Airlines

Overview

Southwest Airlines provides air travel within the continental United States for customers at an affordable rate. The affordable rate allows many customers who may not be able to afford air travel an option to fly for discounted rates. Southwest has continually expanded its areas of service and has really created a niche for itself in catering to the everyday customer. Having a large area of service at an affordable rate provides a useful alternative to more expensive airlines. Southwest continues to slash prices to stay ahead of the game, even during these difficult economic times. However, Southwest is not without competition, AirTran and BlueJet are two airlines that have followed in the footsteps of Southwest and cater to the same customers by offering air travel at lower rates (Bailey, 2008).

Southwest Airlines, like so many other services organizations, have the disadvantage of offering a good that is perishable. Despite the fact that unused seats and cargo space do not decompose or waste away like food, they are perishable. This means that they are only good at the time of service. Any seats left empty or cargo space that is not used, essentially amounts to lost revenue that can never be made again. Even though new revenue can be made on the next extension of the flight, the original extension of the flight is in the past and past seats on a flight cannot be sold.

In today’s economic environment, demand and market conditions are conjoined. Thus creating a condition that an increase in demand can improve the market conditions. For an organization such as Southwest Airlines, market conditions are contingent on the fact that they are able to fly each route at capacity.

For instance, each seat on a flight as well as each cargo hold has a dollar amount assigned, which must be recuperated per flight to make the flight profitable. If Southwest Airlines were to consistently fly routes that have a perishable viability of 30%, that would mean lost...