Southwest airlines presentations


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With 40 consecutive years of profitability, Dallas-based Southwest Airlines (NYSE: LUV) continues to differentiate itself from other carriers with exemplary Customer Service delivered by nearly 46,000 Employees to more than 100 million Customers annually. On May 2, 2011, Southwest completed the acquisition of AirTran Holdings, Inc., and now operates AirTran Airways as a wholly-owned subsidiary. Southwest is the nation’s largest carrier in terms of originating domestic passengers boarded and, including AirTran, operates the largest fleet of Boeing aircraft in the world to serve 96 destinations in 41 states, the District of Columbia, the Commonwealth of Puerto Rico, and five near-international countries. Southwest has lower unit costs (adjusted for stage length), on average, than virtually all major domestic airlines and consistently has one of the best overall Customer Service records. Southwest’s all-Boeing fleet consistently offers leather seating and the comfort of full-size cabins. The majority of Southwest’s fleet is equipped with a new, eco-friendly cabin interior, and satellite-based WiFi connectivity, including a new inflight entertainment portal, which gives Customers the ability to watch live TV, news, sports, and movies.

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Southwest airlines presentations

  1. 1. William Gholston Ladel Harris II Thomas Haskins Brittany Taylor Erika Witherspoon
  2. 2. Industry Analysis
  3. 3. Market • Southwest Airlines Started as an intra-state operator in the state of Texas in 1971 • Short haul, high frequency, low cost strategy, and point to point route system • In 1994 southwest held 4.4 Market Share% • Southwest • Make the expansion to become a major carrier • Lowest operating cost in the domestic airline industry • Low cost philosophy survived, a severe price war
  4. 4. • US passenger airlines into 3 categories • Major Carrier • annual revenue 1billion; 95% domestic passengers carried • 80% all major carrier domestic • National Carrier • annual revenue 100million-1billion • Regional and Commuter Carrier • annual revenue less than 100million • In 1978, the United States had 36 domestic carriers • The major carriers adopted the hub-and-spoke route system •
  5. 5. Estimated Market Share for Major U.S. Carriers in 1994 Based on Revenue Passenger Rating Carrier Market Share % 1 United Airlines 22.1 2 American Airlines 20.2 3 Delta Airlines 17.6 4 Northwest Airlines 11.8 5 Continental Airlines 8.5 6 USAir 7.8 7 Trans World Airlines 5.1 8 Southwest Airlines 4.4 9 American West Airlines 2.5 Source: Southwest Airlines company records. Firgures rounded
  6. 6. Market Share % 4.4 2.5 5.1 22.1 1 United Airlines 7.8 2 American Airlines 3 Delta Airlines 4 Northwest Airlines 8.5 5 Continental Airlines 6 USAir 7 Trans World Airlines 20.2 11.8 8 Southwest Airlines 9 American West Airlines 17.6
  7. 7. • Major carriers turned their attention – Long haul routes • As major carriers pruned or reduced service on these short-haul routes – Regional carriers and New airlines filled the void
  8. 8. • Mergers and acquisitions mergers in the 1980’s • Eight Airlines controlled 91% of U.S traffic causing them to be fragile • Price competition- due to deregulation price competition
  9. 9. • In 1994, 92% of airline passengers bought their tickets at a discount • on average just 35% of the posted full fare
  10. 10. • Customer Service – sense of humor in our workers – the compassion for passengers and coworkers – desire to work • in 1994 we were awarded the triple crown of the airline industry for the third consecutive – time performance – baggage handling – overall customer satisfaction
  11. 11. Problem Statement Southwest Airlines strategy to respond to United Airlines unexpected news that “Shuttle By United” will make changes in their services and prices strategies. “We’re going to match Southwest” strategies? United’s decision to increase all 14 “Shuttle By United” fares by $10. Furthermore, suspend service between Oakland-Ontario, beginning in April. Can we gain Market Share with these actions?
  12. 12. Relevant Criteria 1. Increase Market Share in the Major U.S. Airline Carriers market. 2. Move from maturity-saturation stage to repositioning initial strategies. 3. Continue low-fare carrier image. 4. Create Brand Loyalty with current customers.
  13. 13. Alternative Strategies • Match United by having Shuttle to increase profits from the extra money per ticket as the main competitors in the market will remain the same and at the same price.
  14. 14. Alternative Strategies • Adjust their prices by a different amount to stay competitive while keeping an increase in profit. Creating an increase in ticket price by a smaller amount than Shuttle by United they have an increase in profit and offer a better price than their competitor
  15. 15. Alternative Strategies • Offer more amenities and services though a promotional push • Do Nothing
  16. 16. Assumptions • “Ticketless”/ “electronic ticketing” system that Southwest Airlines has currently scheduled to go nationwide January 31 • Southwest doesn’t need to go as low as United, due to their capitalization on customer service
  17. 17. Assumptions • Southwest would gain market share for United’s discontinued service for OaklandOntario, CA • Strategy also wouldn’t hinder the advertising, sales, promotion, and scheduling matters pertaining to the start of the scheduled service to Omaha, Nebraska
  18. 18. Comparative Advantages (Southwest vs. United Airlines)  High customer preference  Lower cost and higher efficiency  Well established image  Cost Per Available Seat Mile
  19. 19. A common unit of measurement used to compare the efficiency of various airlines. It is obtained by dividing the operating costs of an airline by available seat miles (ASM). Generally, the lower the . CASM, the more profitable and efficient the airline 0.09 0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01 0 0.1050 $0.070800 Series1
  20. 20. Comparison SWA Price Increase to $8 vs. SBU Fare Increase to $10 with Discontinuing of Oakland-Ontario Route Projection 1995 1th Quarter Operating Results $1,800,000 $1,551,709 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 Series1 $600,000 $400,000 $200,000 $193,340 $SWA SBU
  21. 21. Final Decision According to analysis above, by not matching United Airline's $10 per ticket fare increases, instead an increase of $8 per ticket fare keeping Southwest Airline's "Lowest fare Airline". Southwest will be able to capture more customers from United Airline's discontinued Oakland-Ontario route. Gain market share in the US markets.
  22. 22. In conclusion, • Southwest should not match United's fare increase of $10, but increase their fares to $8. • Southwest should market its Low Fare Strategy in West Coast Markets. • Continue to improve its Customer Service record.
  23. 23. Comments or Question? Thank you!