Southwest History and GrowthCorporate Level Strategy.docxrafbolet0
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Southwest History and Growth
Corporate Level Strategy
Mission and Goal
Southwest has its mission statement since January 1988 as following: âThe mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spiritâ. The company uses a welcoming approach to deal with customers and employees, utilizing great customer service to deliver the best the industry can have. Therefore, to differentiate itself from other airlines, Southwest places a large dedication to its employees, giving them authority to make the necessary decisions to better assist customers with all the comfort needed. This strategy is key for Southwest to provide respect and loyalty for customers.
By following a simple goal: âA primarily short-haul airline that flies directly from city to city, with just one type of plane - the Boeing 737 - and the lowest costsâ, Southwest has its horizon set, making sure to deliver a good service that excise âluxuriousâ rivals to gather market share, increasing profitability customer value.
Short/Medium-Haul
Southwest Airlines has their strategy focused on short/medium flights across the U.S. They participate in an extremely competitive market, where airlines are constantly hunting for competitorâs market share. Southwest uses different approaches to differentiate itself from the market. By providing good customer service, quick airplane turnovers, no baggage fees, low tickets price, efficient operations, and a great work environment, the company is able to maintain airplanes capacity in desired levels.
Connecting airports with a point-to-point strategy has allowed Southwest to provide service at lower costs. The choice of only using Boeing 737s, and training all the personnel to turnover the airplane in a fast and efficient manner, brings efficiency and pleasure to customers that enjoy a wider range of flight times.
Customer Service
Southwestâs hiring process is one of the strongest points that the company has been focusing to deliver superior satisfaction to customers. Employees are not only assessed on their qualifications and experience, but also on the attitudes they bring to their positions (Campbell, 2010). The process concentrates on prospective employees that fit the service culture of the company. This procedure ensures Southwest that when their newly trained personnel is out to perform, they will create constructive relations to customer requests based on their excellent abilities and passion to work. Southwest believes that training is important and crucial to deal with demands on ground, but abilities and high-class social skills are top-not on the companyâs preferences.
By providing an example of what means to be âcustomer orientedâ, Southwest delivers a sense of a friendship that can be perceived by their workforce. The company takes different approaches to support that mentality. Clients receive birthday cards and event inv.
SouthWest
SouthWest
Company name, website and industry
The company I would be analyzing is Southwest Airlines which operates in the Airline industry. The website of the company is https://www.southwest.com.
Background and history of southwest Airlines
Southwest Airlines was founded in 1967 and it stands as the premier low-cost air carrier in the United States. The company was incorporated by Rollin King and Herb Kelleher on March 16, 1967 (Lauer, 2010). As of 2013, the company had a fleet of 579 planes and flies between eighty-nine destinations. It has the reputation of being the highest utilized airline by American citizens for domestic flights with an operation of about 3,400 flights each day. In 2012, the company had an annual revenue of $17 billion (Hill & Jones, 2013). Its current chief executive officer is Gary C. Kelly who has received several honors, including being the best CEO in the US for 2008, 2009 and 2010 (Hill & Jones, 2013).
Analysis of Southwest Airlines using Porterâs Five Forces Model
Competitive rivalry-High. Southwest Airlineâs direct competitors comprise of six major low-carriers operating in the domestic market with similar services such as Delta Air Lines, American Airlines, United Continental Holdings, JetBlue Airways, US Airways Groups and Allegiant Travel. This offers a strong competition., considering their operation in the domestic market and provision of similar competitive packages such as low-cost flights (Flouris & Oswald, 2016).
Threat of new entrants-Moderate. New low cost Airline firms could enter the industry and attract customers. As much as entry into the market is minimized by the huge capital investments required for venturing into the industry, there are no barriers to entry (Flouris & Oswald, 2016).
Bargaining power of suppliers-High. Planes suppliers in the industry include Airbus and Boeing. Supply of fuel in the Airline industry is extremely volatile and unpredictable. This makes the bargaining power of suppliers high.
Bargaining power of buyers-High. Most of the competitors or low cost carriers in the industry offers similar services and limited differentiation. Buyers have a high bargaining power due to availability of alternatives with similar benefits. In order to address the high buyersâ bargaining power, the company can decide on less cancelations, lower price, fewer delays and more amenities (Flouris & Oswald, 2016).
Threat of substitutes-Low. Alternative means of transport such as vehicles, ship and train do not significantly compete with air transport owing to their high speed, comfort and time savings.
Strategy used
Michael Porter presented generic strategies that can be employed by a company to overcome the five forces and accomplish competitive advantage. The first strategy presented is the overall cost leadership which is based on creating a low-cost.
Southwest History and GrowthCorporate Level Strategy.docxrafbolet0
Â
Southwest History and Growth
Corporate Level Strategy
Mission and Goal
Southwest has its mission statement since January 1988 as following: âThe mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spiritâ. The company uses a welcoming approach to deal with customers and employees, utilizing great customer service to deliver the best the industry can have. Therefore, to differentiate itself from other airlines, Southwest places a large dedication to its employees, giving them authority to make the necessary decisions to better assist customers with all the comfort needed. This strategy is key for Southwest to provide respect and loyalty for customers.
