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Southwest Airlines - Book Report/Review Example

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Southwest Airlines Summary In the year 1992, the Southwest Airlines lost almost $2 billion and combined with the loss till 1991, the airlines lost almost $8 billion TWA, Continental and America West were three carriers which faced severe financial crisis and were called bankruptcy during this time…
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Southwest Airlines
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Southwest Airlines

At the beginning this airlines started to fly to different cities of Texas at lower rates compared to its competitors. Although for small firms it is very difficult to survive after the having a price war, but Southwest airlines somehow survived in the competition. During this time the airlines company not only successfully survived this intense price competition, but also gained significant market share because of the cost-saving nature of its operation. Even larger airline companies could not achieve this level of cost efficiency during this time. But questions have been raised that how long this airline will survive? In the early years of its operations the airlines faced several legal cases. The famous of these cases was the case where the policy of flying from Love Field and cities of Texas have been criticized by the rival airline companies. Eventually, a negotiation between Southwest Airlines and rival companies has been met with the introduction of the Wright Amendment. This amendment provided Southwest Airlines greater success in later periods (Hartley, 2010, pp. 283-285). After these victories in respect to intense price competition and also in regard to legal cases, the airlines company started to face significant growth in the business. The airlines company dominated the market of Texas by providing cheapest level of air services to passengers who were careful about the value of their income as well as the value of time. The policy of most frequent departures of domestic flights has been the most significant strategy of the airline company to gain high level of market share in the country. During the time point of 1987 Southwest Airline was charging $59 as “one-way fare between Dallas and Texas”, whereas during the same time point other airlines were charging $79 as one-way fare for the same route. During early and middle periods of 1980s the number of annual passenger traffic of the company was tripled. During 1989 the company started to increase the cost effectiveness of the company. This goal has been achieved by reducing the “operating cost per revenue mile” to 10 cents. This cost was almost 5 cents below compared to the average cost of the entire industry of the country. Growth in revenues and profits occurred during this time and the company decided to expand its operation by investing its internal financial funds, instead of taking loans. In early 1990s the airlines company expanded its operation across 34 cities in almost 15 states. The company had 141 flights and each flight had almost 11 trips per day. The business domain of rival airlines companies have largely been captured by the Southwest Airlines within late 1990s (Hartley, 2010, pp. 285-293). Again, in some of the markets of the country the company found itself lucky after capturing the share of its rivals. For instance, in Chicago after the announcement of the Midway Airlines of getting bankrupt in 1992, the Southwest Airlines gained significant amounts of share of the market by offering lower prices compared to other companies. During the 1990s prices charged by the Southwest Airlines were lower than fares charged by buses and private cars. This pricing policy helped the company to gain greatest amounts of profits and market share. During this time the company started to capture the most demanded market in the state of California and the company succeeded to a great extent ... Read More
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