Southwest Airlines Competition

Topics: Southwest Airlines, Airline, Low-cost carrier Pages: 3 (828 words) Published: May 15, 2006
According to Wikipedia, an online encyclopedia, Southwest Airlines is currently the third largest airline in the world, measured by the number of passengers carried. Total number of passengers that were carried in the year 2005 amounted to 77.7 million. They are behind American Airlines and Delta Air Lines. After the tragic September 11th incident, Southwest airlines remains as one of the only major airlines that are still profitable. After the September 11th attacks, Southwest Airline's 6 biggest competitors grounded 240 planes and laid off 70,000 people. Southwest kept every single person and plane flying. In fact, they have been so successful, even other airlines have started to copy their practices. One of the biggest reasons why Southwest has been able to remain profitable compared to their rivals would be the practice of fuel hedging that they participate in. What they do is purchase fuel options that allow them to smooth out the fluctuations in the price of fuel. Because of this, they are currently paying only about 50% the current market price for fuel. Their rivals are currently paying more for fuel and carrying fewer passengers. Fuel consumption is the 2nd largest expense for airlines after labor.

In order to compete with Southwest airlines, its rivals have come up with different gimmicks. In an article titled, Airline Competition Moves to In-Flight Entertainment, writer Keith L. Alexander states, "After battling the budget airlines on fares, the traditional carriers are now trying to match their rivals' in-flight entertainment offerings." Competitors such as Jetblue, American, United, and Alaska Airlines have all tried different types of entertainment on their planes. Some have reported success. However, Southwest remains opposed to having in-flight entertainment for their planes. They believe that it is not cost effective because their flights are very short. In the end, their customers would be paying for it. They have decided to...
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