CASE
ANALYSIS
SOUTHWEST
AIRLINES
Candace Rodriguez
Marketing Management
MAR 4803
Professor Barbara Quaintance
Date June 12, 2014
The Problem
Southwest Airline’s has been facing direct competition in 9 routes of the intra-California
market with United Airlines and their Shuttle by United. A Shuttle by United was designed to be
a high-frequency, low fare, minimal amenity, short-haul flight operation initially serving
destinations in California and adjacent states who intent was to match Southwest strategy. In the
four months since Shuttle by United Airlines inception competition has been fierce resulting in
Southwest and United Airlines slashing prices and evoking a marketing blitz in this 9 route area.
Recent news highlighted that Shuttle by United intended to discontinue some service
(particularly the Oakland-Ontario route) and raise fares $10.00 per ticket. Southwest response to
this and the continued threat of losing market share to United Airlines should be: continue
targeted advertising to the 9-route Intra-California market and weather the initial storm by
United Airlines and await their withdrawal (Continental airlines tried to directly compete with
Southwest and lasted 16 months before completely pulling out of the point-to-point market.
United recent actions could demonstrate an inability to compete long-term and they are only in
their fourth month). Match United Airlines rate increase of $10.00 per ticket.
Alternative Course of Action
Alternative courses of action include doing nothing which would not affect the prices of
flights or the routes offered, increasing all fares by $10 which would match the fate increase of
“Shuttle by United”, or increase all fares by $5.
Uncertainties
Uncertainties surrounding Southwest Airlines include brand loyalty in the airline
industry, the effect of competitors on the analysis, the cost per ASM from increased fuel costs,
the five point decrease in consolidated load factor, and the continued targeted advertising to the
Intra- California routes that are directly affected by the Shuttle By United and maintain current
pricing strategy.
Consider Relevant Information
Southwest Airlines wants to maintain leadership with “short haul, point to point, low fare,
high frequency airline committed to exceptional customer service”. They have much lower
operating costs compared to other airlines and fast turnaround times with an average of 15-20
minutes compared to the average of other airlines which is 55 minutes. The customer service is a
big asset for Southwest as they have great customer service ratings as part of their “Southwest
Model” that includes relentless service, creative marketing, and commitment to its customers.
Identify the Best Alternative
The best alternative would be to do nothing by keeping all routes and pricing the same.
They would uphold their marketing position as the low cost leader and continue to serve all
customers. The daily operating profit will increase in price which would cause Southwest’s load
factor to increase due to effects of cross-elasticity.
Develop a Plan for Implementing the Alternative
Southwest’s costs per available seat mile was among the lowest all U.S. carriers which is
why it’s better to stay put for now and not do anything. Their services are one of the best in the
industry as they focus highly on customer service and they produce tangible results. On time
performance, baggage handling, and overall customer satisfaction has rewarded them to be the
“triple crown” leader in the airway industry. The attitudes of the employee towards customers
has been one of the biggest keys to their success.
Southwest has also implemented effective marketing strategies which have led them to be
one of the more profitable airlines. This has differentiated them from the other airlines since it’s
inception. Their service, convenience, and price represent the three pillars of their success.
Southwest differentiated itself from other airlines by choosing a different reservations system.
They decided not to rely on travel agents as compared to other companies. They like to
personalize with customers by having direct communication with them which also saves them
from commission expenses. The fact that they started their operations in smaller cities minimized
their landing time.
Evaluate the Decision
Recommend that is Southwest Airlines have no immediate changes. This will keep
Southwest remain the industry leader in both in price and services. United’s changes affect will
benefit Southwest in the long run.
Works Cited
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