This document provides an overview of Southwest Airlines, including its history, vision, goals, growth opportunities, current situation, and SWOT analysis. Southwest was founded in 1971 and operates over 550 Boeing 737 aircraft across 32 states. Its vision is to provide low-cost air transportation using secondary airports. Goals include attracting more business/leisure travelers with low fares and good customer service. Growth opportunities exist in entering new markets and potentially expanding internationally to Mexico and Canada. The current situation outlines its financial performance and route network. A SWOT analysis identifies strengths like low costs and weaknesses like lack of alliances.
2. OVERVIEW
• Introduction – Vinothini
• Current Situation – Vinothini / Thilini
• SWOT – Asjad
• Marketing Objectives – Asjad
• Marketing Program – Dhananji
• Segmantation – Dhananji
• Implementation – Asjad
• Evaluation – Asjad
3. INTRODUCTION
• Founded in 1971 by Rollin King and Herb Kelleher
• The third-largest airline in the world
•Operates more than 550 Boeing 737 aircrafts
• 35000 employees
• The United States’ most successful low-fare, high frequency, point-to-point
carrier.
• It is also known as a “discount airline” since 1973
4. Vision
Provide safe and comfortable air transportation from
close-in air ports, at prices competitive with
automobiles and buses & to involve customers &
employees in the product & the process, making the
airline a fun, profitable & quality experience.
5.
6. Goals
• To attract more business and leisure travelers with the
powerful low-fare brand and outstanding Customer
Service commitment.
• Continued focus on revenue management enhancement
and schedule optimization.
• Maintaining a healthy financial strength.
• Commitment to contain costs and maximize productivity
to protect the position as one of the premiere low-cost
producers among major airlines.
7. Main Objective of the Company
Continue offering low fares and enhancing the
Customer Experience to win new Customers and
retain those already captivated by the Southwest
Culture.
8. Growth Opportunities
• Southwest has already entered many of the highest
demand markets and established its dominance on the
most profitable routes but should focus on entering
the remaining top 50 cities in which they have no
service.
• The long term solution for Southwest’s growth
question is to look outside the U.S. for suitable
markets such as Mexico & Canada.
9. CURRENT SITUATION
• Currently operates 3,100 flights per day
• Provides low fare service to 64 cities in 32 states with more than 500
boeing 737 aircrafts.
•In 2010, profit increased 285 percent to $550 million, or a record $.74
per diluted share,compared to $143 million, or $.19 per diluted share, for
2009.
• Revenue increased from $10.35 billion in 2009 to $12.10 billion in
2010.
10. CURRENT SITUTAION
• Net income increased from $200 million in 2009 to $459
million in 2010
• Share of the domestic market grew to 21 percent as the largest
domestic carrier in terms of originating passengers boarded,
compared to 20 percent a year ago
• Recently started new nonstop air service between Denver and
Boston Logan, Denver and Reno in 2009.
11. INTERNAL ENVIORNMENT
STRENGTH
- Sensible expansion policy
- Strong financials
WEAKNESS
- Little room for strategic expansions
- No established alliances
- Fully valued share price
-
12. Areas of Services
• Domestic flights
•Arrival Suites
•Frequent flier loyalty program
•Cargo transportation services
•Contract flight training
•Online ticket booking services
•Airport lounge
14. The Main Reason for Success –
Low cost
• The average airfare
for southwest
passenger is $112.76
•No baggage fees
•Complimentary in-
flight service
•Open seating policy
•Fleet of Boeing 737
Aircraft
16. • One plane fits all
• Point to point flying
• Simple In flight service
• No frills, no fees
• Strong Management
• A relatively happy workforce
• Aggressive fuel hedging
• The fine print
17. U.S Low Cost Career Industry
SouthWest Airlines
US Airways
AirTran Airways
Jetblue Airways
Alaska Airlines
Express jet Airlines
Others
18. Market Share
2010 Top 5 U.S. Airlines Market Share based on
Revenue Passenger Miles
Rank Carrier Market Share
1 American 13.8%
2 Southwest 13.8%
3 Delta 11.8%
4 United 10.4%
5 US 8.0%
Airways
19. The New Competitors
JET BLUE
- Almost large
- Inexpensive
VIRGIN AMERICA
- Inexpensive
- Luxury Feel
- Premium Option ( seats, food, drinks )
23. Competitive advantage
• point-to-point services
• Southwest strategically secured routes
through secondary airports which generally
had lower fixed costs for the airlines and less
congestions for passengers ease.
• Southwest also implemented the first and
most simplistic frequent-flier program
24. PROBLEMS
• September 11, 2001, terrorists attacked the world trade center and the
pentagon, shook the whole country.
•20% falloff in airline traffic in the fourth quarter of 2001
•Unprecedented three day shutdown of flights
• On March 5, 2000, Southwest Airlines Flight 1455 overran a runway at the
Burbank airport in California
• On December 8, 2005, Southwest Airlines Flight 1248 skidded off a runway
at Midway Airport in Chicago, Illinois, in heavy snow conditions
26. POSSIBLE STRATEGIES
• Expand into more cities
-Increase amount of shorter
destination flights into the -larger
airports
• Increase direct flights
-Purchase bigger planes
-Get agreements with Airports for
flights
• Eventually look to acquire American
Airlines
30. SLEPT Analysis
Social Environment
• Southwest tried to make use of this social environment. It
gave tickets at a reasonable price.