By following a simple goal: âA primarily short-haul airline that flies directly from city to city, with just one type of plane - the Boeing 737 - and the lowest costsâ, Southwest has its horizon set, making sure to deliver a good service that excise âluxuriousâ rivals to gather market share, increasing profitability customer value.
Short/Medium-Haul
Southwest Airlines has their strategy focused on short/medium flights across the U.S. They participate in an extremely competitive market, where airlines are constantly hunting for competitorâs market share. Southwest uses different approaches to differentiate itself from the market. By providing good customer service, quick airplane turnovers, no baggage fees, low tickets price, efficient operations, and a great work environment, the company is able to maintain airplanes capacity in desired levels.
Connecting airports with a point-to-point strategy has allowed Southwest to provide service at lower costs. The choice of only using Boeing 737s, and training all the personnel to turnover the airplane in a fast and efficient manner, brings efficiency and pleasure to customers that enjoy a wider range of flight times.
Customer Service
Southwestâs hiring process is one of the strongest points that the company has been focusing to deliver superior satisfaction to customers. Employees are not only assessed on their qualifications and experience, but also on the attitudes they bring to their positions (Campbell, 2010). The process concentrates on prospective employees that fit the service culture of the company. This procedure ensures Southwest that when their newly trained personnel is out to perform, they will create constructive relations to customer requests based on their excellent abilities and passion to work. Southwest believes that training is important and crucial to deal with demands on ground, but abilities and high-class social skills are top-not on the companyâs preferences.
By providing an example of what means to be âcustomer orientedâ, Southwest delivers a sense of a friendship that can be perceived by their workforce. The company takes different approaches to support that mentality. Clients receive birthday cards and event inv.
SouthWest
SouthWest
Company name, website and industry
The company I would be analyzing is Southwest Airlines which operates in the Airline industry. The website of the company is https://www.southwest.com.
Background and history of southwest Airlines
Southwest Airlines was founded in 1967 and it stands as the premier low-cost air carrier in the United States. The company was incorporated by Rollin King and Herb Kelleher on March 16, 1967 (Lauer, 2010). As of 2013, the company had a fleet of 579 planes and flies between eighty-nine destinations. It has the reputation of being the highest utilized airline by American citizens for domestic flights with an operation of about 3,400 flights each day. In 2012, the company had an annual revenue of $17 billion (Hill & Jones, 2013). Its current chief executive officer is Gary C. Kelly who has received several honors, including being the best CEO in the US for 2008, 2009 and 2010 (Hill & Jones, 2013).
Analysis of Southwest Airlines using Porterâs Five Forces Model
Competitive rivalry-High. Southwest Airlineâs direct competitors comprise of six major low-carriers operating in the domestic market with similar services such as Delta Air Lines, American Airlines, United Continental Holdings, JetBlue Airways, US Airways Groups and Allegiant Travel. This offers a strong competition., considering their operation in the domestic market and provision of similar competitive packages such as low-cost flights (Flouris & Oswald, 2016).
Threat of new entrants-Moderate. New low cost Airline firms could enter the industry and attract customers. As much as entry into the market is minimized by the huge capital investments required for venturing into the industry, there are no barriers to entry (Flouris & Oswald, 2016).
Bargaining power of suppliers-High. Planes suppliers in the industry include Airbus and Boeing. Supply of fuel in the Airline industry is extremely volatile and unpredictable. This makes the bargaining power of suppliers high.
Bargaining power of buyers-High. Most of the competitors or low cost carriers in the industry offers similar services and limited differentiation. Buyers have a high bargaining power due to availability of alternatives with similar benefits. In order to address the high buyersâ bargaining power, the company can decide on less cancelations, lower price, fewer delays and more amenities (Flouris & Oswald, 2016).
Threat of substitutes-Low. Alternative means of transport such as vehicles, ship and train do not significantly compete with air transport owing to their high speed, comfort and time savings.
Strategy used
Michael Porter presented generic strategies that can be employed by a company to overcome the five forces and accomplish competitive advantage. The first strategy presented is the overall cost leadership which is based on creating a low-cost.
Airfares Global Distribution Strategy for Higher Incremental Revenues in Non-...Simon Riha, MSc, MBA
Â
This paper was written for the 2nd International Aviation Management Conference 2014 organized by the Emirates Aviation University in Dubai, UAE. It elaborates an often ignored commercial potential of non-core and distant countries. It is shown that airlines can seek incremental revenues in off-line markets utilizing their current distribution channels at minimum investment. Yet the airlines often miss these opportunities by not having set their fares accordingly. The study, supported by sound literature review, analyzes these points of issue, proposes an airfare global distribution strategy for higher incremental revenues from non-core and distant countries and provides recommendations for implementing this strategy.
Marketing Excellence Southwest Airlines
Southwest Airlines debuted in 1971 with little money but lots of personality. Marketing itself as the LUV airline, the company featured a bright red heart logo and relied on outrageous antics to generate word of mouth and new business. Flight attendants in red-orange hot pants served Love Bites (peanuts) and Love Potions (drinks). Today, it is Fortuneâs seventh-most admired company in the world.
