Essay About Southwests Business Model And Southwest Airlines Serves

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Threats to the success of Southwest Airlines
Threats
Southwest Airlines is the only U.S. carrier to be profitable every year since 1972.
Southwests business model of targeting new cities where the competition is weak and
the costs are low has been very prosperous for the company. But in this post 9-11
environment, with the additional security procedures at airports, increased fuel costs,
labor unions demanding more from management, and other external factors on the
industry as a whole. It will be tough on Southwest to continue to turn a profit, and
continued success wont be so easy.
Opportunities for growth
Southwest Airlines, however, is not without weaknesses. No matter how successful,
Southwest Airlines serves only 29 states and cannot compete against the bigger
companies that serve nationally or even internationally. Furthermore, Southwest Airlines
does not utilize a hub system that allows for bigger competitors to reach further out.
The old strategy of focusing on good climates and smaller less congested airports has
contributed to Southwests low costs. Expanding to more northern routes will be subject
to weather and the weather conditions can effect the airlines ability to maintain on-time
performance and can significantly effect down-line operations such as paying people
while they cannot service a plane. A schedule based on quick turn around, leaves little
room for any type of flight delays. “This puts a limit on growth because there are only a
finite number of markets that can satisfy these criteria” (Jackson & Randall, 2006, p.
650).
Moving into Denver is one of the bigger risks the airline is taking as it tries to
grow before other airlines catch up. Frontier and United already have matched the low
fares Southwest announced for its flights from Denver. With comparable fares,
passengers will be able to choose between Southwests no-frills and two airlines that
unlike Southwest offer assigned seating and premium features such as first-class sections,
and in-flight entertainment. For some passengers, that might be enough to keep them
flying Frontier and United. Saving a few dollars might not be worth giving up all the
little extras the competitors are giving to passengers. When a comparatively small, new
company is able to take on major players in an extremely competitive industry, gain
market share, please customers and employees alike, it is time for others to take notice.
Southwest Airlines strategy has proven so effective, it will be duplicated and
emulated by its competitors to a point where it would lose the originality. This could
result in competitors offering low rates to the areas covered by Southwest and beyond,
making Southwest Airlines range and limitations more obvious.
Probably one of the biggest weaknesses is how Southwest has started to emulate many
of the features the bigger carriers use to support their large networks. The hub and spoke
system to enable long range traffic failed, sponsorships, and national advertising all seem
to drain a lot of money needed for day to day operations. These tactics originally did not
work for the larger carriers, and Southwest will find out the same in their rush to gain
more markets.
Outdated 737s
Another weakness of Southwest Airlines is their choice of using Boeing 737s
exclusively. Southwest owns the biggest Boeing 737 fleet in the world. “Being limited to
one type of airplane leaves them with little flexibility when
the model receives a bad reputation or a critical flaw is discovered” (Jackson & Randall,
2006, p. 650).
Boeing had a labor strike in 2005, this action threatened to delay the delivery of new
airplanes Southwest had ordered for 2006. If Southwest didnt get those planes, many
expansion cities could not get service off the ground limiting Southwests ability to
compete with other carriers in these new markets. This could cripple Southwests
profitability for the upcoming year, and limit their future growth.
If Southwest decides to enter the long-haul markets, they will have to decide whether
or not to introduce food service. If they go that way it would require galleys and onboard
services that would boost the cost of operations