This website uses cookies to ensure you have the best experience. Learn more

Why Southwest Can Succeed In The Airline Industry.

2089 words - 8 pages

SOUTHWEST AIRLINESCASE STUDYMay, 2002 (note we want to consider whats going on now, Feb 2003)Wow! An excited Colleen Barrett, new president of Southwest shouted in the meeting with her management team. We have bucked the money-losing trend that other U.S carriers are in and have reported a profit of $21.4 million in the first quarter of 2002. Now the management team is reflecting on second quarter 2002 results.At the same time that Southwest Airlines reported this quarter, the nation's six largest airlines posted hefty losses. (We need to find latest financials)Airline:1st Quarter 20021st Quarter 20011st Quarter 2000American Airlines($43 million)$132 millionUnited Airlines($313 million)($99 million)Delta Air Lines($133 million)$172 millionUS Airways($178 million)($115 million)Northwest Airlines($171 million)$3 millionAmerica West($12.8 million)$14.6 millionSouthwest Airlines' profit margin was 9.2% compared to industry 2.3%. We need to find out what it is now. What accounts for this enormous difference between SWA and the other carriers? What management policies and operating procedures does SWA follow that the other carriers do not? Ms. Colleen Barrett is looking to the future. What's next with all this uncertainty in the airline industry? Ms. Barrett noted an article she was reading about another low-fare carrier JetBlue Airways entering the market. The new company is modeled after Southwest.One thing that has helped SWA outperform its competitors is a hedging program it implemented to control rising fuel costs. In 2000, SWA hedged 80% of their fuel needs at a price based on crude oil at $22 per barrel. When the price of crude oil rose, and continued to rise, SWA was unaffected. As a result of their hedging, SWA paid an average of 78 cents per gallon compared to 82 cents per gallon paid by the competition.Airline passenger traffic was down 15% nationwide in the first quarter of 2002. While other airlines have lamented that demand for travel has slowed in the past few months, particularly by business travelers unwilling to pay full price for tickets, SWA is unaffected because of its low-fare strategy. In fact, SWA sold 40% of their tickets at full price during the first quarter 2001. Many customers, tired of the problems and lack of service associated with the other airlines, are switching to SWA because of its performance record. How else could you explain why SWA had a 15% increase in revenue over first quarter 2000 while their competitors lost money?Disgruntled employees have a negative effect on customers. Right now, the industry is taking on a lot of flack. In August 2000, the heads of the major airlines were called to Washington to discuss the problems of the past summer. (American Airline's accident rate is up; Delta is getting complaints; and Northwest prompted a new wave of outrage by leaving passengers on a plane this past winter for over eight hours.) As a result of these and many other problems, Congress is looking into legislating...

Find Another Essay On Why Southwest can succeed in the airline industry.

Economic Profile: The Airline Industry Essay

1710 words - 7 pages provide the services. Several factors contribute to the ongoing struggles this industry faces.The travel industry heavily relies upon current market conditions to determine their success. Inflation, fuel costs and weather conditions control the amount and frequency in which the consumer will travel. Each one of these factors determines the supply and demand. If the cost of an airline ticket is low, this usually means that there is a surplus of

Industry Overview of the Airline Industry

1562 words - 6 pages Surviving all odds could be considered a slogan for the U.S. Airlines Industry.Through inflation, depression, terrorist activity and much more the Airline Industry has taken several set backs and still managed to survive. While profits have fluctuate a great deal, the U.S. Airline Industry can be characterized by it steady growth, falling prices and overall stability and contribute a great deal to this economic system. In a brief study of the

Why did the Revolution fail to topple the Tsar in 1905, but succeed in 1917?

1670 words - 7 pages Why did the Revolution fail to topple the Tsar in 1905, but succeed in 1917?The Russian Revolution had a decisive impact on the history of the twentieth century. Its implications and influences went on to effect a huge area and last decades. True to the large impact that it had, it was a large event. It spanned years and included many various groups and individuals. When studying the Russian Revolution it is important to note that it came during

IT Governance in Airline Industry Case Study

1548 words - 6 pages Contents A description of the organisation and the market in which it operates 3 A description of the IT governance used 3 A summary of the case study 4 A critical analysis of the impact of the IT governance on the organisation 5 References 8 A description of the organisation and the market in which it operates Airline and travel industry profitability has been strapped by a series of events starting with a recession in business

