Southwest Airline Case Study

Donovan Lee

June 23, 2017

Bus 438

Southwest Airline Case

        Southwest Airlines is the nation's fourth largest carrier in terms of customer boarding. Southwest began Customer Service on June 18, 1971 with three Boeing 737 aircraft serving three Texas cities - Dallas, Houston, and San Antonio. Southwest has grown immensely since then and now operates over 350 Boeing 737 aircraft all over the United States. Southwest Airlines is also well-known for having a very productive and loyal workforce. Southwest maintains good employee relations because what they believe in is that if employees are happy, satisfied, dedicated, and energetic, they'll take real good care of the customers. 

However, though coupled with several strengths, Southwest Airlines is not without weaknesses. Among such weaknesses is their use of only the Boeing 737 airplane. As it contributes to low training and maintenance costs, limiting itself to only one type of aircraft causes Southwest to have no flexibility at the time Boeing 737 receives bad reputation due to a critical flaw found in it. And it would be a costly undertaking to find a replacement aircrafts for the company who’ve consistently used only one type of aircraft. Another weakness of Southwest Airlines is the fact that it currently serves only few states in the US, mostly in the South. This limited area of service limits the number of geographical market for Southwest. And this causes the inability of the company to compete against the larger airlines that serve both nationally and internationally, with hubs that allow them to reach a much larger share of the overall market than Southwest.

Recommend that Southwest Airlines should take full advantage of its financial stability and profitability to expand its operations by extending its services to new territories, purchasing additional aircrafts and upgrading some facilities to make a few changes in which the airline’s aesthetics would be more accommodating. All of these may be costly ventures, but it would open the company to a larger market. This move will help Southwest to sustain their current market and still acquire more, thereby maintaining the company’s lead and originality that will prevent copycats from outperforming them. We perceive such recommendation as crucial for the company because if Southwest would just stay as is, there may come a time when they will be left behind by more advance and flexible airline companies that have a more effective low cost strategy. 

The best way for Southwest to respond would be to focus on more aggressive deals/discounts and offer more benefits to their membership subscriptions. They should also introduce new tiers to their memberships to attract all types of customers and not just wealthy businessmen. Exhibit 9 shows that for every price change that has a lot of perceived value, the number of passengers on discount flights increases significantly. For a limited time, Southwest could promote free flights to a few lucky membership subscribers. This should induce more customers to get a membership and with more customers coming in from these new memberships, Southwest could start doing free ticket giveaways for a few weeks at a time and they can be announced directly on the flight. 1-2 Basic fare tickets would be given away on each flight and the flight attendants would deliver them while making a big deal out of it. This would be the best route to take because if Southwest invests heavily in expanding, it would be for nothing because the competition will copy Southwest within a few weeks so it would be better to implement this strategy once Southwest stabilizes their financial status. The new routes that Southwest would put in place would be instantly copied by Braniff, putting more pressure on Southwest which would increase their debt and make them harder to break even on their investment. Therefore, focusing on customer retention should be a priority for Southwest instead of attracting new customers.

Southwest Airline, a new airline company operating across three major cities in Texas, Dallas, Houston, and San Antonio, has been showing steady growth in the market ever since operation started in June 1971. In 1972, Southwest captured an impressive 39.9% of market share competing against their two main competitors Braniff International Airways and Texas International Airlines. Southwest is changing the game within its competitors with their strategic marketing approach of a friendly brand image, advertisement with witty slogans, and price discounts. To gain further market share, Southwest announced in January 1973, a “60 Day Half Price Sale” on all flights between Dallas and San Antonio. To compete against this price discount, Braniff also announced in February a half-price “Get Acquainted Sales” on all flights between Dallas and Hobby Houston until April 1st.  For Southwest, Dallas-Houston is their major route with the most traffic and cannot afford to lose this route to its competitors which can lead to further net loss in the company. To respond to Braniff, Southwest should not price match as it will only help temporarily sales and instead utilize their competitive advantage of clever advertisements and offer better services to capture the market.