Southwest is known to be the pioneer of low cost travel in the industry

Southwest is known to be the pioneer of low cost travel in the industry. The company is the largest low cost domestic airline and has the second largest market share by revenue passenger miles. The main office of Southwest Airlines Co. is in Dallas, Texas. The airline was established by Herb Kelleher in 1967. The Southwest Airlines adopted its current name in 1971. Based on the U.S. Department of Transportation’s most recent data, Southwest Airlines is the nation’s largest carrier in terms of originating domestic passengers boarded. Southwest operates the largest fleet of Boeing aircraft in the world, most of which are equipped with satellite-based WiFi providing gate-to-gate connectivity. To other low-cost carriers, Southwest Airline has been a major influence and at the same time an inspiration. Around the world, its business model has been reproduced and repeated a lot of times. This aggressive method and approach associate the high level of employee and the aircraft productivity with low unit costs by lessened aircraft turnaround time, especially at the gate. The company’s various cost reductions help the company pass on the benefits to the end consumer in the form of lower fares. The lower fares help the company gather higher demand for its tickets. The high demand also helps the company save money by selling directly on its website, and thus reducing marketing expenses.
By operating from smaller airports, the company better utilizes its aircraft, as it faces lower ground times and delays due to less congestion in smaller airports. This also helps the company reduce its costs. Southwest Airlines, however, is not without weaknesses. No matter how successful, Southwest Airlines serves only 29 states and cannot compete against the bigger companies that serve nationally or even internationally. Furthermore, Southwest Airlines does not utilize a hub system that allows for bigger competitors to reach further out. Such competitors are aware that they cannot match Southwest Airline’s prices; their market is larger and is not feasible to offer cheaper tickets at the cost of no in-flight meals. Instead, competitors narrow the price difference between Southwest Airlines and themselves and stress on the quality of these frills (such as roomier seats). Others, through use of flight hubs, are the only ones who can economically serve remote customers. Driven by the idea that customers can be satisfied without having expensive options available for them, Southwest Airlines have stepped on the toes of many of its bigger competitors.
Southwest Airlines were able to operate their business relatively undisturbed. It was only in the poor economic conditions that suddenly Southwest Airlines’ method of operation became the ideal model for its competitors. While the publicity is beneficial in raising employee morale, and raising stock prices; Southwest Airlines is now target of competitors’ focus. A tactic that Southwest Airlines can do to inflict damage to competitors is to slash prices. This type of tactic is typical of a big company that has a monopolistic rule in an industry squeezing other competitors. This tactic is advisable when competitors are near bankruptcy or are in dire situations. Because competitors cannot match Southwest Airlines’ prices, the most they can do is narrow the gap of the price difference. Southwest Airlines, which has consistently made a positive profit, can increase the price gap by lowering their prices. Southwest Airlines will incur losses from this move, but the goal of this move is to drag the competitors further into debt. Because this move affects both companies, this move is very risky and should not be done unless Southwest Airlines is sure that their competitor is near bankruptcy. Possible reasons for this move would be to eliminate the weakest competitor in the industry, which would free up the market held by that company.
In conclusion, Southwest Airlines has done a remarkable job in being able to sustain its low-cost leadership strategy over thirty years but the company can seek other opportunities to be a stronger forcer in the transportation industry. I recommend Southwest airline to take this opportunity to expand to greater regions. It is the time for Southwest airline to use its low-priced tickets to drive its competitors out of business and take over their market. We believe, giving up some of the profit to cut the ticket price even lower and upgrade hardware can open Southwest Airline to a much larger market that will bring more profit in future. Implementations of cost saving technology such as internet is needed to lower the operation cost to give customers better deals.