How did a small-budget airline accomplish so much? Southwestâs business model is based on streamlining its operations, which results in low fares and satisfied, loyal consumers. The company uses a point-to-point routing system, flying thousands of shuttle trips between different pairs of airports or âpointsâ and carrying more passengers per plane than any other airline. Each aircraft averages 6.25 flights a day, flying for almost 12 hours. Southwest can accomplish such a feat because it avoids the traditional hub-and-spoke system and has extremely fast turnaround. In its early years, it turned planes around in less than 10 minutes. Today it averages 30 minutesâhalf the industry average.
Southwestâs unique boarding process also helps expedite departure. Instead of getting assigned seating, passengers are put in one of three groups (A, B, C) and given a number when they check in. Group A boards first and in numerical order (for example, A1âA30). Once on board, passengers may sit anywhere they like.
Southwest also saves by flying only Boeing 737-700s and 737-800s. This simplifies the training process for pilots, flight attendants, and mechanics and lets management substitute aircraft, reschedule flight crews, and transfer mechanics quickly and effortlessly.
One of Southwestâs biggest cost savings techniques is its strategy of purchasing fuel options years in advance. Jet fuel is an airlineâs largest expense and now accounts for 35 percent of operating costs versus 13 percent just a little more than a decade ago. Many of Southwestâs long-term contracts allowed the airline to purchase fuel at $51 per barrel, a significant savings especially during the 1990s and 2000s when oil spiked past $100 per barrel. Analysts estimate it has saved more than $2 billion this way.
Southwest also improves its fuel efficiency by making its planes lighter. Crew members power-wash the jet engines each night to remove dirt, planes carry less water in bathrooms, and seats have been replaced with lighter models. Because the airline consumes approximately 1.5 billion gallons of jet fuel each year, every minor change adds up.
Southwest has expanded by entering new markets other airlines overprice and underserve. These usually include secondary cities with smaller airports, whose lower gate fees and reduced congestion promote faster turnaround and lower fares. The company believes it can reduce fares by one-third to one-half whenever it enters a new market, and it expands every market it serves by making flying affordable for more people. S.
Marketing Excellence Southwest Airlines
Southwest Airlines debuted in 1971 with little money but lots of personality. Marketing itself as the LUV airline, the company featured a bright red heart logo and relied on outrageous antics to generate word of mouth and new business. Flight attendants in red-orange hot pants served Love Bites (peanuts) and Love Potions (drinks). Today, it is Fortuneâs seventh-most admired company in the world.
How did a small-budget airline accomplish so much? Southwestâs business model is based on streamlining its operations, which results in low fares and satisfied, loyal consumers. The company uses a point-to-point routing system, flying thousands of shuttle trips between different pairs of airports or âpointsâ and carrying more passengers per plane than any other airline. Each aircraft averages 6.25 flights a day, flying for almost 12 hours. Southwest can accomplish such a feat because it avoids the traditional hub-and-spoke system and has extremely fast turnaround. In its early years, it turned planes around in less than 10 minutes. Today it averages 30 minutesâhalf the industry average.
Southwestâs unique boarding process also helps expedite departure. Instead of getting assigned seating, passengers are put in one of three groups (A, B, C) and given a number when they check in. Group A boards first and in numerical order (for example, A1âA30). Once on board, passengers may sit anywhere they like.
Southwest also saves by flying only Boeing 737-700s and 737-800s. This simplifies the training process for pilots, flight attendants, and mechanics and lets management substitute aircraft, reschedule flight crews, and transfer mechanics quickly and effortlessly.
One of Southwestâs biggest cost savings techniques is its strategy of purchasing fuel options years in advance. Jet fuel is an airlineâs largest expense and now accounts for 35 percent of operating costs versus 13 percent just a little more than a decade ago. Many of Southwestâs long-term contracts allowed the airline to purchase fuel at $51 per barrel, a significant savings especially during the 1990s and 2000s when oil spiked past $100 per barrel. Analysts estimate it has saved more than $2 billion this way.
Southwest also improves its fuel efficiency by making its planes lighter. Crew members power-wash the jet engines each night to remove dirt, planes carry less water in bathrooms, and seats have been replaced with lighter models. Because the airline consumes approximately 1.5 billion gallons of jet fuel each year, every minor change adds up.
Southwest has expanded by entering new markets other airlines overprice and underserve. These usually include secondary cities with smaller airports, whose lower gate fees and reduced congestion promote faster turnaround and lower fares. The company believes it can reduce fares by one-third to one-half whenever it enters a new market, and it expands every market it serves by making flying affordable for more people. S.
This book examines how Southwest Airlines, the largest carrier of passengers in the largest market in the world has become the envy of financial performance, customer, and employee satisfaction for the airline industry. For those of us who are involved in Organization Development or Human Resources and toil under the belief that people make a bottom line difference, this is our book. For leaders this is also your book, the lessons learned at Southwest are transferable not only to the airline industry but to any industry. A word of caution, the book is based on an academic/statistical study of the airline industry and reported more as an academic treatise than a captivating book. Don't let the style of writing get in the way of the important message:Â
Southwest's most powerful organizational competency--the "secret ingredient" that makes it so distinctive--is its ability to build and sustained high performance relationships among managers, employees, unions, and suppliers. These relationships are characterized by shared goals, shared knowledge, and mutual respect.
