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Taking A Look At Southwest Airlines

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Southwest Airlines was a pioneer in Low Cost Carriers (LCC) operating four planes servicing a limited Texas based operation in June, 1971. In 2015, Southwest Airline’s Chief Executive Officer (CEO), Gary Kelly, announced a strategic shift away from the short-haul flights between cities such as Dallas and Houston or San Francisco to Los Angeles to more long-haul business travel routes (Tully, 2015). This strategic decision was intended to capitalize and gain market share in the largest and fastest-growing segment of U.S. air travel in a market dominated by competitor legacy carriers who Southwest had proven success at being competitive in short-haul operations. The business model over the last 47 years has been primarily focused on servicing small airports in large urban markets where competition was limited in a point-to-point service as opposed to its larger competitor’s …show more content…

While there was much to gain from a market share perspective, there was also risk in transforming a no-frills travel experience designed for the common traveler with little to no experience as a competitive contender with the traditional carriers. The legacy carriers had grown larger and more efficient through the turmoil of bankruptcies, restructuring, and mergers of the past with lower cost airfare and well-established networks and performance in the business travel market. The economic risk was made clearly evident in May, 2015, when Southwest CEO announced he was raising the goal for additional capacity in the form of available sear miles from 7% to between 7% and 8% for the year. American Airlines immediately offered to match any fare to counter LCCs attempt to gain their customers. This bantering between the two rivals resulted in the collapse of stock prices by 12% erasing roughly $10 billion in market value for Southwest, American, and United (Tully,

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