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Taking A Look At Southwest Airlines

993 Words4 Pages

Introduction: Southwest airlines dominates the markets for the numerous strategies that they employ. Some of them include being a low-cost provider, fuel hedging, maximizing market share at particular airports, etc. These strategies have led Southwest to announce record earnings of $1.1 billion in 2014 (Damaraju, 2015). CEO Gary Kelly, believes this is due to their “air train integration, fleet modernization efforts, and the continued growth of [their] rapid rewards program”. In 2015, southwest was scheduled to save $1.7 billion in fuel costs, which is above the market average (Damaraju, 2015). Moving forward Southwest needs to employ multiple strategies for continued success. Southwest should still continue to ride the wave of the oil revolution, …show more content…

By maintaining a low-cost position Southwest will be able to continue their competitive advantage they have on the market. In 2013, the cost per average seat-mile (ASM) was 12.6 cents. This remained extremely lower than that of big carriers (Damaraju, 2015). The ASM is calculated through fuel costs, wages, and benefits. Moving forward, Kelly should look to squeeze costs where it is possible. Southwest should continue their investments in automation and streamlining the ticketing and boarding process. The result of continued reduction of boarding times would directly contrast with those carriers who still have long wait times. To further control their expenses, Southwest should continue to invest in the new Boeing 737 Max Jet. This jet will be able to seat 11 more individuals then the current 737 model, and will provide 20 percent better fuel efficiency per seat compared to the second most fuel-efficient jet (Damaraju, 2015). Imposing strategies like these will continue their competitive advantage on the …show more content…

Going forward, Southwest is predicted to save around $1.7 billion in fuel costs in 2015 compared to 2014 (Damaraju, 2015). This is mainly due to the fact that energy prices are having a sharp decline. Southwest was able to readjust their hedging program after realizing the depth of the energy price drop and was “essentially unhedged for 2015”, said CFO Tammy Romo. Going forward Southwest needs to continue to examine the energy drop, and crude oil prices. While examining these factors, they need to continually adjust their prospective hedges. Referring to figure one, if Southwest continues there successfully fuel hedging, they will be able to buy fuel at much lower prices than the rest of the market. This allows Southwest to continue to be a low cost

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