Southwest Airlines Case Study

Published: 2021-06-29 07:06:06
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Southwest Airlines

MGT 450
Carol Williams
March 18, 2012

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Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18, 1971, with three Boeing 737 aircraft serving three Texas cities-Houston, Dallas, and San Antonio. Today, Southwest operates more than 550 Boeing 737 aircraft among 72 cities. Southwest topped the monthly domestic originating passenger rankings for the first time in May 2003. Yearend results for 2010 marked Southwest's 38th consecutive year of profitability. Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark. Southwest is the United States' most successful low fare, high-frequency, point-to-point carrier. Southwest operates more than 3,300 flights a day coast to coast, and is the largest U.S. carrier based on domestic passengers boarded as of March 31, 2011, as measured by the U.S. Department of Transportation. On May 2, 2011, Southwest acquired Orlando-based AirTran Airways and expects to complete the integration of the two airlines during the next several years. (Southwest Airlines, 2012)
Southwest Airlines like any company is subject to the changing economy. They are affected by supply and demand just like any other company. They fly to secondary airports in order to keep their costs down. By keeping their costs down they keep up with the shift in supply and demand. They use the elasticity of their product to their advantage. Low prices keep pleasure travelers flying and business trips more cost effective. The company keeps its costs down by hedging their fuel purchases. They are a no frills airline which also keeps costs down. They continue to experience growth. Southwest is adding more destinations and adding to their fleet. Southwest competes with all other airlines that fly domestically. Their prices and their marketing strategy set them apart from other airlines. The business cycle affects Southwest in the same
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ways that any other company, however their prices are what keep them doing as much business as previous years and has led to their growth. The recession may cause Southwest to miss sales because of their already lowered costs of operations. Expansionary monetary policy will affect Southwest by giving consumers new jobs, and lowering taxes. Also the building of new airports will give Southwest new destination to fly to. International markets are a hurdle that Southwest is looking to overcome. "Southwest Airlines Swallows Up AirTran ... Goodbye AirTran!" (BoardingArea)
The interest rates affect Southwest in that higher interest rates keep the company from borrowing money to expand. High interest rates also keep consumers from using their credit cards to buy tickets. Southwest is a company that adapts to meet the market as it changes.

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