Southwest started its operations in 1971 in Dallas-Houston, Dallas-San Antonio & San Antonio-Houston our operations were delayed by lawsuits filed against us by our competitors. Braniff and Texas International (TI) were the two major Airlines played a very distinctive role in these routes & our competitors. Customers were not happy with service provided by both, this when Southwest entered with new prices and quality services. The two giants maintained their fares $27 & $28 but Southwest started with $20 fare. When we started off with operations it was calculated that we would need 39 passengers per flight for breakeven but we were averaging 13.1 and 12.9 passengers per flight. Reopening of William P. Hobby airport because of customer preference which led to increase in transportation revenues & our passenger loads went from 18.4 to 26.7 passengers per flight. Southwest came up with a discount flight of $10 on Friday evenings after 9.00pm, seeing the response to this in May it was started on daily basis with half-fare flights after 8 PM, also Saturday flights were reintroduced with the same half-price. To improve sales in Dallas-San Antonio market, a limited period offer was made, flights were to be half priced for this route. If it showed positive responses we were considering making it a permanent price. This strategy was countered by Braniff’s “Get Acquainted Sale” which now offered half fare flights in our Dallas-Houston Hobby route which is our most profitable route.
How to retain a market share in Dallas-Houston Hobby route. To protect our market share in the Dallas-Houston Hobby route from Braniff. In a longer term problem we can say that they may adopt this pricing strategy in the other markets Causes
Braniff adopting similar pricing & servicing strategy of Southwest: - Braniff has organised a "Get Acquainted Sale" adopting a similar pricing strategy from our Dallas-San Antonio route. Giving also a 1st class option at $17.
Initially in 1967 – 1970 Braniff played a major role in this interstate routes as their market share was 77.5% whereas that of TI was 22.5%. So we state that Braniff was the monopoly in the route of Dallas-Houston for those particular years. In 1971 when Southwest entered, the market changed making it an Oligopoly market. In the beginning of 1973 the market became a Duopoly wherein the two major players were Braniff and Southwest Airlines with 51.5% & 41.2% market share.
S.W.O.T. (Strengths Weakness Opportunities Threats)
* Market Leader: Within a short span of starting operations Southwest airlines have taken over the market & become 1 of the market leaders in the Dallas-Houston route. * Benchmark: During this time we have become the benchmark setters in terms of customer service satisfaction & pricing.
* Only Coach-Class: All our current flights & services are only offering coach-class. While some of our competitors are offering 1st class as well. * Breakeven: Our company has still not reached breakeven. We still need to recover all our costs. * Service Differentiation: In this industry with the current situation there is very little scope for 'service' differentiation without raising our costs.
* Interstate Routes: Southwest could look at the other states & start flying on those interstate routes. This may be in the future. * Houston's Intercontinental Airport: The Houston Intercontinental airport is another opportunity which we can utilise in the near future. We used to fly earlier in this airport but completely stopped services, we could restart some flights on this airport.
* Competitors: In this case our competitors would be the substitute mode of transportation & other service providers * Rise In Cost Of Operation: This would be derived from figures given in exhibit 5 where we see there has been a rise...