Over time Southwest Airlines has developed 10 organizational practices to facilitate coordination among 12 distinct functions: pilots, flights attendants, gate agents, ticketing agents, operations agents, ramp agents, baggage transfer agents, cargo agents, mechanics, fuelers, aircraft cleaners, and caters by building relationships of shared goals, shared knowledge, and mutual respect. The heart of this book is the description of these 10 practices and how managers in any setting can implement them to improve their business performance.
Airfares Global Distribution Strategy for Higher Incremental Revenues in Non-...Simon Riha, MSc, MBA
Â
This paper was written for the 2nd International Aviation Management Conference 2014 organized by the Emirates Aviation University in Dubai, UAE. It elaborates an often ignored commercial potential of non-core and distant countries. It is shown that airlines can seek incremental revenues in off-line markets utilizing their current distribution channels at minimum investment. Yet the airlines often miss these opportunities by not having set their fares accordingly. The study, supported by sound literature review, analyzes these points of issue, proposes an airfare global distribution strategy for higher incremental revenues from non-core and distant countries and provides recommendations for implementing this strategy.
Marketing Excellence Southwest Airlines
Southwest Airlines debuted in 1971 with little money but lots of personality. Marketing itself as the LUV airline, the company featured a bright red heart logo and relied on outrageous antics to generate word of mouth and new business. Flight attendants in red-orange hot pants served Love Bites (peanuts) and Love Potions (drinks). Today, it is Fortuneâs seventh-most admired company in the world.
How did a small-budget airline accomplish so much? Southwestâs business model is based on streamlining its operations, which results in low fares and satisfied, loyal consumers. The company uses a point-to-point routing system, flying thousands of shuttle trips between different pairs of airports or âpointsâ and carrying more passengers per plane than any other airline. Each aircraft averages 6.25 flights a day, flying for almost 12 hours. Southwest can accomplish such a feat because it avoids the traditional hub-and-spoke system and has extremely fast turnaround. In its early years, it turned planes around in less than 10 minutes. Today it averages 30 minutesâhalf the industry average.
Southwestâs unique boarding process also helps expedite departure. Instead of getting assigned seating, passengers are put in one of three groups (A, B, C) and given a number when they check in. Group A boards first and in numerical order (for example, A1âA30). Once on board, passengers may sit anywhere they like.
Southwest also saves by flying only Boeing 737-700s and 737-800s. This simplifies the training process for pilots, flight attendants, and mechanics and lets management substitute aircraft, reschedule flight crews, and transfer mechanics quickly and effortlessly.
One of Southwestâs biggest cost savings techniques is its strategy of purchasing fuel options years in advance. Jet fuel is an airlineâs largest expense and now accounts for 35 percent of operating costs versus 13 percent just a little more than a decade ago. Many of Southwestâs long-term contracts allowed the airline to purchase fuel at $51 per barrel, a significant savings especially during the 1990s and 2000s when oil spiked past $100 per barrel. Analysts estimate it has saved more than $2 billion this way.
Southwest also improves its fuel efficiency by making its planes lighter. Crew members power-wash the jet engines each night to remove dirt, planes carry less water in bathrooms, and seats have been replaced with lighter models. Because the airline consumes approximately 1.5 billion gallons of jet fuel each year, every minor change adds up.
Southwest has expanded by entering new markets other airlines overprice and underserve. These usually include secondary cities with smaller airports, whose lower gate fees and reduced congestion promote faster turnaround and lower fares. The company believes it can reduce fares by one-third to one-half whenever it enters a new market, and it expands every market it serves by making flying affordable for more people. S.
Marketing Excellence Southwest Airlines
Southwest Airlines debuted in 1971 with little money but lots of personality. Marketing itself as the LUV airline, the company featured a bright red heart logo and relied on outrageous antics to generate word of mouth and new business. Flight attendants in red-orange hot pants served Love Bites (peanuts) and Love Potions (drinks). Today, it is Fortuneâs seventh-most admired company in the world.
How did a small-budget airline accomplish so much? Southwestâs business model is based on streamlining its operations, which results in low fares and satisfied, loyal consumers. The company uses a point-to-point routing system, flying thousands of shuttle trips between different pairs of airports or âpointsâ and carrying more passengers per plane than any other airline. Each aircraft averages 6.25 flights a day, flying for almost 12 hours. Southwest can accomplish such a feat because it avoids the traditional hub-and-spoke system and has extremely fast turnaround. In its early years, it turned planes around in less than 10 minutes. Today it averages 30 minutesâhalf the industry average.
Southwestâs unique boarding process also helps expedite departure. Instead of getting assigned seating, passengers are put in one of three groups (A, B, C) and given a number when they check in. Group A boards first and in numerical order (for example, A1âA30). Once on board, passengers may sit anywhere they like.
