Boustani 1 Southwest Airlines: Staying on Course through Turbulent Times Southwest engages in price competition by offering its services at the lowest price possible, while eliminating certain amenities such as meals and onboard entertainment. By using value pricing it can offer a similar level of service that compare to larger airlines, while keeping costs low to preserve profits. Its focus on customer service and fast turn around times at airports enabled Southwest to create nonprice competition while capturing more business. By limiting its flights to less than 750 miles, and keeping its expenses low, Southwest was able to use market-penetrating pricing to quickly expand its routes to easily accessible airports throughout the nation. Southwests strategy launched a price war among other airlines as they too gave birth to short-flight spin-off services with low fares, however many were unsuccessful.

Southwests operating costs per available seat mile are 7.5 cents compared to an industry average of 9.5 cents. It offers cheap snacks instead of meals, only operates the Boeing 737 to reduce training and inventories, and sells tickets directly to consumers via the Internet. It turns its planes around at airport gates quickly to stay in flight an average of 11 hours per day, compared to 8 hours for other airlines. It continued to focus on customer service and improving employee satisfaction and morale. It refused to participate in a price war by not listing its fares on online travel agencies and price comparison sites.

To continue its expansion and increase business during a slow airline economy, Southwest needs to show that it is still best to fly, even for short trips under 750 miles. It

Boustani 2 can feature more of the employees in advertising to show a better portrayal of customer service, while improving communications and education of employees to preserve morale and job satisfaction in the now larger organization. Offering high-value services that many customers seek, such as Internet access, satellite radio, and television programming will close the gap between it and what larger airlines provide. Passengers could be charged a rental fee for these services, or they can have a flat fee applied to their fare for unlimited use of the services.

Lower fares should continue to be offered for reservations made via the Internet. However, a limited amount of flights can be listed on online travel agencies to increase visibility and to test the return on investment of the strategy. Price is not always the main factor when considering flights; Southwest may not lose on price to other airlines when travelers select it for preferable departure times, a good on-time record, and fewer connecting flights. The business traveler market can be targeted by offering corporate accounts with incentives for frequent use and loyalty. Like the fashion-adoption process, attempt a trickle-up of certain flight routes to test the response. This can be achieved with longer routes that offer more amenities at a higher price. Implement a customer relationship management (CRM) system to improve marketing to businesses.

Advertise the fact that fuel prices are so high that it is often more economical to fly, especially on trips longer than 500 miles; and how according to the National Transportation Safety Board, air travel is still among the safest ways to travel; with 859 aerospace accidents compared to 41,893 automobile accidents in 1993 (CNN).

Boustani 3

The effectiveness of service company employees as advertising spokespersons revealed that front-office employees functioned best as print advertising spokespersons, compared to CEOs and back-office employees (Stephens & Faranda). Create a Webbased portal for employees to provide training, company information, human resource assistance, administrative assistance, contact information, and other corporate services.

Offer in-flight entertainment such as small television screens on each seat which could hold prerecorded programming and movies, as well as radio stations. Having prerecorded programming would not require a more expensive system that would include live satellite feeds. Provide power outlets for electronic devices and laptop computers, including free communication for purchasing items from the airlines onboard magazine.

Include extra value with the Rapid Rewards program for passengers that make all their reservations online (Southwest). Incentives could include lower rates, bonus program credits, express boarding passes, first bid on special rates, and in-flight bonuses such as additional snacks or drinks. Expand the Rapid Rewards program to include special services for business travelers. A new Business Rapid Rewards program can offer services specific to corporate clients, such as an exclusive reservation lines and group discounts for multiple passengers. The CRM system would be used to collect data and improve the offers to business clientele.

List a few routes on online travel agencies such as Orbitz and Expedia to evaluate

Boustani 4 the response from bargain shoppers. This will increase exposure and may lead to a dramatic increase in business. Provide some premium services included in higher rates, such as unlimited in-flight data calling or reservations for preferred seating. A passenger could pay a premium for first-class services, without the need for a first-class area onboard.

Offer special facilities for the aging population, which will increase significantly over the next decade. Provide temporary child-sitting services available to insure child safety while the parent is away from their seat. Use information technology to collect passenger data, including baggage claim, preferences, connecting flights, and service frequency. This data can be used to offer personalized services, upgrades, and to note any medical conditions or disabilities of members for future reference.

Southwest can continue to thrive in the discount fare airline category with services that increase revenue and loyalty while keeping costs down.

Works Cited

Boustani 5

CNN (1997). Death by accident: Flying vs. driving. Retrieved January 12, 2006, from http://www.cnn.com/US/9705/valujet/data.points/driving.vs.flying/ Southwest Airlines Rapid Rewards. Retrieved January 12, 2006, from http://www.southwest.com/rapid_rewards/ Stephens, N., & Faranda, W. (1993). Using Employees as Advertising Spokespersons. Journal of Services Marketing, 7, 36.