• Introduction Part 1: about SW Case airlines • Situations of study SW airlines Part 2:Question& Answer.
Company’s slogan “A Symbol of Freedom’’ The most successful US airlines • The company set up by1967 Herb Kelleher • Southwest airlines was the nation’s best performing1972-2002 stock
• The company earned $4422003 million • Gary Kelly took over CEO2004 role from Mr. Kelleher NO.3 among America’s Top Ten most admired2005 corporations
Listed by Business Ethics magazine "100 Best2007 Corporate Citizens" 35,000 employees2008 $9.1 billion revenue
-SW airlinesknown as Alow-price It began to Madeairport service SW’s other- Fuel-price higher-cost workwasincreasing airports worserapidly
Changing strategy Deciding target customer isDisadvantage business travelers in Changing Strategy Most of bargain customers were -hunting business people Lack of professional services
Build Expand their Convenient networks & Earncustomer additional services loyalty revenue Provide frequent - Preferential boarding Make an agreementflights to 63 cities in - Bonus frequent-flier with discount 32 states credits carrier ATA Airlines - Free cocktail flight More nonstop & Develop newMore frequent flights - Renovate boarding areas software to shift => suitable for - Install roomier seats, planes to more business travelers’ power outlets, workstation profitable routes counters schedules - Flat-screen TVs broadcasting CNN- Change website- Discounted Charge extra fees forcontracts with thingsbusiness
Serve second tier destinations where cost were lower NO assigned seats Serve SNACKS instead of MEALSNO electronic entertainment NO FEE to change same- fare ticket Offered employees profit- sharing plan
„‟A Symbol of Freedom‟‟Part 2 : answerthe questions.
1. What has been Southwest‟straditional pricing strategy? Why has this pricing strategybeen so successful throughout theairline‟s first three decades?
2. What values do airline customers-both business and leisure travelers-seek when they buy air traveltickets ?
Each class has different request: Leisure travelers Buiness - Low pricing -Don’t care much - On time about price arrivals, no -The assurance additional fees. of on time - High profit arrivals cities -Safe, convenient - Using smaller flights with high - less crowded qualified airports services
Has SW done a better job thecompetitors of meeting the needs ofthese air travelers? In what ways?It has done a better job+ knew clearly who were itscustomers(leisure travelers ), whatvalues, needs of travelers and getcustomers to their destination as quicklyas possible
3. What internal and external factorsaffect airline pricing decisions? Internal factors:- Airlines marketing objectives ….>make profit by filling the seat at the lowest possible cost to thecustomer. External factors:- Rapidly escalating fuel prices. => fuel-price hedgingstrategy. “they try to pass to the customer throughincreased baggage fees”- Determination of prices => linked to what thecompetitor is doing.”
Pricing : Raise aggressively 6 times in 2006, 11.4 percents average fare increasing. successfully marketed. Profit: $100million of the $1 billion (2010).
4. What is Southwest Airline iscurrent pricing strategy?- Low-cost.- Flight frequency high use & limit the use of travel agents.- Light standardization,- Working crew of high capacity- Lower-cost services in short -haul markets- Increasing fares in longer-haul markets- The Pricing Model
Does this strategy differentiateSouthwest from its competitors?- Other airlines cannot compete withSouthwest in the same manner as they doeach other- Much lower operating costs
Is the strategy sustainable?-The industrys inability to continue to chargerelatively high fares in short-haul markets will-Creates an even greater need for the government toencourage low-cost, new entry, as a discipline forSouthwests pricing behavior in the future.- Replace service of other major airlines that arescaling back service or exiting markets dominated bySouthwest.
5. What marketing recommendations,including pricing recommendations, wouldyou make to Southwest as it moves into thenext decade? - Continue to advertise. - Build the cost. - Capitalize on the business class seatsavailable in many of AirTrans planes.