Strategic Management Case Discussion on Southwest Airline

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Strategic Management Case Discussion
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  • Jetblue, frontier, skybuscontinental
  • Strategic Management Case Discussion on Southwest Airline

    1. 1. STRATEGIC MANAGEMENT CASE DISCUSSIONMBA MULTIMEDIA UNIVERSITY, CYBERJAYA
    2. 2. Strategic Management Case Discussion on Presented by: Julius Tanantaputra 1111200166 Azzalea Nowensha Shika 1111200127 Uun Ainurrofiq 1111200141 Poon Wai Chuen 1111200122 Lecturer : Mr. Mohd Noor Ismail
    3. 3. 1971 June1ST FLIGHT :1986 Multimillion dollar training center for flight crew1988 best on time record, bagage handling, fewest complain1994 1st ticketless travel1996 own 243 aircraft1998 fuel hedging strategy2004 online boarding pass2006 No.1 in customer satisfaction2008 purchase AirTrans Airlines [*SWA’s main competitor] Strategic Profile
    4. 4. increased fuel costs other high operating expensesdecrease in business travelers due to budget cuts increased regulation placed strains on airline companies Industry Challenge
    5. 5. Low Cost Traditional Airline Airlinevs. Skybusvs. Frontier vs. Continental vs. American Airways vs. US Airways vs. United Value Airline vs. Jetblue-Competitive Environment-
    6. 6. Source : BTS data 2010US AirlineMarket Share2010
    7. 7. SWOT • Cust Service • Punctuality • Union Walkout 2008 unequal payment, no raise since ‘05 • Violation of safety • IT Superiority Requirement • Financially Fit FAA 1998. 117 aircrefts unchecked Strength Weakness • Growing Market • Everyone does the same” • Efficiency Enabler (eg. new Technology, new Regulation) • Fuel Price Volatility • Security • Economic Downturn Opportunity Threats
    8. 8. As the airline industry as a whole suffers, due to threats from fuel priceincreases, ever-escalating operational costs, potential security threats,and the current global economic crisis, can Southwest maintain its 36-year streak of profitability?QUESTION 1
    9. 9. Profit1973 – 20091973 – 2011
    10. 10. With fluctuating oil prices, can Southwest continue to depend on fuelhedging as an important source of cost control?QUESTION 2
    11. 11. As it expands its domestic flight operations, will point to-point“methodology still prove to be useful?QUESTION 3
    12. 12. Point to Point Hub and Spoke
    13. 13. As the major traditional airlines become more like their low-costcounterparts, will they ultimately become more of a competitive threatto southwest?QUESTION 4
    14. 14. Airline Domestic Market Share May 2011 – April 2012 Domestic Revenue Passenger Miles Airlines Share (billions) Delta 16.2%100 92 Southwest 15.1% 90 86 80 75 American 13.1% 70 65 United 11.5% 60 50 45 US Airways 8.0% 40 29 Continental 5.1% 27 30 21 20 17 13 JetBlue 4.8% 10 Alaska 3.6% 0 AirTran 3.0% SkyWest 2.2% Others 17.4% Based on Research and Innovative Technology Administration Bureau of Transportation Statistics, 2012
    15. 15. Operating Income Financial Data Year ended December 31, (Millions $) 2011 2010 2009 2008 2007 Operating 15,658 12,104 10,350 11,023 9,861 revenues Operating 14,965 11,116 10,088 10,574 9,070 expensesOperating income 693 988 262 229 791 Operating Revenues Year ended December 31, (Millions$) 2011 2010 Passenger 14,735 11,489 Freight 139 125 Other 784 490 Total 15,658 12,104 Based on Southwest Airlines Annual Report, 2011
    16. 16. Uniqueness No bag fees for second luggage No assigned seat cost Punctuality The least complaints compare to others
    17. 17. Even though major traditionalairlines become more like their low-cost counterparts, Southwest is still the leader of low-cost Airlines
    18. 18. Using its current strategies, will Southwest be able to expandinternationally?QUESTION 5
    19. 19. Low Cost Strategies One Model Fleet Tactic • Boeing 737-700, 737-500, 737-300 series • Reason: • Lowers inventory, record keeping, and maintenance cost, • Minimize number of technical manual, tools & spare parts Fuel hedging Implementation of blended winglets on all 737-700 • Improve performance by extending the airplane’s range, saving fuel, lowering engine maintenance cost EcoPower engine wash services. • Anticipates saving more than $20million iin fuel cost
    20. 20. Expand Internationally ?? • Short to medium 737- range narrow body 500 • Std range with max 114 pax : 2815km • Short to medium 737- range narrow body airliner 300 • Std range with max 128 pax: 4973km • Short to medium 737- range airliners 700 • Range with 126 pax : 2852km
    21. 21. Using their own April 2010 Westjetairlines is not enough announced the to expand partnership was internationally terminated History of partnership: 2008 Westjet Airlines, to sync flights between Canada and US
    22. 22. The addition of a larger Current Updates aircraft, the Boeing 737-800, to Southwest’s fleet, which is scheduled to begin in first May 2011, quarter 2012 Southwest acquired Airtran to operate a multi-aircraft fleet, serve international destinations, Attract more Buiness travelers In 2012, Southwest will be the first customer for the Boeing 737 MAX, having ordered 150 of the new planes that will be equipped with fuel-efficient engines and are expected to be delivered by 2017.Based on Southwest Airlines Annual Report, 2011 and Reuters, “Southwest Airlines tooks new ways to stand out” 2012
    23. 23. Can it maintain its positive relations with employees and avoid futureunion walkouts and negotiations?QUESTION 6
    24. 24. Flight attendants will gainwage increases and a boost in Increasing wages can avoid the 401k contributions, but only future walkout, as long as theydegree that such increases will feel equal allow Southwest to keep its low-cost advantage. Others program offered : Financial Security The The Free Flight • Retirement freedom to freedom to on plan create and work and Southwest • Profit Sharing innovate have fun Plan
    25. 25. If the current economic crisis persists, how will the present expansionplan by Southwest fare?QUESTION 7
    26. 26. Company Positionas of Jan 2008 3,400: Approximate number of daily departures 34,000: Number of employees 2,600: Number of employees in the Bay Area $645 million: Net income in 2007 101.9 million: Passengers carried in 2007 Profit for the last 35 years!
    27. 27. EconomicCrisis 2008
    28. 28. As environmental uncertainties mount, what overall strategies and aswell as competitive tactics should soutwest consider to maintain it lowcost position and perception of customer loyalty?QUESTION 8
    29. 29. • Fuel Hedging Program• Customer Loyalty Program• Maintain minimal cost – Simple Iniflight Systems – Strong Management• Expand to more profitable routes• Maintain happy work force• No Frills, No Fees
    30. 30. ConclusionI need to read thru the entirepresentation first.. 
    31. 31. DON’TLET THE GROUPESCAPEEASILY..aSKQUESTION :)
    32. 32. DON’TLET THE GROUPESCAPEEASILY..aSKQUESTION :)
    33. 33. DON’TLET THE GROUPESCAPEEASILY..aSKQUESTION :)
    34. 34. DON’TLET THE GROUPESCAPEEASILY..aSKQUESTION :)
    35. 35. Low Cost

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