n US Airways survive by remaining the same carrier it is 3. If you were AirTran,
ID: 388689 • Letter: N
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n US Airways survive by remaining the same carrier it is 3. If you were AirTran, JetBlue, or Southwest, how take market share away from US Airways? would you continue to 4. Do American, Delta, and United still pose competitive threats to US Airways Case 5-3 Southwest Airlines Southwest Airlines started its passenger service as an intrastate carrier in Texas. Initially, it offered service between Dallas, Houston, and San Antonio. The original founders of Southwest were probably considered eccentric or even crazy during the early years of the company's development. After all, their strategies were contrary to the conventional wisdom of the 1970s and 1980s. Most airline executives felt that interstate service offered the most potential for profit and that an important ingredient of efficiency was to use the hub concept for service. These same executives also felt that in-flight service of beverages, snacks, and/or food should be included in the fare and that guaranteed seating and baggage checking were necessary ingredients for success. Perhaps even more important was their vision that air service was a premium transportation alternative and should be priced accordingly The Southwest Approach Dissatisfied with the then-current airline service, the founders of Southwest Airlines felt that there was a great opportunity for an intrastate carrier to serve the growing metropolitan areas of Dallas, Houston, and San Antonio. Southwest also after a while, switched its service to the old airports in Dallas and Houston that had s into e. been almost abandoned by the larger carriers. ys ou Southwest used a no-frills, low-price service approach in their marketing strategy After deregulation of the airline industry in 1978, there was greater opportunity to offer "rock bottom" fares, point-to-point, in selected market areas Another important ingredient of the Southwest strategy was its approach with here ns. Its ational cus its in the employees. Southwest is run like a democracy, with all of its employees given the opportunity to participate in running the company and having an ownership stake through stock investment. Employees are viewed as the most important asset of the company and its number one priority. Underlying this philosophy is the belief that happy employees will help make the company efficient and will provide better overall customer service. This approach has worked for Southwest-their profitability, cus tomer service, and employee morale are the stuff that legends are made of ost air- an, and irTran The key points of their continuing success have been: . Dominance of the short-haul, high-density markets using secondary airports . Discount fares Aggressive advertisingExplanation / Answer
South west airline presently reeling under two dynamical issue i.e. to reduce the deficit which it can done by either increasing revenue through price or reducing cost. It also be noted that it cannot exercise both option because it is not viable. To remain relevant in the market it has to churn long term strategic decision so that revenue will be accelerated, and cost can be optimized in the near future. It has already accumulated huge sum of loss in its kitty. Financial prudence and an army of motivated employee is needed by South West Airlines at the present scenario. I will suggest it to work on two fronts so that profitability can be achieved in a competitive way. The first thing it should target is capturing more market share which it can achieved through offering competitive price, so it has to lower the price in the segment it operates. It will have significant impact in revenue in the present period but gradually revenue can be accelerated through consolidation. The other front it should work is to minimize the cost and basically optimization of cost so that decline in revenue per seat can be offset in the present time. All the unnecessary cost can be cut down and allocation of budget in different head should also be reevaluated. A new entrant will face major problem in this segment which are getting market share, building brand, owning the confidence and satisfaction of the customers. Apart from this operation is also a big challenge. Initial cash burn will be much more for a new entrant so it is important to shed those huge amount and sustain in the market.
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