Financial Strategy for the Southwest Airlines Sample Essay

Southwest Airlines was instituted in 1967. ab initio as Air Southwest by Rollin King and Herb Kelleher and assumed the present name in 1971. It has grown from a little air hose to one of the prevalent in the industry in the US every bit good as in the universe. It is considered the taking low-fare bearer in America. Additionally. it is besides a major bearer for domestic flights. Ever since its origin. the airline’s net incomes have bit by bit been increasing. Its operational policy is based on the cognition that clients made picks based on the ticket cost. That has put the company at an advantage. Notably. unlike all its other rivals. it has survived several crises among them energy catastrophes. the September 11 onslaught by terrorists and even the great planetary recession of 2008-2009 ( Gittell. 2003 ) .

However. some major alterations in the industry have affected the air hose negatively. presenting as challenges to the gross generated. By the twelvemonth 2009. the bequest bearers in the state had gained land and large amalgamations refering some major air hoses were agitating up the concern. Furthermore. some other smaller air hoses were disputing Southwest Airlines with the concentration on low-fares and rider reactivity. Internally. in 2011. the air hose had to cover with the effects of a amalgamation with AirTran. They had to absorb a labour force of in surplus of 8000 and command a fleet of aeroplanes different from the normal Boeing 737 they were used to ( Ruppel. 2009 ) .

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Key Issues

Inside every constituent of its commercial maneuver. Southwest pursued to separate itself by simpleness. In its initial old ages. the diverseness was obviously. The company did non supply repasts onboard. There was no assignment of seats or first category bundle. In add-on. there was besides no harmonisation with other air companies. Outstanding client service is one of the ways Southwest lingers its clinch on the topographic point market of low-fare commercial air travel. Southwest’s selling has ever placed the air hose with low monetary values that endorsed regular. convenient travel ( Gittell. 2003 ) .


When the company bought Air Tran Airways. it faced a job in integrating of the operations and civilization. That posed a challenge to the company. it was non easy to get the new alterations from the meeting procedure. A batch of attention had to be involved to guarantee that the amalgamation did non work against the company. The ground why it was a hard undertaking to take in the alterations was because the Air Tran Airways was besides a big company that had its alone processs of operations. In add-on. the market base became bigger for the new company. The operational disbursals became higher because of the rise in the figure of the flights involved. Besides. the figure of employees increased enormously.


The company faced stiff competition from the upcoming companies in the industry. For case. the Jet Blue poses a challenge to the success of the Southwest Company. Its significant selling and low preliminary menus started a pricing struggle with incumbent air hoses. In add-on. the company has to last in the international market amid the lifting competition. Many companies have come up with new methods of fulfilling clients. Although the Southwest Company is non left buttocks. the state of affairs is now different from the yesteryear when it was the largest Airline company in the US. To be able to keep low costs and hedge terrible competition. it focused most of its initial extensions on moderate-sized towns and low-level landing fields of large metropoliss.


The cost of operations for Southwest airlines is a factor that poses as a jeopardy. These costs include increasing labour costs and fuel costs. The air hose besides has to cover with increased disbursals in respects to passenger security. In response to the September 11 terrorists’ onslaughts. Torahs and orders were introduced to heighten security. Southwest can be unable to go through on the costs to clients since it embarks on low-fares and have to provide for the security costs and buy anti-weapon constructions ( Gittell. 2003 ) .

Different competitory factors in the market can besides impact the client penchant for Southwest. While the air hose holds monetary value as the competitory facet for clients. some riders may experience different. They may be more orientated to the frequence of flights and the suitableness of scheduling. going safety and security protocols and even the client service. These factors can find the figure of clients who prefer Southwest over other air hoses ( Slack. Orife. & A ; Anderson. 2010 ) .


Clearly. Southwest air hose has penetrated many of the extreme moneymaking markets. However. there continues to be legion other chances for enlargement. By keeping its present operational attack. the air hose can follow an amplified consideration on deriving market portion by counter extension hastening its low liability degrees whereas the staying industry stays reasonably weak. The air hose should concentrate on perforating the metropoliss where they have non entered. upsurge happening in current markets. and in the long tally expression for finishs within the continent and possibly overseas. Furthermore. they can concentrate on acquisitions and amalgamations which will non merely assist them spread out but it will besides cut down their rivals. By steady attending on operational competency and cost ordinance. Southwest will linger on as profitable and vivacious ( Slack. Orife. & A ; Anderson. 2010 ) .

In add-on. the company should set in topographic point a strategic program that will guarantee that it does non run into losingss when unsmooth times come about. For case. when making any amalgamation. it should be with a company that is runing at about the same degree as the company. That will guarantee that the employees absorbed have the relevant accomplishments and will non ask retraining. Furthermore. the company should make away with any processs that do non look to add any value to its operations. It should guarantee that duties are assigned based on specialisations. Surplus forces could besides be eliminated ( Gittell. 2003 ) .


Gittell. J. H. ( 2003 ) . The Southwest Airlines Way: Using the Power of Relationships to Achieve High Performance. New York: McGraw-Hill.

Ruppel. J. ( 2009 ) . Soutwest airlines client service committedness. Dallas. Texas: Southwest Airlines Co.

Slack. F. J. . Orife. J. N. . & A ; Anderson. F. P. ( 2010 ) . Effectss of committedness to corporate vision on employee satisfaction with their organisation: an empirical survey in the united provinces. International Journal of Management. 27 ( 3 ) . 421-436.

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