Southwest also saves by flying only Boeing 737-700s and 737-800s. This simplifies the training process for pilots, flight attendants, and mechanics and lets management substitute aircraft, reschedule flight crews, and transfer mechanics quickly and effortlessly.
One of Southwestâs biggest cost savings techniques is its strategy of purchasing fuel options years in advance. Jet fuel is an airlineâs largest expense and now accounts for 35 percent of operating costs versus 13 percent just a little more than a decade ago. Many of Southwestâs long-term contracts allowed the airline to purchase fuel at $51 per barrel, a significant savings especially during the 1990s and 2000s when oil spiked past $100 per barrel. Analysts estimate it has saved more than $2 billion this way.
Southwest also improves its fuel efficiency by making its planes lighter. Crew members power-wash the jet engines each night to remove dirt, planes carry less water in bathrooms, and seats have been replaced with lighter models. Because the airline consumes approximately 1.5 billion gallons of jet fuel each year, every minor change adds up.
Southwest has expanded by entering new markets other airlines overprice and underserve. These usually include secondary cities with smaller airports, whose lower gate fees and reduced congestion promote faster turnaround and lower fares. The company believes it can reduce fares by one-third to one-half whenever it enters a new market, and it expands every market it serves by making flying affordable for more people. S.
This book examines how Southwest Airlines, the largest carrier of passengers in the largest market in the world has become the envy of financial performance, customer, and employee satisfaction for the airline industry. For those of us who are involved in Organization Development or Human Resources and toil under the belief that people make a bottom line difference, this is our book. For leaders this is also your book, the lessons learned at Southwest are transferable not only to the airline industry but to any industry. A word of caution, the book is based on an academic/statistical study of the airline industry and reported more as an academic treatise than a captivating book. Don't let the style of writing get in the way of the important message:Â
Southwest's most powerful organizational competency--the "secret ingredient" that makes it so distinctive--is its ability to build and sustained high performance relationships among managers, employees, unions, and suppliers. These relationships are characterized by shared goals, shared knowledge, and mutual respect.
Over time Southwest Airlines has developed 10 organizational practices to facilitate coordination among 12 distinct functions: pilots, flights attendants, gate agents, ticketing agents, operations agents, ramp agents, baggage transfer agents, cargo agents, mechanics, fuelers, aircraft cleaners, and caters by building relationships of shared goals, shared knowledge, and mutual respect. The heart of this book is the description of these 10 practices and how managers in any setting can implement them to improve their business performance.
Acetabularia Information For Class 9 .docxvaibhavrinwa19
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Acetabularia acetabulum is a single-celled green alga that in its vegetative state is morphologically differentiated into a basal rhizoid and an axially elongated stalk, which bears whorls of branching hairs. The single diploid nucleus resides in the rhizoid.
A Strategic Approach: GenAI in EducationPeter Windle
Â
Artificial Intelligence (AI) technologies such as Generative AI, Image Generators and Large Language Models have had a dramatic impact on teaching, learning and assessment over the past 18 months. The most immediate threat AI posed was to Academic Integrity with Higher Education Institutes (HEIs) focusing their efforts on combating the use of GenAI in assessment. Guidelines were developed for staff and students, policies put in place too. Innovative educators have forged paths in the use of Generative AI for teaching, learning and assessments leading to pockets of transformation springing up across HEIs, often with little or no top-down guidance, support or direction.
This Gasta posits a strategic approach to integrating AI into HEIs to prepare staff, students and the curriculum for an evolving world and workplace. We will highlight the advantages of working with these technologies beyond the realm of teaching, learning and assessment by considering prompt engineering skills, industry impact, curriculum changes, and the need for staff upskilling. In contrast, not engaging strategically with Generative AI poses risks, including falling behind peers, missed opportunities and failing to ensure our graduates remain employable. The rapid evolution of AI technologies necessitates a proactive and strategic approach if we are to remain relevant.
Operation âBlue Starâ is the only event in the history of Independent India where the state went into war with its own people. Even after about 40 years it is not clear if it was culmination of states anger over people of the region, a political game of power or start of dictatorial chapter in the democratic setup.
The people of Punjab felt alienated from main stream due to denial of their just demands during a long democratic struggle since independence. As it happen all over the word, it led to militant struggle with great loss of lives of military, police and civilian personnel. Killing of Indira Gandhi and massacre of innocent Sikhs in Delhi and other India cities was also associated with this movement.
How to Make a Field invisible in Odoo 17Celine George
Â
It is possible to hide or invisible some fields in odoo. Commonly using âinvisibleâ attribute in the field definition to invisible the fields. This slide will show how to make a field invisible in odoo 17.
June 3, 2024 Anti-Semitism Letter Sent to MIT President Kornbluth and MIT Cor...Levi Shapiro
Â
Letter from the Congress of the United States regarding Anti-Semitism sent June 3rd to MIT President Sally Kornbluth, MIT Corp Chair, Mark Gorenberg
Dear Dr. Kornbluth and Mr. Gorenberg,
The US House of Representatives is deeply concerned by ongoing and pervasive acts of antisemitic
harassment and intimidation at the Massachusetts Institute of Technology (MIT). Failing to act decisively to ensure a safe learning environment for all students would be a grave dereliction of your responsibilities as President of MIT and Chair of the MIT Corporation.
