Who are some of the major competitors? Southwest competes against many low-cost carriers or low-cost subsidiaries of larger carriers. Southwest's main low-cost carrier competitors are AirTran and JetBlue Airways. Its other competitors include American Airline, United and Delta. Because of its efficient cost-saving strategies, Southwest's 37-year streak of profitability is unmatched in the airline industry.
Southwest Airlines – 2008 Case Study Executive Summary Millions of people fly everyday. Southwest airlines provide low-fare travel among 58 cities in the United States. Although the airline industry suffered greatly in the aftermath of September 11, Southwest was able to continue to hold strong. Southwest airline continues to maintain steady sales as much of the industry was affected by changes in laws/regulations and competition entering the market. In the following report there is a brief introduction to Southwest Airlines and their strategy and then what, if anything, they need to do or not do to remain at the top and competitive in the airline industry.
Case Summary and Important facts Despite the fact the airline industry had 87 new-airline failures in the US over the past 20 years. David Neeleman convinced a group of investors and quickly raised $130 million from venture-capital community. With its strong capital base, JetBlue acquired a fleet of new Airbus A320 aircraft and focused on innovation, providing the most valuable and the most excellent travel experience, low-cost, point-to-point service to large metropolitan areas with high average fares or highly traveled markets that were underserved, mainly on central and Western routes in the US. During 2001 and 2006, the airline industry was facing a number of external stress, such as the 911 terrorist attacks, Iraq War, SARS, high price of petroleum, ect. The airline industry in US has been challenged and many of firms were bankrupt.
Suppliers’ bargaining power in oil sector is low, as these industries used vertical integration to control the process, there is no threat of forward integration (as in Airlines) and the concentration is low (there are many plant suppliers and engineers). In Airlines it is high, as the concentration of aircraft producers is moderate, the power of services is low and the power of jet fuel producers is high. To face the threat of entry industry can keep costs low and consumer loyalty high and encourage the Government to limit foreign business activity. In oil companies this threat is very low, as there are very high barriers to entry (high capital cost, economies of scale, environmental regulation) and product differentiation is low, as the main factor is oil. In Airlines the threat of entry is higher than in the oil industry.
Internal capabilities/strength and weakness of JetBlue JetBlue is the largest Airline at JFK airport in New York City. The strengths of JetBlue are low operating cost. JetBlue has been efficiently utilization the resources which results in low cost operating cost. For instance, there is 6.03 cents mile vs. 10.91 industry average and also direct booking. Moreover, JetBlue has efficient employee.
Industry Analysis Two large airlines take the initiative to expand their horizons and decide to affiliate and join together. The alliance between US airways and British Airlines was widely publicized and criticized because it was the largest such venture ever attempted in an industry. British Airways, in 1939, British Overseas Airways Corporation was formed. The company became heavily loaded with debt through the 1950s and 1960s as it acquired new aircraft, experienced severe swings in capacity as passenger traffic ebbed and flowed, and began to compete internationally with the large U.S. airliners. For many years the British government continually subsidized the losses.
Lockheed Martin Corporation does most of its business with the U.S. Department of Defense and U.S. Federal government agencies. Lockheed Martin provides products and services such as; tactical aircraft, airlift, missile and fire control, space launch, commercial and government satellites, and much more (About, 2011). II. Current Events Currently Boeing is carrying almost 8 billion in Goodwill and other intangible assets; to some this seems like a red flag that Boeing may have some financial issues in the near future. The problem with inflating net assets with goodwill is that it is intangible and will go away if the acquisition or merger doesn't create the amount of value that was expected.
It has been founded in 1915 and was based in St. Louis area. The business has been successful in the mid and late 1960s due to strong automobile market and heavy defense spending associated with the Vietnam War. However, HMTC’s business slowed down in the 1970s with the withdrawal from the war and the oil embargo. Hampton, though, was able to recover in the late 1970s. It has even increased its market shares with the rise of military aircraft sales mainly because of its conservative policy and strong working capital position.
Analyse the attractiveness of the airline industry pre-9/11. There had been several structural changes in the global airline industry for the last decades. Some of the main factors are: globalisation, deregulation, technology improvements, and ongoing improvement in the jet engines in order to make it longer routes Pre 9/11, the demand for air travel increased due to the rise of world GDP, rise in world trade and investment (economic influence). In addition, the demand for travelling increased due to the growth of the number of retirees (social influence). This was a major opportunity within the airline industry since the global number of passengers increased from 450 million to 700 million between1990 and 2000 mainly due to the retiree that were travelling for leisure.
This also strengthened their friendship with oreos Britain because they were seen to be helping them in their hour of need - the war. This friendship was so strong that America fought with the Triple Entente at the end of the war. One of the reasons for the economic boom was the introduction of hire-purchase whereby you put a deposit on an item that you wanted and paid installments on that item, with interest, so that you paid back more than the price for the item but did not have to make one payment in one go. Hire-purchase was easy to get and people got into debt without any real planning for the future. In the 1920’s it just seemed to be the case that if you wanted something you got it.