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SOUTHWEST AIRLINES CASE STUDY
UNIVERSITY OF GREENWICH
MODEL STUDENT ANSWER
29TH MARCH 2013
CONTENTS PAGE
1. EXTERNAL ANALYSIS
1.1 Wider Macro-Environmental Analysis - US Airline Industry
POLITICAL
The extant US Airline Deregulation
Changes in the political environment can have major consequences for the airline industry. One such political consideration that has had a major consequence for the airline industry is the recent deregulation of the industry. This has made it easy for new entrants to enter the industry and competition is becoming more intense (FAA, 2013). In addition, the FAA also regulates other aspects of civil aviation such as environmental pollution and noise pollution and stricter controls are being put in place for the airline industry. Implementing such environmental control measures will mean higher operating costs for airlines.
Taxation
The US Government has recently imposed higher taxes and has also introduced new fees on aviation including homeland security, disease control, infrastructure enhancement, environmental protection, airway operation and maintenance and agency financing (Airlines for America, 2013). This rapid rise in taxes and other fees will increase airlines’ operational costs and will negatively impact their financial success. In addition, such increase in taxation will have a knock on effect on the availability of job opportunities and is likely to retard economic growth in this area. In addition, because the cost of air travel will have increased, the demand for air travel could simultaneously decrease and other travel options within the US might be deemed more favourable. Strict Safety Regulation for fear of Terrorism
After the tragic event on 11th September 2001, strict safety regulation has been imposed by the Transportation Security Administration to manage security within airports and airplanes in an attempt to prevent any future similar incident. This
UNIVERSITY OF GREENWICH
MODEL STUDENT ANSWER
29TH MARCH 2013
CONTENTS PAGE
1. EXTERNAL ANALYSIS
1.1 Wider Macro-Environmental Analysis - US Airline Industry
POLITICAL
The extant US Airline Deregulation
Changes in the political environment can have major consequences for the airline industry. One such political consideration that has had a major consequence for the airline industry is the recent deregulation of the industry. This has made it easy for new entrants to enter the industry and competition is becoming more intense (FAA, 2013). In addition, the FAA also regulates other aspects of civil aviation such as environmental pollution and noise pollution and stricter controls are being put in place for the airline industry. Implementing such environmental control measures will mean higher operating costs for airlines.
Taxation
The US Government has recently imposed higher taxes and has also introduced new fees on aviation including homeland security, disease control, infrastructure enhancement, environmental protection, airway operation and maintenance and agency financing (Airlines for America, 2013). This rapid rise in taxes and other fees will increase airlines’ operational costs and will negatively impact their financial success. In addition, such increase in taxation will have a knock on effect on the availability of job opportunities and is likely to retard economic growth in this area. In addition, because the cost of air travel will have increased, the demand for air travel could simultaneously decrease and other travel options within the US might be deemed more favourable. Strict Safety Regulation for fear of Terrorism
After the tragic event on 11th September 2001, strict safety regulation has been imposed by the Transportation Security Administration to manage security within airports and airplanes in an attempt to prevent any future similar incident. This
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