1.0 Executive summary
Business players always devise strategies aimed at keeping them afloat in the market. They build up on their competitive advantage which in turn they utilize to be ahead of their peers. The strategy may be informed by what the customers, employees and the management expect of each other. South West airline has strived to offer flights within the USA and the surrounding areas which are lowly priced while at the same time with excellent services. Through this strategy the company has managed to build a reputation for itself whereby it has emerged has the company many in the country opt to fly in. their driving agenda has been infused into the employees and the customers have managed to buy into the same. Through their loyalty programmes they have managed to retain their customers while attracting new ones.
1.2 Research methodology
The report uses analytical modality in arriving at the conclusions and recommendations. Of essence, is the analysis of how the company treats its employees and its customers and what the company derives from such arrangements? The type of aircrafts used, the training costs and the routes flown are also analyzed which helps in bringing out a picture of cost effective airline, which has turned out to be a darling of many.
South west airline is among the largest America carrier in terms of customer boarding. The company which embarked its operations on three major Texas cities, which are Dallas, Houston and San Antonio, in 1971, has expanded rapidly, and operates over 350 Boeing 737 aircraft all over the United States. The company has the lowest operating cost structure in the domestic airline industry, whereby it provides primarily short haul, high frequency, point-to-point, and the lowest and simplest fares. The airline currently serves 59 airports in 58 cities in 30 states. The company has managed to retain one of the best customer service records. Creative, flexible work with high productivity is the core advantage of the company. High quality customer service delivery in a friendly manner with warmth, individual pride and company spirit is the mission statement of the company. The business strategy of airlines revolves around the objectives of increasing frequency of short trips carrying more passengers at a low fare with strong commitment from customers and employees. The company has a target of a niche market from where it gets its customers’. The company mainly on top of providing lowest fares for business and leisure travelers, it concentrates on inter state short trips and more maximizing the profitability than focusing on market Share. It is this strong vision which out weigh the allurement of international flight market and this enables the airline to concentrate on its own niche to gain profit (Smith, 2004). Southwest Airlines began operating commercial flights from June 1971 (Marie, 2011).
1.4 Analysis of the strategic and design issues as applied to the operation in South West Airline
The company has managed to stay afloat and leverage on its key competencies by sticking to its motto which reads as follows” keep it cheap, keep it simple”. This is the opposite of its competitors who rely on hub and spoken system. Southwest airlines operate about 2,700 flights on a daily basis covering 29 states that includes more than 55 cities. The main strategy of south west airlines is to offer short flights with duration of less than an hour to the customers at low cost. On an average, the airlines operate planes for 11 hours daily that is above the industry average. This enables the airlines to cover on the fixed costs by spreading it. To combat competition, the south west airlines lands at small airports to get rid of congestion.
The point to point service of the airlines helps in reducing the delays in the overall trip time. This helps the company to achieve break even at a fast rate. The south west airlines has managed to attract more customers due to its cheap fares, which large carriers can not manage without incurring huge losses. The company doesn’t offer frills such as full meals, seating assignments, or baggage transfers. Snacks such as peanuts and drinks on its flights are what the company offers only (Freiberg, Jackie and Kevin Freiberg, 1998). By virtue of elimination of these frills, the company ends u reducing the operational costs. The company operates just one type of plane the Boeing 737, which is more fuel efficient than the larger planes operated by other companies and this has a lot of benefits to the company especially reduction of costs incidental to pilots training and mechanics as well as low requirement for inventory levels of spare parts. The company also offers ticket-less travel system aimed at trimming travel agents’ commissions and running its own preservation system. A lot of the customers using the airline make their reservations through its website. South west airlines has the advantage of online sales of air tickets and ranks the highest in the online sales of air tickets according to Jupiter Airline core data. The company is also impressive in shifting their customers to online in a convenient and easy manner.
Another strategy used by the airline is their devotion to their employees and their customers. A culture has been created by their CEO Herb Kelleher whereby their employees do feel as part of an extended family. The work force owns 11% of the company, and this helps in aligning their interests to those of the airline. The company has managed to achieve a team spirit which can only be an envy of others. The company provides their employees with enormous information aimed at enabling them to better understand the company, its mission, its customers and its competitors (Hallowell, 1996). The employees are made to understand that they must at all times comply with the company concept of never inconveniencing the valued customer. It’s by virtue of sticking to its formula of excellent customer service and a positive working environment for employees that the company has managed to remain profitable for over 30 years. The company has had only one strike in its history and has only three employees laid off in 25 years of who were rehired immediately. It is through this job security that loyalty to the company is enhanced. The costs of the south west airlines are reduced to a great extent through a low employee turnover and more efficient working practices. These aspects also act as a means of competitive advantage for south west airlines (Anderson, F. P. & Slack, F. J., Orife, J. N. (2010).
The company has also a distinctive marketing approach. It is through these marketing approaches that the company tries to distinguish itself from the rest from the airline industry. In their marketing, the company tries to assure the consumers that they offer real value while making flying fun. They do promote themselves as offering safe, reliable, low-cost fare with outstanding service. The company always targets a new crop of passengers instead of competing with other airlines for the existing customers. These groups of customers are those who are convenience; time oriented travelers and price-sensitive leisure travelers. The company always strives to cater for both groups. South West airline was the first company to give credit for the number of trips taken and not the number of miles flown. The company also pioneered senior discounts; fun Fares, Fun Packs, a same day air freight delivery service, ticket-less travel and many other unique programs. It’s through their commitment to this promise, that has brought them credibility and the airline industry’s best cumulative consumer satisfaction record. Through its business model the company has managed to generate customer loyalty, unlike the rest of the airlines where both product differentiation and customer loyalty are low (Ruppel, J. (2009).