• Southwest became a talk of the town by using certain social
trends. Since it was based at love Field Airport--it ran ads
with the slogan "there is somebody else up there who loves
you”.
• The company fare structure :
i. “Wanna Get Away”
ii. “Anytime”
iii. “Business Select”
31. Legal Environment
Airline Deregulation Act passed 1978 by the US Congress in 1978
created an political obstacles for Southwest and yet they were able
to overcome it through an agreement with the Senators and House of
Congress.
1. It enabled Southwest to operate from Love Field airport non-stop
flights only to cities within Texas or to those states bordering with
Texas namely Louisiana, Arkansas, Oklahoma, and New Mexico.
2. But the law forbade South West to advertise, publish schedules or
fares or check baggage of the inter state flights taking off from
Love Field.
According to the Air Transportation Association airlines have to use
ground based radar dependent navigation systems with legacy
facilities and process.
32. Economic Environment
• Objective was to become a low cost, low-fare airline.
• They bought new 737 air craft’s from Boeing Company at a price
of $12 million while the normal price was $15 million.
• Recruited many senior and well skilled people who were
retrenched from big companies due to the slump in the airline
industry in the late 70’s.
• Jet-fuel prices do no perfectly correlate with oil prices but the
historical price level of $70.85 for oil reached in 2005,
Historically crude oil has averaged around $20/barrel in the U.S.
but since it reached its historical high, the price of crude oil has
remained above 60$/barrel which meant problems for southwest..
• Southwest currently has an advanced hedging program that is
continually trying to determine future cash flows relating to jet fuel
prices to optimize their hedges.
33. Political Environment
Governments helps to stabilize domestic industries and
strengthen competitiveness through various fiscal & monetary
policies.
• Obama administration is pushing for changes in the way fares
and baggage fees are disclosed by airlines.
• Airports in the U.S. are interested in raising the $4.50
maximum passenger facility fee says a spokesperson for the
Air Transport Association.
34. Technological
Environment
• Southwest uses only Boeing 737 minimize extra training
requirements for the pilots.
• First major airline to test satellite technology on commercial
aircraft to supply passengers with Wi-Fi Web connectivity.
• New ticketing systems with online boarding passes are
introduced.
• Open seating system with first-come basis. There is no need
for software to sort and hold seat assignments, and it
reduces cost of printing boarding passes.
36. Strengths Opportunities
•Low Operating Costs •Vertical Integration
•Modern Cost efficient flight network
•Service innovation •Long Term Industry Growth
•Technical Expertise
•Product Innovation •18 States available for new routes
•Brand Image
•Excellent Customer Service •International growth
•Well experienced in the industry
Weakness Threats
•Decreasing differentiation to •Increasing costs in Fuel and Labor
Competitors
•Terrorist Attacks
•Lack of intra-airline services and
alliances •Weather
•Ageing company patriarch & visionary –
Herb Kelleher •Legislature & regulatory constrictions
•Recession can reduce travel (Business
Class)
37. Strengths Opportunities
•Low Operating Costs •Vertical Integration
•Modern Cost efficient flight network
•Service innovation •Long Term Industry Growth
•Technical Expertise
•Product Innovation •18 States available for new routes
•Brand Image
•Excellent Customer Service •International growth
•Well experienced in the industry
Weakness Threats
•Decreasing differentiation to •Increasing costs in Fuel and Labor
Competitors
•Terrorist Attacks
•Lack of intra-airline services and
alliances •Weather
•Ageing company patriarch & visionary –
Herb Kelleher •Legislature & regulatory constrictions
•Recession can reduce travel (Business
Class)
38. Strengths Opportunities
•Low Operating Costs •Vertical Integration
•Modern Cost efficient flight network
•Service innovation •Long Term Industry Growth
•Technical Expertise
•Product Innovation •18 States available for new routes
•Brand Image
•Excellent Customer Service •International Growth
•Well experienced in the industry
Weakness Threats
•Decreasing differentiation to •Increasing costs in Fuel and Labor
Competitors
•Terrorist Attacks
•Lack of intra-airline services and
alliances •Weather
•Ageing company patriarch & visionary –
Herb Kelleher •Legislature & regulatory constrictions
•Recession can reduce travel (Business
Class)
40. Short Term (1-2 Years)
• Increase Market Share by 5%
• Add 2 new cities and 2 states to the route map
Medium Term (3 Years)
• Introduce new innovative low-cost services by
3%
• Increase the number of new cities to 5 and
states to 4 within three years
41. Long Term (5-10 Years)
• Continue to increase product lines by 5%
• Reduce employment turnover to 2%
• Continue to improve service quality by 5%
• Decrease the number of customer complaints
per 100,000 passengers to 1% per year.
