Date post: | 02-Apr-2018 |
Category: |
Documents |
Upload: | gaurav-sharma |
View: | 219 times |
Download: | 1 times |
of 12
7/27/2019 Southwest Case study solution
1/12
7/27/2019 Southwest Case study solution
2/12
Southwest airlines-Pricing
Kumar Kushagra- 12MBA0128
Gaurav Sharma- 12MBA0039
Roopali Singh- 12MBA
Pushkar Sinha- 12MBA0116
7/27/2019 Southwest Case study solution
3/12
About southwest airlines
1967: Herb Kelleher and Rollin King founded SW
1970: management team built
June 18,1971: 1st fly in Texas-Houston, Dallas, San Antonio
(Golden Triangle) with 3 Boeing 737s aircrafts and 25 employees
Operation focus: short-distance flights (>500 miles), point-to-pointflights, only 737 Boeing, high frequency flights, low fares, no
international flights
1st national carrier to sell seats online ($1 per booking)
1st airline to use ticketless travel (January 31,1995)
2000: biggest aircraft order (94 737s Boeing) >>> 355 fleets in2002
2003: 4th largest US airlines in terms of domestic passengers carried
7/27/2019 Southwest Case study solution
4/12
What Pricing Strategies does Southwest
Airline Employ to compete against otherairlines?
7/27/2019 Southwest Case study solution
5/12
Low-Cost LeadershipSouthwest understand that it is low costs
that they can profitability offer low fare.
They control expenses by; offering cheap snacks than most other
airlines. operates a single type of aircraft the Boeing
737one aircraft type significantly simplifiesscheduling, maintenance, flight operationsad training activities.
7/27/2019 Southwest Case study solution
6/12
focused on increasing employeeproductivity currently employ 71employeeper aircraft.
there marketing strategy remains short-
flight and domestic route thus 85% flightsare 750miles or less.
They serve airports that are readilyaccessible rather than large international
airports, it help in reducing the long delay. southwest also increase aircraft average
time in air i.e 11hour per day, compared to8hours for other airlines.
7/27/2019 Southwest Case study solution
7/12
Cost structure of airlines
Variable costs Maintenance
Fuel
Labor
Fixed costs
Fees
Lease payments for airports Other costs( food, entertainment etc.)
7/27/2019 Southwest Case study solution
8/12
Cost control
7/27/2019 Southwest Case study solution
9/12
What Southwest does.
Single aircraft type-Boeing 737
Flights to and from secondary airports
Add-on services at an extra charge
Low employee turnover
7/27/2019 Southwest Case study solution
10/12
What Southwest should do.
Utilizing the seating capacity of the plane
Use derivative instruments based on crudeoil, heating oil, or jet fuel to hedge their fuel
cost risk. Plain vanilla instruments to hedge their jet fuel
costs
Swaps Futures
Call options (including average price optionswhich are a type of call option)
collars (including zero-cost collars).
7/27/2019 Southwest Case study solution
11/12
Outsourcing of maintenance and ITprofessionals.
Use of better technology and parts for
planes.
7/27/2019 Southwest Case study solution
12/12
Internet and Southwests
Pricing Sold tickets directly to customers
online.
Deletion of travel agents and toll free
numbers. Saved $80 million
Generated 25% of revenue online