The Southwest Airlines

Résumé du document

The US airline industry, a mobility services market, has known on average a significant growth in the last three decades. The yield management, the increase of the customer purchasing power, deregulation of the airlines industry are some of the major facts that changed the sectors considerably. Although the activity cycle is due to economic situation and terrorist attacks, this market has shown some significant capacity to grow every year in a competitive situation.

We are going to respond to the problem: how can Southwest airlines maintain and develop its activity in the highly competitive airlines market?

In the first part, we are going to present the analysis of the market. We are going to show how the rivalry in the market is high. In the second part, we will focus on strategic alternatives for the company and then we will present our recommendation for the Southwest Airlines.

Extraits

[...] Actually the market identifies some threats. First of all, the competitors can't control price especially the fuel prices. As customers are price sensitive, companies are really aggressive on this aspect, like for example Jet Blue. It develops business models with low cost structures in order to win the battle. Another threat not to forget, is the risk of terrorist attacks and epidemiological risks like H1N1. It arrived and customers didnot travel for a long time. Porter: the five Competitive forces Bargaining power of suppliers: High. [...]

[...] The Southwest is particularly successful with the best ratio debt-equity in the market. Although it succeeded in establishing in Florida, it still can't reach the northeast part of the country. The details of the analysis can be found in the appendix. Strategic alternatives International development The southwest company is actually not represented abroad. It doesn't have international flights that makes the company to lose market shares: Ingoing customers to US and outgoing customers to Europe or Asia. Internationalization of the company can be a clue of development for the company, but at the same time it can cost a lot because it needs new planes, slots and hard cash. [...]

[...] The Northeast could be a place of significant growth for the company. They can fill more planes in directions to the south or east. Southwest doesn't have a strategy of hub which is a strength and a weaknesses at the same time, because it will be more difficult to gain market shares in this area. The high level prices and few slots available makes the mission difficult. Merging with an already established company in the area can be a solution. [...]

[...] New entrants are really aggressive but most of them fail because one needs a lot of financial resources to succeed. Internal analysis Southwest has been a profitable company for 36 years which is a record in the sector. It is a unique company which developed without a hub strategy. It covers almost all the big cities in the US except the northeast cities which are the most populated. Other competitors are very strong on this point and slots are almost all taken, which makes the thing difficult to conquest these markets. [...]

[...] It will reach new airports in the South and East from Northest. Some transfers will be proposed but it won't be the aim of the company. The company should then communicate aggressively about the low prices proposed, lower than JetBlue because the structured costs will be lower. It has to communicate about tickets with prices like the Easyjet practice in Europe. The company has to inspire from practices from the Low costs companies in Europe. The best is to lease plan for the development and not buy them because if the general economy is bad, the company can't stop the contract and cancel flights. [...]