SOUTHWEST AIRLINES

OBJECTIVES

• WHAT TO MAKE OUT OF UNEXPECTED DEVELOPMENTS

DONE BY “SHUTTLE BY UNITED” AIRLINES

• HOW SOUTHWEST MIGHT RESPOND TO THE NEW

INITIATVES TAKEN BY “SHUTTLE BY UNITED”

INDUSTRY BACKGROUND

1) Prior to 1978 U.S. Airline Industry was regulated by the federal

government through the Civil Aeronautics Board.

2) CAB regulated airline fares , routes & company mergers & CAB

approval was required for any changes in fare or route system.

3) In 1978 , Airline Deregulation act was passed . This act allowed

airlines to set their own fares and enter & exit route without CAB

approvals.

DEREGULATION AND A DECADE OF TRANSITION

• Carriers responded to deregulation with unexpected changes in their operations that

would have long term effects on the industry .

• First major carriers turned their attention to serving non-stop “long haul” routes

anchored by densely populated metropolitan areas or city – pairs which had been highly

Profitable in a regulated environment .

• Second major carriers almost uniformly abandoned point-to-point route systems and

adopted the hub-and-spoke route system .

• Point – to – point systems involved nonstop flights between city-pairs & often

shuttle flights back and forth between city pairs .

• The hub-and-spoke system featured feeder flights from outlying cities to a

central hub city , where passengers would continue their trip on the same plane

or transfer to another plane operated by the same carrier to continue their final

destination .

AIRLINE-WITHIN-AN-AIRLINE CONCEPT

• Southwest airline operated primarily short haul , point-to-point routes , with minimal

amenities

• Southwest had much lower operating costs than other major carriers

• With Southwest’s operating practices as a blueprint several major carriers had already

explored ways to implement a low cost airline service in short –haul markets and

produce a clone of Southwest

• This led to a concept of airline-within-an-airline

• This concept involved operating a point-to-point , low fare , short haul , route system

alongside a major carrier’s hub-and-spoke route system.

CUSTOMER SERVICE & OPERATIONS

• Southwest’s attention to customer service was embodied in the attitudes of the people

• Pilots could be found assisting at a boarding gate

• Ticket agents could be seen handling baggage

• In terms of operations Southwest generally avoided major airlines hubs in large cities

.Instead smaller cities and less congested airports were served

• In terms of seat reservation the customers & agents had to call southwest . As a result

fewer than one-half of Southwest's seat were booked by travel agents which results on

savings on travel agent commission to southwest to $30 million per year.