In this assignment I was assigned the task of comparing 2 different airlines, one being a full service carrier and the other being a lost cost carrier, from United States of America, namely the Delta Airlines and South West Airlines. The points of comparison were market strategies, financial benefits, load factors, contrasting yield, revenues and passenger/cargo loads. The analysis was done on the business model and a long term strategy. Through this it would be known that which airline is performing better than the other. The disruption of air travel through various incidents like the terrorist attacks and global downturn, which can be considered as economic, political and social conditions, effect airlines adversely. References like books and online resources were used in finding the information required in how the airlines would perform in the future and how the business model has worked for them over the last few years.
Southwest Airlines is the world’s largest low cost American airline. Southwest is the largest airline in terms of passenger load (2009) and fifth largest fleet in the world. Southwest Airlines has carried the most domestic and international passengers than any other US airlines since late August. It has posted a profit consecutively for 37 years. It operates about 3200 flights an year mostly which comprise of short and quick trips to the major airports of the world and operating only a single type of aircraft i.e. B737. PEST Analysis
Following contains the PESTE analysis of Southwest
Government regulations regarding restrictions on passenger security and fuel have burdened the industry. The government has restrictions on flying older aircrafts and the cost of fuel has created problems for the airlines. Though this restrictions won’t have greater implications on Southwest due to their fuel hedging and constantly maintained aircrafts. Economic Conditions
During the current economic downturn the whole airline industry went through a very unprofitable phase and the astronomical increase in oil costs in 2008 caused the airlines to lose money. But due to the fuel hedging southwest decreased its losses considerably. Social Conditions –
Due to the threat of terrorism and providing extra security measures to passenger the cost of insuring the aircraft and the passengers has increased significantly, thus causing a considerable decrease in the overall profits. Technological Conditions –
Over the last 2 years a lot of airlines have become bankrupt and now a small number of low cost carriers have come into the market. Though, there has not been an increase in purchase of aircrafts as new airlines have used their resources to buy from the already bankrupt aircrafts. Southwest has been constantly upgrading its aircrafts for a better safety record.
Following contains the SWOT analysis of Southwest Airlines
Strength arises from the resources available to the firm. $727 million a year was saved over the last couple of years due to an aggressive hedging policy, which saved about 70% of the aircrafts fuel consumption. This strategy has allowed southwest to keep prices low and continued to permit passengers to check two bags for free, alienating it from the volatility in recent gas prices. The website has recently been improved and updated making it easier to use, resulting in customer satisfaction.
Southwest’s time arrival rate is 83 % ranking the best in US and flight cancellations were about 1% of scheduled flights. After forming a strategic alliance with WestJet it has further reduced its cost and increased its services. Southwest provides a stable work environment; the CEO recognizes the employee’s efforts on monthly basis and allows for an effective top down communication approach. In general, turnover is low and satisfaction high. A single kind of aircraft provides for lower...
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