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Southwest Airlines 2002: An Industry Under Seige - CPJ 02172014_121600

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Chris Jantzen

on 18 February 2014

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Transcript of Southwest Airlines 2002: An Industry Under Seige - CPJ 02172014_121600

Captain: Tyler Grey

Co-Pilot: Elizabeth Wise

First class host: Ahmed El Fatmaoui

Business class host: Chris Sage

Stewardess: Kim Pham

Steward: Chris Jantzen

Air Marshall: Birendra Kumar
Southwest Airlines 2002:
An Industry Under Seige

Welcome Aboard
Mission:
The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.

History:
Started in 1967 by Rollin King and Herb Kelleher
Regional Airline- Started in Dallas ,Texas
First flights in 1971 due to many legal battles
Leading Low-cost provider
History of Southwest Airlines
Strategic Analysis
Low Cost Provider
P2P (strategic locations)
One model aircraft
Fuel hedging
Efficiency
Loading/ unloading
Maintenance
Utilize Price elasticity
Perks
No baggage fees
Problem #1
Problem # 2
How can, following the 9/11 terrorist attacks, Southwest Airlines
differentiate
themselves and
de-stagnate growth
within the airline industry after one of their
competitive advantages
of being a low-fare provider had been eliminated?

What can SWA do to maintain a corporate
culture
of putting
customer service first
while sustaining
low turnaround times
after substantial government regulations have been enacted?

How can, following the 9/11 terrorist attacks, Southwest Airlines
differentiate
themselves and
de-stagnate growth
within the airline industry after one of their
competitive advantages
of being a low-fare provider had been eliminated?
Recommendations
Problem #1:
Expansion
Inorganic and Organic
Geographical & Product
Problem #2:
Boarding and seat assignment
Rapid process design and implementation
Continuing education/training
Action Plan
Short Term (1 year)
Redesign of in-ground operations
Airport tie-ups for priority security check-ins

Mid-term (2-5 years)
Expand to more cities in US (hundreds in waiting list)
Target vacation travelers (tie-ups at tourist destinations)
Provide freight services with older aircraft

Long-Term (5-10 years)
Acquisition for International operations

Any
Question's?
STRATEGIC INTEGRATION
BADM 5305
Spring 2014
Dr. Mertens and Dr. Knoche

Strengths
Culture
Point to point model
Brand recognition
Single aircraft type
Relative financial strength
Airport selection

Weaknesses
Dependence on passenger revenues
Labor contract
Legal issues
Opportunities
Expansion
Industry can expand geographically
Consolidation
Strategic Acquisition
Demand
Low cost fares in more demand
Partnerships/Profit Pool

Threats
Increased Operating Expenses
Labor (41%)
Fuel (15%)
Maintenance (10%)
Interest Rates
Low Demand
Revenues impacted by changes in Macro Economy
Societal Tectonics
SWOT Analysis
Culture
Servant Leadership
“Hire great people and treat ‘em like family” -- Gary Kelley
Employees before customers
Employee retention helps lower costs
Happy employees result in happy customer



What can SWA do to maintain a corporate
culture
of putting
customer service first
while sustaining
low turnaround times
after substantial government regulations have been enacted?
Problem #2 - Alternatives
Alternative 1: Process Redesign/Training
Boarding process
Rapid process design and implementation team
Continuing education program
Alternative 2: Lobby for deregulation
Problem #1 - Alternatives
Alternative 1: Expansions
Geographical expansion
Lateral expansions through strategic acquisitions
Product expansion: Freight
Alternative 2: Business Partnerships
Complimentary products
Hotels
Rental Cars
Entertainment
Alternative 3: Enhance Current Rewards Program
Technology
Mile-based points
Industry
Industry Profile
Product: Transportation
US Airline Industry $116.5B in 2001
Domestic Travel= 72%
International Travel= 21%
“Imperfect Oligopoly”- Few Industry Players
Classified as “Major, National, and Regional Airlines”
Total of 96 Commercial Passenger Airlines
Top 10 airlines have 93.4% of market share
Air Travel is Capital, Labor, and Technology Intensive


Porter's Five Forces
Threat of New Entrants
: Low
Large capital requirements are required for start-ups
Difficult to differentiate services

Bargaining Power of Customers
: Moderate
High number of customers lowers their bargaining power, however
Product is undifferentiated, giving the buyers some power
Switching costs: Low

Buyers’ purchases represent a sizable portion of revenues

Bargaining Power of Suppliers
: High
Few dominant competitors (airplane manufacturers, airports, and fuel suppliers)
Switching suppliers is costly
Few substitutes are available
Threat of Substitute Products
: High
Threat is higher for domestic travel than international
Car, bus, and train travel is less expensive than air travel
Rivalry Among Competitors
: High
Several competitors within industry
Industry growth is slow during this time
Fixed costs are high
Full transcript