Cost Leadership Strategy of Southwest Airlines

The company needs to be more time efficient. If they can save minutes, then they can reduce the operating costs. For example, a minute cost an airline approximately $60 to $150.

2. Offer flights to local destinations (USA)

Offer international destination flights

3. Does not offer first class seating

Offer first class seating

Threats

1. Rising fuel prices

Investing in fuel-efficient planes

2. Possibilities of terrorist attacks

Keeping real-time assessment of terrorist threats and taking necessary mitigation steps.

3. Stiffening competition

Improving the brand equity and good reputations. Also, expansion to new destinations.

Opportunities

1. Expansion to new destinations

Partnering with other companies offering international destination flights. With the current excellent customer service, the company will capture a substantial amount of the international travel market

2. Improvement in technology

Invest in the new class of Aeroplan’s (Airbus A380) with high-performance efficiency and large carrying capacity.

3. A predicted increase in disposable income of customers

Employing discriminatory pricing strategies to cope up with the expected rise in the disposable consumer income. For example, offer first class seats.

4. Increasing trend in air travel

Expand the operation base to cope with the increasing value of air travel. For example, purchase more aircraft operating in new routes.

Strategy: Cost or Differentiation

The company offer flights which links cities located 500 -1000 miles from each other. Implying offering low cost flights without frills provide the most convenient means of travel between the USA cities. Therefore, the Airline should use cost leadership strategy as opposed to differentiation. The company uses Boeing 737 as the only planes for the business. The strategy of using one type of aircraft ensure the company minimizes cost on spares part inventories, technical team thus implying scheduling procedure and ensure proficient maintenance. The other cost reduction strategies employed by Southwest Airlines include the application of point to point approach, choosing less congested airports, and ticket-less operations.

The opportunity of expanding to new destination work to the advantage of cost minimization. The company should choose airports that are less congested to enable them to reduce fuel wasted in circling airports while waiting for landing clearance or during idle time on jammed taxiways. Moreover, the company introduced blended winglets on the Boeing 737’s with the aim of reducing lift drag allowing planes to reach flight speed faster thus cutting amount of fuel used. Also, new improved engines were fitted on the aircraft which enabled the reduce idle speed whenever the planes are on the ground. Therefore, the fuel consumption reduction strategies have allowed Southwest Airlines to implement a cost leadership strategy successfully.

Addition of value in the Aircraft operations will require improvement in the efficiency of all the operations of the firm. The employees should keep improving their good services to the customers. The process will attract more customers, which will translate into an increase in the volume of sales. The planes have been fitted with more efficient engines, and blended winglets all contribute to the reduction in the amount of fuel used per trip.

Recommendation for Execution

The management must ensure that all the planes have new and improved engines for efficiencies. The company should adopt the following steps in executing cost leadership strategy: (1) research destinations with less traffic (2) introduce one flight to the chosen location and evaluate the success of the test flight. (3) If the first flight is successful introduce more planes to the same destination based on the number of customers. (4) If destination one is successful, then consider exploring the second destination.