This Congress will not stand idly by and allow an environment hostile to Jewish students to persist. The House believes that your institution is in violation of Title VI of the Civil Rights Act, and the inability or
unwillingness to rectify this violation through action requires accountability.
Postsecondary education is a unique opportunity for students to learn and have their ideas and beliefs challenged. However, universities receiving hundreds of millions of federal funds annually have denied
students that opportunity and have been hijacked to become venues for the promotion of terrorism, antisemitic harassment and intimidation, unlawful encampments, and in some cases, assaults and riots.
The House of Representatives will not countenance the use of federal funds to indoctrinate students into hateful, antisemitic, anti-American supporters of terrorism. Investigations into campus antisemitism by the Committee on Education and the Workforce and the Committee on Ways and Means have been expanded into a Congress-wide probe across all relevant jurisdictions to address this national crisis. The undersigned Committees will conduct oversight into the use of federal funds at MIT and its learning environment under authorities granted to each Committee.
⢠The Committee on Education and the Workforce has been investigating your institution since December 7, 2023. The Committee has broad jurisdiction over postsecondary education, including its compliance with Title VI of the Civil Rights Act, campus safety concerns over disruptions to the learning environment, and the awarding of federal student aid under the Higher Education Act.
⢠The Committee on Oversight and Accountability is investigating the sources of funding and other support flowing to groups espousing pro-Hamas propaganda and engaged in antisemitic harassment and intimidation of students. The Committee on Oversight and Accountability is the principal oversight committee of the US House of Representatives and has broad authority to investigate âany matterâ at âany timeâ under House Rule X.
⢠The Committee on Ways and Means has been investigating several universities since November 15, 2023, when the Committee held a hearing entitled From Ivory Towers to Dark Corners: Investigating the Nexus Between Antisemitism, Tax-Exempt Universities, and Terror Financing. The Committee followed the hearing with letters to those institutions on January 10, 202
All You Bought Is The Seat - A Case Study Of Spirit Airlines
1. Running head: ALL YOU BOUGHT IS THE SEAT 1
ALL YOU BOUGHT IS THE SEAT
⌠and the Space Beneath the Seat, For Now
Benjamin Chong
MGMT 642 Air Carrier, Passenger and Cargo Management
Dr. Gerald Cook
Embry-Riddle Aeronautical University â Worldwide, Singapore Campus
July 2013
2. ALL YOU BOUGHT IS THE SEAT 2
All You Bought is the Seat ⌠and the Space Beneath the Seat, For Now
Anyone who has flown with Spirit Airlines would understand the literal meaning of
the title and why it is so apt. Branding itself an Ultra Low Cost Carrier (ULCC), Spirit
epitomizes flying on the cheap, and is proud of it. Founded in 1964 as the Clippert Trucking
Company out of Michigan, it became Spirit Airlines in 1992, having undergone two name
changes and a stint as a charter tour operator along the way (Spirit, 2011). With the
appointment of Ben Baldanza as CEO in 2006, Spirit began its transformation into a ULCC
and in 2007, formalized it as a corporate philosophy with new branding and colors.
⢠Caliente Red â Low fares;
⢠Environmental Green â On-time and reliable;
⢠Sunshine Yellow â Clean new planes and
⢠Ocean Blue â Friendly staff.
These form the backdrop to its approach of offering ultra-low base fares to millions of
customers in the North, Central and South Americas and the Caribbean.
Fleet and Network
Spirit currently operates a fleet of 51 Airbuses (as of end-July 2013), comprising 29
A319s (145 seats), 20 A320s (178 seats) and 2 A321s (218 seats). Future deliveries of A320s
(including A320neos from 2015) and A321s would take its fleet to 79 total aircraft (Spirit,
2013), supporting annual growth of 18-22% through 2015 (CAPA, 2013).
With its corporate headquarters in Miramar, Florida and main base at Fort
Lauderdale-Hollywood, Spiritâs network encompasses 55 cities (as of end-July 2013) and
includes crew bases at Las Vegas, Detroit and Atlantic City (Velotta, 2012). While the
company eschews hub-and-spoke operations and avoids the word âhubsâ, an examination of
the airlineâs route map would reveal that Dallas/Fort Worth and Chicago/OâHare are well-
served with a significant number of flight segments radiating from them (Spirit, 2013).
3. ALL YOU BOUGHT IS THE SEAT 3
Spiritâs preference for point-to-point operations avoids hub-and-spoke inefficiencies and
costs and allows the airline to quickly redeploy assets if the route does not break even or
show signs of profitability within six months (average break-even period is 6.5 months). In
fact, its Dallas/Fort Worth-Houston and Philadelphia-Las Vegas services are scheduled to be
terminated in September 2013 and January 2014 respectively, approximately nine to twelve
months after launch (CAPA, 2013).
