Southwest Airlines Strategy

Southwest Airlines Strategy Introduction Southwest Airlines Co. was founded in 1957 as an airline that flew between the major Texan cities, and over the years, it has grown to become the largest low cost airline in the world. Southwest Airlines has approximately 58,000 employees and makes around 3,000 to 4,000 departures daily. The airline’s services now cover one hundred and one destinations within the United States, and ten countries. Southwest Airlines is making plans to extend its routes to Canada and Europe. After serving Southwest Airlines in different capacities for the last 33 years, Gary Kelly recently stepped down as the chief executive of the airline, and I was appointed to step into his shoes. Gary Kelly was a transformative CEO who grew Southwest Airlines to what it is today, and I am honored to take on the challenge of stepping into the role that he performed so well. In this report, I will outline my plans for Southwest Airlines with regard to long-term success and profitability.

SWOT Analysis Strengths Southwest Airlines has five decades’ experience in intrastate air travel, during which it has perfected its business operations. Unlike most airlines, it is able to offer quality service at a low cost, thus becoming the airline of choice for many passengers. For many of its routes, the airline offers point-to-point service thus saving the time that would have been spent on getting connecting flights.

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Southwest’s strong point is also its large fleet of modern aircraft which enables it to serve its customers effectively across all its routes. In the airline industry, Southwest is considered to be highly effective; it has minimal delays and one of the fastest turnaround times (Hodges, 2018). This enables it to operate more flights daily, thus increasing its revenues and reducing the need to purchase more aircraft. Southwest also derives a significant advantage from its price leadership strategy. As a result of being one of the lowest priced carriers in the United States, more customers opt for it thus increasing its revenues.

Weaknesses Southwest Airlines is yet to fully tap into the freight industry, and therefore earns over 90% of its revenues from passenger revenues. This has the potential to affect the airline’s profits in case there is a sharp decline in the number of passengers who book flights. The low cost strategy also prohibits the firm from generating high revenues, and while it is still profitable, it’s profits are so slim such that it can easily turn into a loss if something unexpected occurs. In the five decades of its existence, Southwest has barely ventured into new markets abroad and this limits its ability to earn higher revenues.

Opportunities Southwest Airlines commands a significant proportion of the United States’ domestic airline industry (Lawrence, & Weber, 2014). The airline is the preferred carrier due to its low cost, and as a result of its popularity, it has the opportunity to gain customers when it expand its reach into the international market. Southwest also has the opportunity to widen its market base by either acquiring or entering into a partnership agreement with other airlines. Being an already renowned and preferred airline makes it possible for Southwest to acquire new customers without spending heavily on sales and marketing.

Threats Over the years, the airline industry has become more competitive due to the introduction of more carriers into routes which Southwest previously dominated. This poses a threat to the airline’s market share, and thus forces it to seek alternative ways of retaining its customers which include offering discounts which ultimately reduces its profitability. Since the late 1990s, the US has continually faced threats of terrorism attacks, and this forces Southwest to constantly be on the lookout for attempted threats and enforce strict security measures against them.

Current Mission and Vision The airline recognizes that it operates in a competitive service industry and as a result, its current vision and mission are centered on attaining growth through providing excellent customer service (Nuruzzaman, 2019). Southwest current vision is simple; to become the most preferred and profitable airline in the world. Its mission, on the other hand, is to go the extra mile to offer the best quality customer service that is warm and friendly.

The current vision and mission will undergo a slight transformation to encompass the constant changes in the internal and external business environment, and also to reflect the fact that the airline is growing from a domestic to an international airline. Southwest Airlines has been a domestic airline for an excessively long period, and as the President, my goal is to transform Southwest Airlines into a world-class airline that covers over sixty major destinations in every continent of the world. The new vision and mission of the airline will center on customer experience excellence. We want the airline to deliver affordability, efficiency and quality.