42. Segmentation
• Demographics
– Age
– Life style
• Psychographics
– Psychological position
• Geographics
– Place
43. Target Market
• Definition
– The consumers a company wants to sell its
products and services to, and to whom it directs
its marketing efforts. Identifying the target market
is an essential step in the development of a
marketing plan. A target market can be separated
from the market as a whole by geography, buying
power and demographics, as well as
by psychographics.
Target Market Definition. http://www.investopedia.com/terms/t/target-
market.asp#axzz1fAtwVPKt (accessed November 29, 2011).
44. Target market
• Medium to high-frequency business travelers. (1-
3 roundtrips per month)
• Male/female professionals aged 24-55 years of
age.
• Price/cost conscious
• Dissatisfied customers from full-service airlines
45. Target Market Cont…
• Commuting distances ranging from 750 - 1700
miles
• Leisure family travelers
• Internet/technology savvy
• 30-60 day trip planners
46. Positioning
• Positions marketing communications as:
– THE only low-fare, short-haul, high-frequency,
point-to-point carrier in America that is fun to fly.
• Southwest’s brand exudes an element of fun
47. Positioning Cont…
• In the minds of their customers SWA is:
– Discount
– tons of special offers
– fun filled destinations
– most importantly a supper awesome cheap trip
48. Marketing Strategies
• A travel product that is built around flights that is
targeted:
– Specific demographics
– Ticket pricing
• Building Brand Loyalty
– By being environmentally friendly
– By entering small markets
• E.g.: Buffalo, Hartford, Ontario and Oakland
49. Positioning Strategies
• Needs to be extremely cost-efficient
• Differentiate itself by doing seemingly weird
things.
– E.g.: NOT assigning seats in its flights.
50. Positioning Strategies
• When SWA enters a new market:
– Traffic explodes
– Southwest nabs many customers who might have
driven before.
• Eg: Louisville and Chicago route passengers grew from
8,000 to 26,000
• Explosive growth in St. Louis and Kansas city route.
52. Product Life Cycle
• Maturity Stage
– They have being in the business from 1971.
– Slowdown in sales growth
– Product and mix modifications – Southwest Cargo
Services
– Excess capacity; price markdowns
– Profit per unit is falling
– Some competitors exit – American Airlines, United
Airlines and etc
56. Pricing policy
• Product Line Pricing
– Prices are different from
• destination to destination
• vehicle to vehicle
• hotel to hotel
• Psychological Pricing
57. Pricing Policy Cont…
• Product Bundle Pricing
– Travel Deals
• Air – Special Vocational Deals (Disneyland, Las Vegas
and etc)
• Car – up to 30% discount
• Hotel – up to 50% discount
– No change fee
– Bags Fly Free
– Pets are welcome
58. Place Policy
• Direct Channel Method
– No intermediaries
– No Agent/Broker
• Nine Reservations Centers
– 30% of sales
– More than 4,000 Southwest Reservations Sales
Agents
59. Promotion Policy
• E-mail newsletters
• Magazines
– Fortune, economic times, time
• Frequent Flyer Mileage Program
61. Process Policy
• Flying multiple short quick trips into the
secondary (more efficient and less costly)
airports of major cities
• Uses only one aircraft type, the Boeing 737
• No common online venue ticket purchase
– Minority are booked through travel agents.
62. Process Policy Cont…
• Tickets are issued
– over the phone
– online at www.southwest.com
• Allows passengers to change reservations
without additional cost.
• Refunds can be made online - just call the
reservation number.
63. People Policy
• Southwest’s motto: The employees come first, the
customers come after them.
• One thesis: Keep employees happy‐ then they will
keep customers happy.
• Pilots, Crew members, Front officers, Ticketing
staff, & Customer relations
64. Physical Evidence Policy
• Southwest is known for:
– Flights
– Tickets
– Reservation Centers
– Boarding announcements
– Crew members that burst out in song.
65. Physical Evidence Cont…
• “Marvin Martinez, a bellman and front desk agent at
the San Antonio River Walk Marriott, says, “We all bring
out smiles in our own special way. Me, I’m a performer.
Every day I’m on stage in front of my biggest fans, my
guests. When I walk into the lobby, I’m on! I’m an
aggressive hospitality animal. My guests always leave
satisfied.”
67. • Allocate a marketing budget of $6M (5% of
revenue) for a marketing team
• Hire additionally 10 people internally for the
marketing team
• Use the marketing team to upgrade the product
lines and service quality for the next 2 years and
for the long term
• Marketing team should analyze customer base
and increase the market share
68. • Expand web-based services to provide advanced
services to increase customer base
• Continue focusing on low operating costs
• Allocate budget of $1.2M (1% of revenue) for
staff training costs and employee working
benefits
• Training will minimize customer complaints
• Working benefits will reduce employee turnover
69. • Trimming unprofitable and less popular flights
to newer routes
• Add Value to the “Business Select” product to
increase number of customers per flight
71. • Board meetings twice a month discussing
marketing plans
• New product development proposal should be
submitted end of eight months
• Quality control has to approve the proposal
• Staff should be given evaluation and suggestion
forms before and after the training programs
72. • Staff performance charts have to be evaluated
every month and targets should be achieved
• Customer evaluation every one flight per
month can be used to analyze the value
adding features per product