You Are Not Free to Move About the Country
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Southwest Airlines 2008
“You are not free to move about the country”
Problem Statement:
To be able to sustain the existing model while expanding the operations, both domestically and internationally, in order to be ahead of the fast catching competitors.
PESTC:
Political
Deregulation: Deregulation sent airline fares tumbling and allowed many new firms to enter the market. It is because of the price wars that southwest airlines were able to base its business model of low cost airline.
9/11 Attacks: Post the 9/11 attacks the US domestic airlines lost about $30 billion and many airlines filed for bankruptcy. Southwest Airlines could survive the crisis because of its strong financial fundamentals. Because of this the airlines was able to win the trust of the customers as well as the employees as they did not lose their job.
Economical
Nature of Cost Structure: The cost structure comprised of Fuel Costs and restrictive union agreements. These were out of the airlines control and were thus fixed costs. This was an advantage for Southwest Airlines as it was able to come up with a very efficient plan of operations which other airlines were not able to adapt to.
Price sensitive leisure travelers: Post the deregulation the industry had majority of travelers which fell under this category. Southwest Airlines was able to understand this fact and it introduced its low fares flights and convinced the travelers that the low fares were not introductory promotions but regular fares.
Social
Customer dissatisfaction with Airline Service: Customers were dissatisfied with the airline services which lead to calls for new regulations of airline competitive practices. Southwest Airlines always emphasized in providing the best possible services to its customers and with the ever demanding customers it will have to maintain its standards.
Technology
E-ticketing: With the advent of e-ticketing, Southwest Airlines was the first airlines to sell sears from an internet site and later went on to be the first airline to create a home page on the internet.
Ticketless travel: Southwest Airline was the only major airline to provide a ticketless travel service.
Strengths
Low Cost model to meet the needs of the industry
Considering the almost inflexible cost structure it created a model that made the best use of the cost structure.
Innovation in providing service in the form of the Positively Outrageous Service
Great support from the employees who considered Southwest Airlines a very desirable company to work for.
The company had always been in a great financial position. It has been earning a profit for 36 consecutive years.
Weakness
Not able to operate efficiently in the challenging environment of the northeast market
Opportunities
Growth opportunities in the Northwest market.
The airline has not yet entered any market outside United States. This gives the airline an opportunity to further expand its operations.
Threats
A very volatile environment in the Northwest Market.
An altogether different environment if the airline thinks of going international as the current model would have to be changed.
The competitors have come back from the fall and have come back even stronger. There is a good chance that they will replicate the Southwest Airlines model in which case there will not be much differenciation.
The competition from JetBlue Airlines which has its operations in the international markets as well.
The airline