Bargaining power of supplies
Plane manufacturers are the one who dictates the prices on the planes, which are over-value because of the scarcity of plane manufacturers. Only two manufacturers in the airplane industry are Boeing and Airbus. There is a fierce competition between the two, which leaves very little marginal space for bargaining to the plane buyers. Airbus and Boeing, as suppliers are always deeply concerned by suggestions and demands of the airlines, since they compete over their own productivity when it comes to closing a deal with an airline. Switching costs too high for any airline to switch to another provider since substitutes are non-existent. And not to mention, the price of the oil is high. Substitutes
Substitute's can be considered as direct competitors along with other airlines such as United, Northwest, Delta, and other airlines. Transportations such as the trains, cars, and buses, and the switching costs for customers are very low compared of the airlines. Yes, the airline industry is very attractive industry because it is not over saturated; when purchasing tickets, switching costs are high between airline fares. I believe SW can even generate more profits if they establish hubs in very populated areas were not many airline companies have not established themselves, just like Wal-Mart does to every rural city, and abolish al possible threats. SW has the resources, capabilities, and the know, they can penetrate any virgin or densely competitive areas and still are a low-cost leader in prices, because of their operating systems and a well developed economies of scales. Another option is that they can merge with other companies to have a competitive advantage over its competition. Bargaining Power of buyers
SW is only limiting regular average customers who only make short trips such as business-oriented customers. Once again, SW stresses that their prices are very low companies to Delta and United....