Introduction Of Southwest Airline Essay

6930 words - 28 pages

CHAPTER 1Introduction of Southwest Airline1.1 Background of SouthwestThere is a very famous story about Southwest airline. According to this story King explain his idea, the concept of the airline, to Kelleher during dinner. He drawn a triangle on a paper napkin. The triangle shows three cities, and three routes, Dallas, Houston and San Antonio. Rolling King and Herb Kelleher started their airline in March 15, 1967 and named it air Southwest. Unfortunately for them, the airliner could fly in that time due to a joint lawsuit. The lawsuit was done by 5 big airliners of that time, Braniff, Aloha Airlines, United Airlines, Trans-Texas, and Continental Airlines. After three years of legal fight, the lawsuit was lifted and the airliner was ready to go with a change in the name from air Southwest to Southwest airline.Southwest founders principals was straight forward and simple; "If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline". This is possible with concentrating on the correct strategy for the company. Southwest noticed the potential customers for air travel are common people and air travel is not only for elite customers. Their operational strategy benefited a lot by this understanding of customer choices in airline industry is primarily driven by price.We need to consider company principles and generic strategies to find out what is their strategy and how do they implement it. To achieve lowest possible fares price, the company need to use cost leadership strategy. This strategy empower the firm to gain market share of price-conscious customers. Cost leadership is about having the lowest price in the market or having the lowest price to value ratio. Therefore, the company cut down all the unnecessary frills which are provided by their competitors. They also use one type of airplane which is the Boeing 737. It allows them to reduce the maintenance cost and also it gives them bargaining power over supplier to get more discount over maintenance and buying new airplane also the need for spare part warehouse is reducing because all the aircraft are using same parts. Therefore they were able to reduce fare and still be profitable.The simple fare structure and short hob service become standard for company. Southwest aim was not competing with full flag long distance airlines. Their philosophy was to provide an alternative for ground transportation among cities. Because of this, Southwest remained on the regional airport which they believed are closer to their customers instead of moving to nearby international airport which provides better services and options for airliners.In March 1971, Air Southwest President Lamar Muse sold promissory notes raising an excess of $1.25 million to cover aircraft and start-up cost (Southwest Airlines, 2011).Start of Southwest airline was a spark for the deregulation in 1978....

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