New Mission and Vision

As the President of Southwest Airlines, my key objective is to work in collaboration with our stakeholders to make the Southwest excel at everything it does. Everything about the Southwest experience will be world-class; from the booking, to cabin features, to in-flight entertainment and dining. We aim to make the process of travelling as stress-free as possible.

Our mission, therefore, is to provide an all-round excellent travel experience to our customers.

Our vision is to make flying safe, easy and enjoyable. We aim to be recognized world over as the best airline.

Communication Plan As Southwest Airlines plans to scale up its operations, it needs a communication strategy that creates awareness about its new direction. For the strategy to be successful, it is essential to consider three major aspects. These are; the objective of the communication, the desired audience and the channels that will be used to deliver the message. The goal of Southwest’s communication strategy is to generate the market’s interest and create positive publicity for the new services on offer. The target audience of the communication plan are the airline’s existing customers as well as the potential customers in the new markets who have not used Southwest Airlines before.

To create a sufficient amount of interest, Southwest Airlines will make the message of its transformation into an international airline intriguing and exciting. To achieve this, there will be press releases, advertisements and a draw where a few passengers will win a free flight to a destination of their choice (Thompson, 2012). Southwest will use different forms of media such as television, radio, print and digital platforms. The target audience for the communication is media industry professionals in major TV, radio and newspaper companies

around the world, digital influencers such as bloggers, YouTube vloggers and reviewers, loyal customers and the target market in the existing and new destinations (Ryan, 2016).

To generate ample publicity, there will be a worldwide launch that will occur simultaneously in all its destinations, and a common hashtag which will be used in every country where the airline launches its operations. The goal is to have at least 15 million views worldwide on the day of the launch. Leading up to the day of the launch, Southwest Airlines will hold press briefings and advertisements in order to create ample interest in the product to be launched.

It is also essential to develop an internal communications plan to increase employee participation so as to enhance their compliance. New management often requires a change in organizational culture, therefore it is crucial as the new president of Southwest Airlines to ensure that there is an open line of communication between management and the rest of the team. The main channels of communication within the organization will be email, display board, meetings, and newsletters. To develop an effective communication channel, it is essential to capture the feedback of employees and to involve them in decision making processes.

Financial Objectives Southwest Airlines’ goal is to become the most profitable airline in the world; this will be achieved through increasing its revenue streams and market share. To determine the strategy to use to enhance the financial performance of the corporation, I will compare the firm’s current performance to that of its competitors locally and internationally, and thus set a target for what the company should achieve. Currently, several airlines in the aviation industry are not turning a significant profit due to the increasing costs of flying, therefore, to

reduce the risk of losses it is essential for the airline to select routes that are busy and do not have too much competition (Smith, Drumwright, & Gentile, 2010). It is also crucial to ensure that it markets itself adequately. To ensure that we select the best routes, we will continually monitor which routes’ market share is increasing or decreasing. This will help the airline to decide which routes are likely to generate more revenues.

Today’s airline industry is competitive, and it is no longer sufficient for airlines to only offer a ticket as its sole product; the modern passenger presents a potential market for other products such as travel packages, insurance, entertainment, extra comfort and food.

Southwest will increase its market share by catering to more market segments and availing more ancillary products for its passengers to choose from prior, during and after the flights. It will cater to luxury and business travelers, as well as those who travel on a tighter budget. It will also earn revenues from providing onboard products such as extra legroom, food and drinks, and premium seats, which it will charge a higher price.

One of the ways through which it can achieve this is by becoming a major freight courier. Currently, cargo services comprise less than 10% of the airline’s revenues, and this causes it to rely excessively on passenger travel for its earnings. The airline will designate between ten to fifteen aircraft to cargo services, and as a result, this will increase the amount of revenue it earns from courier services significantly. The second major step that Southwest will take to increase its earnings is expanding into popular international routes such as London, Germany, South Africa, Shanghai, Canada, Mexico and Singapore, among others.