Fuelling Spiritâs foray into Mexico via Cancun, Los Cabos and Toluca from
Dallas/Fort Worth was the success story from Fort Lauderdale. Spiritâs main base was the
launch pad for its push into Central and South Americas and the Caribbean, and the company
believes it can achieve the same level of growth with Dallas/Fort Worth and Mexico. The
companyâs lack of sentiment about its routes is famous. âWe expect every route to make
money. Not half of them. Not 99%,â said CEO Baldanza in an interview (Yeo, 2012). As
such, travellers should not be surprised to find that a city served by Spirit a year ago has now
dropped off the radar.
Business Model
Spiritâs business model is obsessively simple and focuses on lowering the base fare of
air travel, while unbundling everything it possibly can from the travel experience â checked
and carry-on bags, food and drinks, boarding passes, etc. and charging for them as optional
extras, boosting ancillary revenue. The company believes that passengers should pay for only
what they use and not subsidize othersâ use (disproportionate or otherwise) of resources. An
oft-touted example is checked luggage. Spirit contends that airlines that offer âfreeâ checked
bags have already included their cost into the ticket and passengers are, in a sense, exhibiting
over-consumption of a perceived zero-cost item (Shampanier, Mazar & Ariely, 2007). Those
who have no checked bags are then over-paying for their ticket. In an ideal world, passengers
4. ALL YOU BOUGHT IS THE SEAT 4
would just pony up for fuel âand everything else is an optionâ, according to CEO Baldanza
(Karp, 2011).
Spirit uses the low base fares to stimulate demand in what they feel are under-served
markets, where price-conscious customers are priced out of air travel by the incumbent
carriers, whether legacy or budget. A minimum of 25% reduction in fares is Spiritâs target in
new markets (Ranson, 2012). In fact, they have done better than that, considering the country
as a whole. The average US domestic airfare in 4Q12 was $374 in non-inflation adjusted
dollars (Bureau of Transportation Statistics, 2013) while Spiritâs average ticket revenue was
$126.50 (comprising an average of $75.11 in ticket revenue and $51.39 in ancillary revenue
per passenger flight segment), one-third of the national average (Spirit, 2013). The low fares
stimulate demand, leading to traffic growth, which increases revenue, allowing Spirit to
lower fares and setting off a virtuous cycle, which the airline is exploiting.
Spirit targets the price-sensitive leisure travelers as well as those visiting friends and
relatives (VFR) â low-yield markets that were largely ignored by the legacy carriers as they
pursue the higher-yield corporate travelers. Its initial expansion into Latin America was
fuelled by this strategy and its latest push inland at the domestic US market is but a
continuation of its chase for the âlow-hanging fruit in legacy carrier marketsâ (CAPA, 2013),
emboldened by consolidation domestically and convinced that opportunities abound.
Keeping Costs Low
Spiritâs low cost base allows it to pursue a low-fare market stimulation strategy. The
company aggressively contains costs and works hard at extracting the maximum productivity
out of its assets. Its aircraft utilization is 12.8 hours per day, which compares favorably with
the industry daily average of 10.5 hours (Spirit, 2013; Massachusetts Institute of Technology,
2013). Turnarounds as short as 30 minutes plus scheduling of red-eye flights contribute to the
5. ALL YOU BOUGHT IS THE SEAT 5
high utilization, although any delays would have repercussions down the schedule (Nicas,
2012).
Packing more seats into its aircraft also allows Spirit to reduce seat-mile costs. Its
planes carry 20-30% more passengers than its competitorsâ, which while making for an
uncomfortable flight, have kept unit costs low (Spirit, 2013). Further cost efficiencies are
derived from operating a single aircraft type comprising the A320-family models, reducing
maintenance, inventory and training costs, both for pilots as well as maintenance crew.
Spirit sells most of its tickets (64.2%) through its website (www.spirit.com), reducing
distribution costs. Bookings through its call center and airport counters account for a small
percentage (8.6%) while third-party channels such as travel agents (physical or online) and
global distribution systems (GDSs) make up the rest at 27.2% of sales (Spirit, 2013). The
company seeks to pass on all distribution-related costs to the customer, which has the effect
of driving traffic to its website, where distribution costs are the lowest. Customers without
Internet access or wishing to engage a travel agent would have no choice but to pay the
difference.
At the end of 2012, Spiritâs cost per available seat mile (CASM) was 5.93 cents,
excluding fuel â one of the lowest in the industry. But even it cannot escape the high fuel
prices and its fuel costs were 35.8% of revenue in 2012, about par for the course for airlines
(Spirit, 2013).
Increasing Revenue
Using price to influence consumer behavior is not new to Spirit. When it started
charging for all checked bags in March 2007, the airline discovered that passengers were
bringing more bags onboard as they sought to avoid fees. Passengers contend for space in the
overhead bins, because while the airline managed to squeeze more seats in its aircraft, the
amount of overhead bin space remained the same. Bags that could not fit had to be checked at
6. ALL YOU BOUGHT IS THE SEAT 6
the gate, creating delays that ripple through the schedule (McCartney, 2010). In a first for the
industry, Spirit began charging for carry-on bags in August 2010. Initial outrage within the
industry soon gave way to grudging admiration as passengers kicked up a fuss at first but
then adapted. Load factors are as high as ever, fewer bags are carried on board and the plane
turns around quicker. âMost of the charges for optional services, they act as economic
incentives for customers to behave in a way that would cost us less money,â said CEO
Baldanza (Yeo, 2012).
