Southwest Airlines 2011

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Southwest Airlines 2011

Diagnosis: Southwest airlines began first flight in 1971. They experienced finance loss only in the first year. Southwest’s company vision is to keep a low fare with better customer service. According to different surveys, Southwest airline has the highest margin in all years except 2007 and passenger yield. Southwest has lowest average revenue passenger miles per passenger, load factors, unit costs per available seat per mile, and net debt. In order to maintain their leader position in the industry, Southwest keep on their original low-cost operation and culture while expand the market to compete with other firms. 2010 Southwest announced that they would buy Air Tran. This decision will generate more than 30 new markets. But how to find a balance point between Southwest culture and old AirTran culture would be an urgent issue.

Analysis: Under five porter’s analysis, the competition within the airline industry is pretty intense. According to the case, there are a lot new firms trying to enter the market after the deregulation, even though the industry is a high fixed-cost structure. However, the long-term operation will bring more profitability according to the established companies. In the airline industry, the most important suppliers will be plane suppliers, fuel suppliers and labor. There are two major plane suppliers, Boeing and Airbus. Most of the domestic planes were produced by that two companies, formulated an oligopoly market, which gives plane suppliers more power. Another factor is the fuel suppliers. Fuel prices increases a lot recently, may cause the ticket price go up. Airline companies do not have much power on fuel prices either. There are two types of customers in the industry. The first type is rich and business type. They only concern about the time, there are price insensitive. Another type of customers is majority of public. Most people are price sensitive. At the same time they are seeking for better...
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