Southwest Airline Essay

1469 Words Dec 15th, 2011 6 Pages
Southwest Airlines Group Assignment
December 3, 2011

Group Two:

Cleveland State University
Marketing Strategy MBA Fall 2011
Professor: Rama Jayanti, PhD

How has SWA (a) responded to the “Shuttle By United” initiative (half page 5 points); and (b) what assessments can be made about SWA’s market and financial position on competitive routes based on 1994 4th quarter results (half page 5 points)?

On October 1st, 1994 when United Airlines introduced their “Shuttle By United” high-frequency, low-fare, minimal amenity, short-haul flight operation, Southwest Airlines was already the industry leader in this market segment. Southwest was the eighth largest airline in the United States based on the number of passenger miles flown
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Although Southwest shareholders experienced a sharp drop in their shareholders equity Southwest has still remained profitable for a record 27 years. It’s debt of debt of $871 million is also the lowest among U.S. carriers and they have been able to maintain the highest Standard and Poor’s credit rating in the industry with a rating of A.
How should SWA respond, if at all, to the “Shuttle by United” decision to change its service and price? Why? In order to immediately and effectively respond to the developments in the industry forced by Shuttle By United’s decision to raise prices and drop their Oakland-Ontario route effective in April, Team Two recommends doing the following:

Do Not Raise Prices: Southwest should not modify its pricing structure. Although one may think of pricing only relating to profits or losses, Team Two recognizes the flight costs will generate and change the quantity sold along with attracting customers and competition within Southwest’s pricing configuration. As with this case, “Shuttle By United” was trying to emulate and compete with Southwest Airlines low cost flight philosophy. During our reading and chapter lectures, Team Two learned the importance price has on the image of the brand. Southwest customers fighting for a seat and nibbling peanuts enhances their brand. Southwest bolsters this snack selection by joking “peanuts” is what customers have to pay to fly on their

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