southwest airlines case team power point
DESCRIPTION
TRANSCRIPT
![Page 1: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/1.jpg)
William GholstonLadel Harris II Thomas Haskins Brittany Taylor Erika Witherspoon
![Page 2: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/2.jpg)
Industry Analysis
![Page 3: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/3.jpg)
Market
• Southwest Airlines Started as an intra-state operator in the state of Texas in 1971• Short haul, high frequency, low cost strategy, and point to
point route system
• In 1994 southwest held 4.4 Market Share%• Southwest
• Make the expansion to become a major carrier • Lowest operating cost in the domestic airline industry• Low cost philosophy survived, a severe price war
![Page 4: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/4.jpg)
• US passenger airlines into 3 categories• Major Carrier
• annual revenue 1billion; 95% domestic passengers carried • 80% all major carrier domestic
• National Carrier • annual revenue 100million-1billion
• Regional and Commuter Carrier • annual revenue less than 100million
• In 1978, the United States had 36 domestic carriers• The major carriers adopted the hub-and-spoke route system
•
![Page 5: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/5.jpg)
Rating Carrier Market Share %
1 United Airlines 22.1
2 American Airlines 20.2
3 Delta Airlines 17.6
4 Northwest Airlines 11.8
5 Continental Airlines 8.5
6 USAir 7.8
7 Trans World Airlines 5.1
8 Southwest Airlines 4.4
9 American West Airlines 2.5
Estimated Market Share for Major U.S. Carriers in 1994 Based on Revenue Passenger
Source: Southwest Airlines company records. Firgures rounded
![Page 6: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/6.jpg)
22.1
20.2
17.6
11.8
8.5
7.8
5.1
4.42.5
Market Share %
1 United Airlines2 American Airlines 3 Delta Airlines4 Northwest Airlines5 Continental Airlines6 USAir7 Trans World Airlines8 Southwest Airlines9 American West Airlines
![Page 7: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/7.jpg)
• Major carriers turned their attention– Long haul routes
• As major carriers pruned or reduced service on these short-haul routes– Regional carriers and New airlines filled the void
![Page 8: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/8.jpg)
• Mergers and acquisitions mergers in the 1980’s
• Eight Airlines controlled 91% of U.S traffic causing them to be fragile
• Price competition- due to deregulation price competition
![Page 9: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/9.jpg)
• In 1994, 92% of airline passengers bought their tickets at a discount
• on average just 35% of the posted full fare
![Page 10: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/10.jpg)
• Customer Service– sense of humor in our workers – the compassion for passengers and coworkers– desire to work
• in 1994 we were awarded the triple crown of the airline industry for the third consecutive– time performance– baggage handling– overall customer satisfaction
![Page 11: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/11.jpg)
![Page 12: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/12.jpg)
Problem Statement
Southwest Airlines strategy to respond to United Airlines unexpected news that “Shuttle By United” will make changes in their services and prices strategies. “We’re going to match Southwest” strategies? United’s decision to increase all 14 “Shuttle By United” fares by $10. Furthermore, suspend service between Oakland-Ontario, beginning in April. Can we gain Market Share with these actions?
![Page 13: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/13.jpg)
Relevant Criteria
1. Increase Market Share in the Major U.S. Airline Carriers market. 2. Move from maturity-saturation stage to repositioning initial strategies. 3. Continue low-fare carrier image.4. Create Brand Loyalty with current customers.
![Page 14: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/14.jpg)
Alternative Strategies
• Match United by having Shuttle to increase profits from the extra money per ticket as the main competitors in the market will remain the same and at the same price.
![Page 15: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/15.jpg)
Alternative Strategies
• Adjust their prices by a different amount to stay competitive while keeping an increase in profit. Creating an increase in ticket price by a smaller amount than Shuttle by United they have an increase in profit and offer a better price than their competitor
![Page 16: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/16.jpg)
Alternative Strategies
• Offer more amenities and services though a promotional push
• Do Nothing
![Page 17: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/17.jpg)
Assumptions
• “Ticketless”/ “electronic ticketing” system that Southwest Airlines has currently scheduled to go nationwide January 31
• Southwest doesn’t need to go as low as United, due to their capitalization on customer service
![Page 18: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/18.jpg)
Assumptions
• Southwest would gain market share for United’s discontinued service for Oakland-Ontario, CA
• Strategy also wouldn’t hinder the advertising, sales, promotion, and scheduling matters pertaining to the start of the scheduled service to Omaha, Nebraska
![Page 19: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/19.jpg)
Comparative Advantages
(Southwest vs. United Airlines)
High customer preferenceLower cost and higher efficiencyWell established imageCost Per Available Seat Mile
![Page 20: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/20.jpg)
A common unit of measurement used to compare the efficiency of various airlines. It is obtained by dividing the operating costs of an airline by available seat miles (ASM). Generally, the lower the CASM, the more profitable and efficient the
airline.
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
$0.070800
0.1050 Series1
![Page 21: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/21.jpg)
![Page 22: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/22.jpg)
Projection 1995 1th Quarter Operating Results
Comparison SWA Price Increase to $8 vs. SBU Fare Increase to $10 with Discontinuing of Oakland-Ontario Route
SWA SBU $-
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
$1,800,000
$193,340
$1,551,709
Series1
![Page 23: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/23.jpg)
Final Decision
According to analysis above, by not matching United Airline's $10 per ticket fare increases, instead an increase of $8 per ticket fare keeping Southwest Airline's "Lowest fare Airline". Southwest will be able to capture more customers from United Airline's discontinued Oakland-Ontario route. Gain market share in the US markets.
![Page 24: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/24.jpg)
In conclusion,• Southwest should not match United's fare
increase of $10, but increase their fares to $8.• Southwest should market its Low Fare Strategy
in West Coast Markets.• Continue to improve its Customer Service
record.
![Page 25: Southwest airlines case team power point](https://reader033.vdocuments.mx/reader033/viewer/2022061122/54714005b4af9fb90a8b4ab9/html5/thumbnails/25.jpg)
Comments or Question?
Thank you!