Southwest Airlines: Staying Ahead in the Pricing Game

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1 – What has been Southwest’s traditional pricing strategy? Why has this pricing strategy been so successful throughout the airline’s first three decades?

Southwest’s traditional pricing strategy has been the choice of buying cheap airplane tickets for just basic transportation services, without any extra service, such as meals. Even though there is many people that buy expensive tickets just to have all the comfort that others airlines offer, Southwest decided to do the opposite and selling just the transportation itself for the lowest price it could be just so you could get to places without paying too much for it. They kept it simple and inexpensive.

2 – What values do airline customers – both business and leisure travelers – seek when they buy air travel tickets? Has Southwest done a better job than competitors of meeting the needs of these air travelers? In what ways?

Both business and leisure travelers seek for flexibility, convenience and a balance between good service and price when buying airline tickets. Southwest’s policy allowing customers to change flights without penalty appealed to customers. But what really made Southwest stand out to both customers were its frequent flights serving a ton of cities at convenient times and low prices. Though Southwest did not serve meals or provide electronic entertainment like other airlines, its pricing met the needs of its low-cost seeking target market better than other airlines.

3 – What internal and external factors affect airline pricing decisions? What impact are these factors now having on airline pricing and profitability?

External factors that effect airline prices are: gas prices, seasons, threat levels, competition and prices of inputs to making the airplanes and running their business. Internal factors effect such as labor cost, cost of the planes, gates at the airports, terminal fees. All these factors are increasing considerably the airfares even though Southwest keeps it...
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