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Business Case Study: Southwest Airlines

            For many years Southwest had led the airline industry in providing the lowest cost for airfare. They took into account many variables that enabled them to remain on top and be a traveler's favorite. Their humble beginnings incorporated customer service as a major part of their marketing strategy. They combined a pleasant flying experience with low pricing and two free checked bags to keep customers coming back. Other airlines could not compete because of one major advantage Southwest had over them and that was fuel pricing. Southwest entered into contracts with fuel suppliers to hedge fuel prices during the time when fuel prices shot through the roof (Kotler & Keller, 2012). Other airlines fuel costs accounted for more than 40% of ticket prices while Southwest's fuel only accounted for about 15% of ticket prices. This is the major risk that Southwest had to be ready for as their contracts ended with fuel suppliers. They also made sure that they used the fuel wisely by lightening their load wherever possible. This strategy has helped Southwest to remain profitable for over 30 years even through the economic downturn. They pass on their successful profits to their employees and to the travelers.
             Today, Southwest has a much different image than it did in 2012. They have lost their position as the lowest fare carrier. They now compete with Allegiant, Frontier and Spirit Airlines for that title. They lost the title when their fuel contracts ended, bought out and merged with AirTran and started moving into primary transportation markets. By moving into major airports, they risk competing with major airlines like Delta who is the dominant carrier at the Atlanta based airport. Delta offers about 950 flights a day to 220 destinations and Southwest offers a mere 130 flights a day to nearly 40 destinations (Yamanouchi, 2015). Their major advantage is no baggage fees, no change fees, no assigned seating and lower last minute prices compared to Delta.

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