Southwest Airlines Case Study

Whitney Stover

Marketing 710

Individual Case Update

2/14/2015

Southwest Airlines: Waging War in Philly

Since 2004, Southwest Airlines remained consistent to some of the key fundamentals of their success from the beginning, but they also changed dramatically in other areas to continue a successful trajectory into the future. They entered several new markets, including Denver and Las Vegas, stealing market share for major competitors in both locations. Specifically in Philadelphia, their presence helped lower fares in this airport 83 percent between 2004 and 2010. They managed to keep their cost per seat-mile at 6 to 14 percent less than their competitors, but they still were able to pay their pilots up to 40 percent more than other airlines. The last ten years, however, have been financially difficult for many companies, and Southwest was no exception. Their stock price dropped 18 percent between 2005 and 2010. Analysts criticized Southwest for not responding quickly enough to changes in consumer preferences. Southwest no longer offered the lowest fares consistently enough to for it to be a major competitive advantage for them. The time had arrived for them to look at other revenue streams and new ways to set themselves apart in the industry.

In 2011, Southwest embarked a five-year strategic plan to improve all aspects of their offering and business. One primary element of this strategic plan was a merger with AirTran, which brought many opportunities to the existing business model at Southwest. Their fleet of aircraft offered smaller planes to fly in lower-traffic airports, but they also had a presence in Atlanta and offered international flights. AirTran had overtaken the low-fare market in recent years, and this merger allowed Southwest to gain efficiencies while removing a major competitor. The merger concluded in 2014, but as early as 2012, Southwest began connecting networks and flights and seeing incremental increases in revenue. In...