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Case 1: Southwest Airlines
1. What are some of the ways in which Southwest is different than other commercial airlines?
Southwest is different from the other commercial airlines in many ways. They utilize smaller rather than major, big airports, and focus on short-haul flights. They do not use a third party vendor for ticketing, but do it themselves. Food on planes is restricted to snacks, like peanuts, keeping costs low. The airline promotes nonstop origin to destination flights instead of utilizing a hub-and-spoke route system and does not transfer baggage to other airlines. Employees have to fit into the fun corporate culture, and labor relations are very good despite the fact that 84% of the workforce is unionized. Another big differentiating factor is the airline’s turn time, which is less than half of what other major airlines report.
Due to all these factors, Southwest was able to turn a profit in 1992 as the only airline in the industry. They have been able to keep their costs low and keep customer satisfaction high. This allows the company to increase their number of flights, which will increase the fixed cost utilization and allow for lower prices to the customers and increased profits for the company.
2. Which of the new routes would you recommend, Detroit-Phoenix, or new service to Dayton or Baltimore? Why?
Detroit-Phoenix: This route would fit perfectly into Southwest’s current service area. It has a strong demand and would increase the Detroit and Phoenix departures by about 3 per day. This would increase the utilization of the existing gates at each airport. However, the fee per passenger would be higher than the airline’s average due to higher gate and landing fees. These are variable costs that would have to impact the ticketing price negatively.
Dayton: Dayton has the lowest potential for flight volume out of all the alternatives with a population of 970,000. However, it is expected to contribute to the Chicago growth goals. The...
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