Evolution of Airline Industry in India

2328 words - 10 pages Airline industry is affected by no. of factors such as fuel price fluctuations, high fixed costs, strong influence of external environment and excessive use of marginal costing by carriers. Recessions in the industry tend to last longer, while recovery periods are generally shorter. Over the past nine years, it is observed that industry has made losses for five years and during the profitable years margins were on a lower end. The airlines

The Structure of the Airline Industry

2577 words - 10 pages depends on how innovative it can be towards cost cutting while maintaining profitable with quality products & services.ConclusionThe airline industry was born from technological breakthroughs in aviation that started in the early 1900s and keep on going these days. The first half of the 20th century was like the "incubation period" for the industry, during which technology was developed and became mature. During that time, there was no

Analysis and Recommendations for the Airline Industry

3119 words - 12 pages potential value. (same as sentence before). The importance and emphasis on these customer loyalty programs prove how critical the buyers are to the airline industry. By focusing on the buyers, the airlines can increase profits tremendously.SuccessAirlines are able to find success amongst the high buyer power that exists in the industry. Southwest airlines accumulated $11 billion in revenues in 2008 and according to southwest executive Colleen

An Analysis of the Airline Industry

1132 words - 5 pages My industry analysis will be about the airline industry. Nature of competition The airline industry is in a state of oligopoly, bordering onto the state of imperfect competition. The various aspects that have a bearing on the nature of competition will be covered subsequently. Imperfect information. There is imperfect information about the airline market. This can be gauged by the fact that airlines are never sure as to what is the exact

Economic Impacts on the Airline Industry

1858 words - 7 pages policies affected the changes?With airline industry being a luxury to most of its customers the supply and demand shifts as prices change. At the present time the price elasticity of demand has been very elastic. We can see this when the prices of an airline ticket goes up, the demand for airline travel decreases, and in contrast when prices of airline tickets go down the demand for airline travel increases. But the price elasticity of supply is

The Airline Industry After 9/11

2113 words - 8 pages enough taxes (Smith and Pearce, 2005). The positive contribution the industry brings is by maintaining their infrastructure so that consumers can go from point A to point B. This outweighs any reduction or elimination in taxes that the industry may or may not have to pay at this time. If the airline industry did not have enough funds to maintain its infrastructure, the public sector would suffer because businesses use the airlines to conduct

The Airline Industry Impacts on Economy

1773 words - 7 pages in the end (Jerram, 1998).Due to the airline industries market dependency it is very unstable. Positive and negative externalities affect the entire industry and this makes many airlines unable to remain profitable. The externalities can affect the customers, the global economy, employees, other airlines, and many others. The classification of the airlines industry is debatable due to the nature of the industry itself and its customers. Many

Similar Essays

Southwest Airline Inc. Case : "Pest" Analysis Of Airlines Industry

1052 words - 4 pages measures. Political support can play a key role in the industry's search for markets abroad. Without it, an industry may face a difficult situation.Scanning the Political Environment in this case we find that Southwest sought to make use of the opportunity created by Airline Deregulation Act passed by the US Congress in 1978. This law permitted inter-state air flights. But Southwest's attempt to becoming an inter -state airline soon faced political

Promotion Tactics In The Airline Industry

981 words - 4 pages ). There are many ways that the companies in the airline industry advertise and promote their product. They are trying anything they can to promote higher sales. In the past years the most common is by joining up with other industries that passengers like. For example, the airline industry has joined up with Coca-Cola for the upcoming holiday season. Through this promotion you get 25 dollars off a round trip when you get special marked 12 packs

The Airline Industry Essay

1551 words - 6 pages revenues, a small change in load factors or fare levels can have a large impact on profits. The industry is therefore highly vulnerable to an economic slowdown. Besides, the airline industry is one of the most heavily taxed in the U.S., with taxes and fees accounting for approximately 20% of the total fare charged to a customer. Thus higher prices of air tickets become a major problem of the consumers.Airline 7Competition in Airline industry:It is

Discussion Surrounding Global Alliances Operating In The Airline Industry

1587 words - 6 pages of Air France, who before cooperating with Skyteam partner Delta were only able to directly service 15 destinations in the United States. Under their alliance, Air France can now offer connections to around 200 destinations, benefitting customers and Skyteam partners alike. However, airline alliances are not necessarily the best option for any particular airline. According to Gaggero and Bartolini (2011), airlines such as Emirates and Southwest