Analysis Of Southwest Airlines Opposition In The Industry
Southwest Airlines was established to fulfill the increasing demand for local air travel in Texas. Rollin King saw a niche in the market to create a business which would cater to the combined population (data showed 4,856,000) of Texas’s four largest cities. Dallas-Fort Worth Regional Airport would also serve as a hub for two cities. Braniff International Airways was the main control of the airport. Southwest Airlines found it difficult to compete with these competitors.
Braniff served a market of international scope, including many US cities. TI focused on a localized market. Due to logistical reasons, the two companies clashed over the issue of combining port for both long flight and short flight aircraft. This led to years of legal disputes and opposition. Braniff gained a bad reputation in punctuality. They were eventually referred to as, “World’s Largest Unscheduled Airline”. Braniff’s dominance in the region was not taken for granted. Although Braniff controlled 86%, the competition could fill the void left by the previous dominant company. A tri-system was also implemented to encourage more efficient use of the airport hub where the three businesses wanted coexistence. Muse, an independent financial consultant informed King about these weaknesses and the areas that needed improvement to make his business more efficient. King and Muse began the turnaround of Southwest by looking at the west coast and negotiating new/used aircraft under high pressure to raise capital to grow the company. Boeing Company ultimately contracted to buy four Boeing 737 jets, each costing $16.2million. Southwest used heavy marketing to increase profits and fill every seat on every flight. They hired staff who had a positive attitude and were innovative in their service. To standardize cleaning, they also created a fun environment inside the Boeing 737 cabin. In their advertisements, they advertised “At Last, A $20 Ticket You Won’t Mind Getting” and “A Fare To Remember”. These ads attracted customers who were eager to discover a brand new airline.
Southwest is known for its efficient turnaround of aircrafts, maximizing their use. Since there are no assigned seats, customers are encouraged to arrive on time. This two-fold goal worked together well and the flights earned a good reputation. Southwest discovered that shorter routes and frequent flights allowed them to maximize the time their Boeing 737s spent in the air. Southwest chose airports with fewer passengers and encouraged carry on luggage as a way to increase efficiency. They were able to reduce their inventory by offering only peanuts and sodas. Southwest Airlines created an innovative business model that revolutionized the airline industry.
Southwest was able to maintain its competitive edge by implementing innovative pricing systems and rewards programs that strengthened their customer base. With their Commuter Club card, they offered unlimited travel on all routes. Reduced occupancy on flights was another way to improve customer satisfaction. This allowed for more legroom and a spacious cabin. In one case, two rows of seats were sacrificed to reduce the occupancy from 112 down to 104. The result was more legroom and a better overall customer experience. Southwest saw a loss of 2% in customers as the competition created their models. Revenues, however, increased. Southwest promoted $10 discount fares through radio advertisements, which led to a 12% rise in traffic. Southwest Airlines was able remain competitive by implementing these policies and making efforts.
Southwest’s marketing campaign focuses on the company’s strengths. Their ads attracted customers who were looking for low-cost, short flights. Southwest Airline thought that sacrificing luxury and international concerns was not important to their new business model. Their ads were still effective. Southwest Airline established a new service by creating a brand image that was efficient and affordable. Southwest Airline innovated constantly to meet the changing needs and wants of customers.
Braniff’s ad for? Southwest, in response to Braniff’s advertisement for? Southwest could benefit by siphoning off some of its traffic and establishing competitive pricing. This would allow them to maintain customers along this route, as well gaining a foothold on other segments where more air traffic may be needed. Southwest’s sale was only for 60 days. This means that in that timeframe, they could gain control in other segments and reestablish themselves in Houston-Dallas. Southwest would also be able overcome the negative impact of Braniff’s media announcement, because the effect will last until Southwest announces another innovative deal. Southwest was the only airline that dominated the local air traffic in the region. This shows they are innovative enough to maintain their control.
Southwest’s business model was the foundation of their success and Braniff should continue to use it. Southwest, which has always maintained low COGS costs and lower variable costs, is able to absorb a small revenue loss by either lowering ticket rates or temporarily losing the market. If they do not pursue competition, they risk losing customers for good and allowing Braniff a chance to take over a key route. Southwest should review the changes they made in order to reduce costs, and determine if a temporary new route can be created to defend Dallas-Houston. The case supports the idea that Southwest is capable of responding to the crisis caused by Braniff’s advertisement in? This route is eligible for a discount on tickets.
