Southwest AirlinesStrategic Issues & Decisions

Ryan Taylor, Todd Rosenhagen, Dan Norton, & Wes Messing

Going International

• Delta– Expanding partnership with Air France – Looking to pursue Japan Airlines

• American Airlines– Enlisted Quantas and British Airways – Have had long alliance with Japan Airlines

Why go International?

• Airlines are looking to grow• Companies forming Alliances– Mergers are too Expensive– Companies are Stubborn

• Strengthening Global Alliances– Necessary for Survival– Domestic Market not showing improvement

Southwest Goes International

• Interested in going International– Mexico, Asia, Canada, and Europe

• Codeshare Partnerships with Volaris and West Jet have already begun

• Have not officially begun International Flights• Companies worried about Southwest’s

entrance into International Field

Southwest’s Loss of Frontier Airlines

•Southwest Airlines loses bid for Frontier Airlines•Why they lost•What they will do•First possible annual loss in 37 years•Customer Satisfaction•Acquisitions

Additional Charges• Southwest is the only major airline not to charge for two bags of luggage given that both bags weigh under 50 lbs. The additional baggage charge is set at $50 and this fee will get you up to 9 pieces of luggage.

• This is very reasonable when compared to other major airlines that charge outrageous prices for each piece of luggage.

Examples:• American Airlines- $20 for the first bag, $30 for the second• Delta- $15 for the first bag, $25 for the second, $125 for the third bag• US Airways- $20 for the first bag, $30 for the second, and $100 for the third

Charges Continued• Southwest Airlines recently announced that

customers would be able to reserve better boarding line positions for an additional $10 fee as they are an airline that doesn't have assigned seating. This will allow passengers an improved chance to sit in the seat they desire for a relatively inexpensive price.

• Southwest Airlines will also allow customers to carry small pets (cats and dogs only) on board all flights. All in-cabin pets must be carried in an appropriate pet carrier. The pet fee will be $75.00 each way per pet carrier, and each pet will also count as a piece of luggage.

Managing Increasing Costs• Low Fares are

Southwest’s Advantage• Increasing Fuel Costs

are Unavoidable– Must Manage Non-Fuel

Operating Costs• Fuel Efficiency• Maintenance & Labor

Fuel Efficiency• Newer, More Fuel

Efficient Planes– Too Many Old, Inefficient

Planes

• Blended Winglets

Jet Fuel Expense vs. Consumption

www.airlines.org

Labor• Over 40% of Costs Due

to Salaries, Wages, and Benefits

• Labor Force is 80% Unionized– Many Upcoming

Negotiations

• Currently Has Good Management-Employee Relationships

Thank You

Any Questions?