No-frills airlines usually focus on low-cost strategies in every aspect of their business. The low-cost strategies can be implemented by applying various factors, such as using one type of airplane, using secondary airports with short flights, point-to-point transit with simplified routes, speedy turnaround times and assigning multiple roles to staff in order to reduce the labor cost. These types of strategies let you play a win-win situation because once the cost is reduced; it benefits the passengers as well as the company itself. But in real time, it is not necessary that every low-cost carrier airline will apply all the above mentioned strategies, still they can achieve better results due to efficient implementation of such strategies.
Pacific Southwest Airlines originated the concept of first low-cost carrier in May 1949. However, Southwest Airlines started in 1971 and achieving a significant profit every year since 1973. Such progress of low-carrier airlines causes problems for full-service airline because of competition on price. The price is the main factor for customers when selecting an airline. Between the years 2001 and 2003, a large number of full-service airlines faced heavy losses due to terrorism and wars. In these days, low-cost carriers like Southwest remained profitable, despite the destruction in aviation industry.
As per the requirement, I selected a tool called “SWOT ANALYSIS” in order to analyze the company’s potential resource strengths and weaknesses, opportunities and threats. Following are the findings of my analysis:
Potential Resource Strengths and Competitive Capabilities:
Low-Cost Operations Elimination of on-board service:
Southwest has eliminated the on-board services like entertainment, catering, seats reservations,
airhostess and other complementary services. The objective of this elimination is to achieve the
low-cost and better turnaround time.
Low-Cost Operations Economy Class:
In order to maintain the low-cost strategy, Southwest is focusing on the Economy Class
passengers to get more travelers. Furthermore, the seat space has also been narrowed down to put
more seats in the plane cabin.
Work Environment Love, Care and Fun:
Southwest Airlines believe in the fact that the organization should have open, enjoyable
environment. Employee productivity depends on their peace of mind during working hours.
Southwest Airlines allow their employees to have fun and entertainment during working hours
and the employees are not bound to any hard and fast restricted rules. And this results in a good
productivity. Furthermore, to promote this corporate culture of fun and love, the Southwest is also
listed on the New York Stock Exchange as “LUV”. A blog titled “The Nuts about Southwest” is
also launched to create a personal love and fun relationship between the company bloggers and
the readers. (http://www.blogsouthwest.com)
Fast Turnaround Time:
Southwest airlines have short flights in terms of time-period. This allows them to use their planes
at maximum. The constant utilization of their aircrafts ensures the maximum revenue which
improves the turnaround time for Southwest Airlines.
One Type Aircraft:
Southwest Airlines uses only a single type of aircrafts named “Boeing 737”. This benefits them in
different areas such as spares and equipments can be easily replaced. Employees training reduce
significantly. The maintenance cost for different types of aircrafts is usually very high. By using
single type of aircraft, Southwest cuts down their cost by a large number when purchasing or
repairing aircrafts. Boeing 737 has low-fuel consumption and possesses low operating cost as
compare to other aircrafts.
Boeing 737 aircraft are smaller in size as compare to usual aircrafts therefore they can land and
take off on secondary airports. This...
References: * Southwest Airlines: Culture, Values and Operating Practices (in Thompson, A. A., Strickland. A. J. and Gamble, J. (2005) Crafting and Executing Strategy (Fourteenth Edition), McGraw-Hill, NewYork.
* Huselid, M. (1995) The impact of human resource management practices on turnover, productivity and corporate financial performance. Academy of Management Journal
* Middaugh D.J
* Gibson J. W. & Blackwell C. W. (1999). Flying High with Herb Kelleher: A Profile in Charismatic Leadership. (p. 120). Journal of Leadership Studies.
* Spinetta L. (2006). Fuel hedging: lessons from the airlines. (p. 30). Air Force Journal of Logistics, Vol. 30, Iss. 3
* Daraban, I
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