cities. A repeal occurred in 2014 to overturn this amendment
Summary
Considering all the adversity the airline industry has faced in last few decades, Southwest Airlines has continued to thrive. Southwest Airline has had an earning profit for over 40 consecutive years. Southwest Airlines continues to look for methods in improving their “product” and look for a continued season of success for the years to come. Some of these new methods included three new fare categories, new boarding processes, allowing fliers high status in the frequent flyer program, increased emphasis on sales, and finally promotion of the “two bags fly free campaign”.