Apart from the space beneath your seat, everything else is chargeable. Even the
printing of boarding passes at the airport would cost you money. As the airline aggressively
and some would say, ruthlessly, stripped out non-essentials, it was embarking on âprice
discoveryâ to find out what travelers value (Denning, 2012). And what travelers value is low
fares, in the market segment that Spirit is targeting. By charging for ancillaries, allowing the
company to simultaneously lower base fares, Spirit has managed to maintain an average 85%
load factor over the past two years. Despite being crowned Americaâs most-hated carrier in
the latest Consumer Reports rankings, Spirit has seen no let-up in its demand, as customers
consistently vote with their wallets, even as they moan about fees (Karp, 2013).
Competition
Spiritâs route network has 60% market overlap with American Airlines, but it would
be slightly inaccurate to term American as a competitor, at the moment, given that both
airlines target different segments of the market. Spiritâs operations into the Caribbean and
Latin America from Fort Lauderdale contend with Americanâs out of its Miami hub.
Likewise, JetBlue Airways has a presence in Fort Lauderdale and competes on those routes
as well (Spirit, 2013). Thus far, Spirit has managed to avoid market retaliation, as it is small
(approximately 1% national market share) and it is not taking customers away from the other
carriers (Nicas, 2012). What it is doing, is growing the market with its low fares, attracting
7. ALL YOU BOUGHT IS THE SEAT 7
price-conscious travelers who were previously priced out of the market, particularly in the
VFR segment in the Caribbean and Latin America.
Another airline with a similar model is Allegiant Air. Like Spirit, it targets the price-
sensitive leisure travelers and derives a large portion of its revenue from ancillary fees.
However, its network has very little overlap with Spirit and one of its business strategies is to
use fully depreciated old aircraft that are cheap to operate, despite fuel inefficiencies.
Nonetheless, Allegiant is eyeing the Mexican market and its expansion plans may bump up
against Spiritâs as both compete in same market segment (Nicas, 2013).
Profitability
Spirit has been consistently profitable since its emergence as a ULCC in 2007. Its
2012 net income of $108.5 million was 42.0% higher than the previous yearâs. Its pre-tax
profit margins in 1Q13 was 13.4%, the second highest among U.S. airlines (first was
Allegiant with 18.5%) (Nicas, 2013). As noted earlier, the airline is not focused on market
share, but profitability. It institutes just enough flights to stimulate demand (typically two to
three flights daily) and would not enter a battle for dominance, unlike legacy carriers who
need frequencies and service to attract the high-yield corporate traveler. Such tactics are
anathema to Spiritâs model and it assiduously avoids them, in fact yanking non-performing
routes and redeploying assets at short notice.
Another key driver of Spiritâs profit is its ancillary revenue. Accounting for 40.6% of
total revenue in 2012, it grew 40.3% from the previous year to reach $535.6 million in 2012
(Spirit, 2013). Wolfe Research airline analyst Hunter Keay says, âWe factor in our opinion of
an airlineâs willingness to pursue new fees when we decide whether or not to recommend the
stockâ (Karp, 2013).
Continued profitability in any business is dependent on delivering exactly what the
customer wants. As CEO Baldanza puts it, âWe care about the thing that customers tell us
8. ALL YOU BOUGHT IS THE SEAT 8
they care the most about, and thatâs offering the lowest possible fares. If you can do it
yourself, itâs free. If we have to do it, youâll pay for itâ (Mouawad, 2013).
Conclusion
Spiritâs success is due in no small part to its first-mover advantage in the ULCC
business. It was shrewd enough to identify a gap in the market and moved quickly to fill it.
Despite constant bad press (or free publicity, as the company would say) and reviews, there is
still significant demand for Spiritâs product. A best-ever second quarter showing of $45.8
million in adjusted net income in 2Q13 (a 29.6% gain year-on-year) attests to that (Spirit,
2013).
As it continues to expand, Spirit would face pressure to reduce its cost base further,
given its stated goal of a baseline 25% reduction in fares upon market entry. If network
carriers are successful in trimming their costs, Spirit has no choice but to get even more
creative in unbundling. Perhaps, a cleanliness charge would be next. As long as it is in line
with their business model and fares continue to drop (2Q13âs base fare fell 4.4% year-on-
year), passengers such as one Mr. Sech on one of Spiritâs Atlanta-Florida flights would
continue to fly. He summed it up nicely, saying, âI would never be loyal to this airline. But I
appreciate the model â as long as they don't ever charge to use the bathroomâ (Spirit, 2013;
McCartney, 2010). Customers would move out of the target segment as their incomes grow,
but there would always be more passengers for whom the lowest fares beat everything else.
9. ALL YOU BOUGHT IS THE SEAT 9
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