Another way through which Southwest Airlines can increase its revenues is by marginally increasing the price of an air ticket. This could be by as little as $10 to $50 depending on the class the passenger wishes to travel. It is crucial to raise the price of an air

ticket due to the constant fluctuation of fuel prices which make low airfare an unsustainable strategy (Kotler, & Keller, 2016). To encourage the consumption of ancillary products, customers will earn loyalty points for every extra service or product they purchase. Non-ticket revenues are going to be one of the key new revenue generators for the airline business and we will continually look for new ways to improve the flying experience by constantly innovating new products.

Technology-wise, the airline industry is very dynamic. New advanced aircrafts are developed regularly, and this brings up the cost of acquiring aircraft. To overcome this challenge, Southwest Airlines will lease as opposed to purchasing aircraft. This strategy will make sure that the airline constantly has new technologically-advanced airplanes while reducing the cost of acquiring and maintaining the aircraft.

Plan The five financial goals require a detailed plan of action to become achievable. The first strategy is to select busy and profitable routes. The routes that are guaranteed to have passengers throughout the year are China, Singapore, India, Dubai, London, Tokyo, and Canada. It is therefore likely to be profitable for Southwest Airlines to enter these markets.

The airline should develop a suitable entry strategy based on the markets’ needs and the current competitors in the market. Combining affordability and quality service is guaranteed to be a successful strategy in most markets. It is also important to provide a variety of products to cater for the diverse needs of the market, thus widening the corporation’s market share (Kornish, & Ulrich, 2014).

The second method of generating additional revenues for Southwest Airlines is to offer additional products besides the ticket. These include extra leg room, drinks, food and

snacks, Wi-Fi, inflight entertainment, travel insurance and accommodation arrangements. All these will be offered by the airline at an extra charge. Customers who purchase these offers will earn more loyalty points than customers who purchase the regular ticket.

The third financial objective is to diversify the airline’s sources of income by adding freight carriage to the services it offers. The airline currently concentrates mostly on passenger travel, and has not sufficiently explored the transportation of cargo to various destinations. This provides a major opportunity for the airline to offer affordable courier services in this sector, and thus earn higher profits for the corporation.

The fourth financial objective is increasing the cost of a ticket. The airline’s tickets are significantly cheaper compared to its industry peers and while this may attract many customers. it also makes the airline more vulnerable to losses should a major expense or event occur. It is therefore imperative for Southwest to increase the average price of its tickets such that it is neither expensive nor cheap (So, King, Sparks, & Wang, 2014). The airline can also classify its customers into different segments and offer different products according to their ability to pay for them.

The fifth financial objective is to lease as opposed to purchasing aircraft. This can be achieved through making arrangements with aircraft manufacturers such as Boeing to provide aircraft to the airline at a certain monthly or annual charge. The aircraft manufacturer will be responsible for maintaining and servicing the aircraft while Southwest will only cater for fuel charges.

As the President of Southwest Airlines, my role is to understand what customers really want and offer it at a fair price, and in doing so, increasing the airline’s revenues sustainably.

For a long time, we have concentrated on the cost leadership strategy, but to enhance our

competitiveness, it is essential to cater for different market segments adequately. Some clients need comfort and others need affordable prices, it is essential to arrive at a median.

Methods of Control and Feedback My role as the president of the organization is to provide the team with the resources it needs to achieve its vision, mission and goals, and regularly assess the corporation’s progress in attaining the goals (Kim, 2014). To do this, the goals will be divided into short, medium and long term. The management will gauge what the team has actually achieved against what was actually supposed to be achieved.

Conclusion Under its new leadership, the vision, mission and objectives of Southwest Airlines will change significantly. However, the airline still needs to maintain its standard as a leading organization in the aviation industry by adopting the appropriate strategies and practices. The best way of achieving market leadership is by understanding who its target market is, what this market needs, and thereafter developing products that adequately address the needs of the market. To enhance its competitiveness in the dynamic aviation industry, Southwest Airlines will ensure that it maintains excellence in everything it does and also be agile enough to adapt to different business environments internationally.

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