1.5 Service Quality
- The company has always strived to keep and honor the promises it has made to its customers. For instance, the company has always charged low fares since it embarked on its operation.
- With a good personnel and communications channel which the company has established, messages do circulate quickly within the company. This enables the employees to discuss the problems facing them together and come up with a solution which is welcomed by all. This in turn ensures that their customers are likely to have services which are well thought out after such discussions by the employees.
- The company uses the point to point flight routing system as opposed to hub and spoke system which is used by many other airlines. This means that the airline can serve more cities than other airlines in a day.
- The company always demands of a error-free record by using Boeing 737 for all of its aircrafts which have simplified training, maintenance and ground operations for the company. This informs the fact that the company had no passenger fatality emanating from an accident.
- The employees are tasked with the responsibility of ensuring that all phone calls are answered within the first ring of the call.
- The employees of Southwest Airlines are selected according to their passion for the job hence their services are willingly and readily performed.
- South West employees are allowed to make major decisions on their own hence have authority to grant permission to deal with circumstances occurring during flight. This leads to the employees giving prompt services when needed, without recourse to their boss in remediating the situation.
- There is a culture in south west airline, where the employees do work as a closely knit family. Every one in the crew share the responsibility of cleaning up the aircraft and this is aimed at allowing the aircraft to take off again after a relatively short period of time of ground duty. The company did pioneer a rapid turn around service on keeping its aircraft on the ground for less than twenty minutes. The company has also changed the interior design of the aircraft with an aim of speeding up the time of ground duty.
- Southwest Airlines started a non-ticket policy in 1995 that enabled customers to avoid loosing their tickets before boarding the plane.
- The company updates its employees on regular basis of the company operations thus equipping them with requisite knowledge, to enable them answer customers questions at any given time.
- The company tries to crew the impression that they do care for their passengers in a more responsible manner. The slogans of the South west airlines reveal the caring attitude of the company towards their passengers. The company website has a list of slogans used to capture the interest of the customers in assuring them the best service.
- The company has a sound and reliable safety record and this makes the customer feel that he or she will not be in any risk of danger.
- The company also offers convenient operating hours.
The company tries to ensure that its services don’t confuse the intended customer. The company doesn’t reserve any seats for its customers. This is aimed at ensuring that their customers do not have to look for their seats but they can choose from a pool of the ones which have not yet been occupied.
- The company offers peanuts to their passengers and no meals. The company projects only plane ride with a short duration.
- The agreement between the company and Mark Travel Corporation gave the customers the option to choose on the vacation packages. The vacation packages include the options in transportation, flight tickets, accommodations in hotels and all sorts of guidance.
The various other facilities offered by Southwest Airlines include the baggage allowance, legroom, pre arranged seating, passenger change, online facilities, child concession fares, senior concession fares, provisions for carrying pets, musical instruments, in flight services like WiFi, soft drinks etc, Air mile reward points, in flight magazines and alliances with other airline providers. Southwest Airlines purchased AirTran in May, 2012 increasing its passengers to 100 million annually (Mike Wagon, 2012).
1.6 Findings and Conclusion
The market leader position of Southwest airlines is attributed to the flexible nature of the company to adapt to the changes in addition to low fare and quality customer service. In recent years of global economic recession and the increasing global price of oil has caused airline companies to raise their ticket fare. Michael Zennie, 2013 discusses that the Boeing 737 – 700 flights used by Southwest Airlines are not safe for long hauls citing the crash of southwest airlines crash with its nose dipping in the runway at LaGuardia Airport in New York City. Sixteen people were injured in the July 22, 2013 crash of southwest airlines with ten passengers hospitalized (Meghan Keneally, 2013).
This situation caused the passengers showing aversion to airlines and opting for alternate modes of transport. The Southwest airlines also faced the decrease in their passengers as a result but able to overcome these issues with aggressive marketing.
In the greater part of 2008, the price per barrel of oil soared to the highest that the world has ever seen. As a result of this, world gas prices also increased making it very difficult to operate airplanes as the costs were increasing on a rapid basis. Airline companies faced bankruptcy and many airline companies became bankrupt as a result of economic recession and rising oil prices globally. The air line ticket sales came down drastically with most of the airlines carrying fewer passengers causing huge losses to the companies. The low cost carriers like Southwest airlines were the most affected as a result of this situation as the operating income of such low cost airlines are low. Southwest airlines have survived this critical situation and have recovered from a bad situation through the various business strategies (Bailey Jeff, 2007).
Virgin Atlantic and Jet Blue are the major competitors of Southwest airlines in America. One recommendation to Southwest airlines is to operate shorter haul flights to get more competitive advantage. Southwest airlines must project it as a low cost short duration carrier to attract more customers and clarify its position in the airline market. The company has procured flights like Boeing 737 that can be operated within a short range and hence it is strongly recommended not to operate such flights in long haul as maintenance and up gradation become a huge problem for the company.
Southwest airlines must look at the opportunity of operating international flights in future by procuring more advanced flights. This will create a new market segment for the company.The company can look at this option in a serious manner in future to operate long haul flights.
Another recommendation to the company would be to operate in cooperation with other airline companies to offer quality services to the customers on a wider range as the network of aircraft carriers expand. This can also become a cost cutting measure for Southwest airlines and can enhance the network of the company in the aspect of vacation packages.
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