Southwest Airlines and AirTran Airways - Essay Example

Running Head: Southwest Airlines Company Business Analysis Student’s name Institution Course Professor Date Southwest airline is an airline company that operates in the United States of America and the nearby international markets. The company was incorporated in 1967 in Texas, United States. It is the largest air carrier in the United States as of September 30, 2012 according to the United States Department of Transportation. The company operates Southwest Airlines and AirTran Airways (Roberts, 2013). It started its operations on June 18, 1971. They started their operation with only three aircrafts, Boeing 737 and served Texas cities of Dallas, San Antonio and Houston. In the year 2012, it added their services to new states of Georgia and Iowa and six new ports of Dayton International Airport, Des Moines International Airport, Hartsfield-Jackson Atlanta International Airport, Akron-Canton Regional Airport, Key West International Airport and Ronald Reagan Washington National Airport. AirTran added new destinations of Cabo San Lucas and Mexico City. The new international services also added were from Denver, Chicago, Austin, San Antonio and Orange County (Mann, 2009). At the end of 2012, Southwest Airlines Company served a total of 97 destinations in 41 states and six international cities of The Bahamas, Mexico, Jamaica, Aruba, Dominican Republic and Bermuda. The total fleet operated by December 31, 2012 by Southwest and AirTran combined were 694 aircraft which includes 606 Boeing 737 and 88 Boeing 717. The company has plans to expand its services to Maine and Kansas states and seven new United States cities in 2013. The company had 45,861 full-time employees consisting of 20,374 ground, customer and fleet service, 19,575 flight, 3,208 maintenance and 2,704 management, marketing, clerical and accounting personnel as of December 31, 2012 (Annual Report, 2012). In 1964, the Fort Worth's and Dallas cities were ordered by civil aeronautics board to build a joint operated airport. One of the competing airports was Dallas Love Field. This was brought by competition between the two airports which the board argued it was harmful to the airline industry. They responded by creating the Dallas-Fort Worth board and adopted regional Airport Concurrent Bond Ordinance in 1968. The ordinance contains agreement to transfer activities of both cities to Dallas-Forth Worth Regional airport which would serve the region as a primary airport and phase out operations from the existing ones. Southwest airlines refused to move to Dallas-Forth Worth regional airport and did not sign the agreement. At the time, the company was operating interstate flights solely from Love Field and thus it was exempted by Civil Aeronautics Board certification. This action was followed by a litigation filed to force Southwest Company from Love Field at the United States Fifth Circuit Court of Appeals. The court decided that Southwest Company has a federal declared right to continued use of the Love Field and access to it as long as it remains open. The company applied to provide interstate services between New Orleans and Love Field after its deregulation from airline industry by congress in 1978. The Civil Aeronautics Board granted the permission arguing it has no power to deny it. Southwest was dealt with another blow by the Congress by enacting Wright amendment which prohibits interstate services from New Orleans and Love Field. Shelby Amendments of 1997 which provided certain exemptions for airlines operating aircrafts with 56 passengers or less, allowed contiguous state exemption allowing flights to and from Mississippi, Louisiana, Oklahoma, Alabama, Arkansas and New Mexico if flights do not provide service or ticketing with another carrier and not provide sale transportation to and from any point outside these states (Mann, Roberts & Smith, 2009). The effect was additional flights to and from Love Field by airlines. Lawsuits were brought in the Federal and state courts to block additional service from Love Field. Department of Transportation issued declaratory orders ruling that Love Field services may not be restricted to cities of Dallas and Forth Worth, the amendments of Wright and Shelby may preempt the ability of Dallas city to limit the type of Airline service operated at Love Field, the board of Dallas Forth-Worth International airport may not operate interstate airline service and the exemption of commuter airline overrides any agreement between Dallas and Forth Worth cities (Smith & Robertson, 2013). The Department of Transportation Declaratory Orders was challenged citing it had violated the administrative procedure but its orders were affirmed by the court. Today, Southwest Airline Company has leased the land at Dallas Love Field which houses its corporate headquarters. The company has benefited from this case in which there is a modernization program by the company at Love Field. The Dallas city approved this program in 2008. Edward Carmona sued Southwest Airlines Company for breach of contract in 2005 in one of the employment disputes that had faced the company. He alleged disability and sex discriminations and failure to accommodate. He worked as a flight attendant from 1991-2005 for Southwest airline company. The terms and conditions of his employment with the company were governed in Transport Workers Union of America and Southwest which sets rules for sick and medical leave, termination, discipline and attendance procedures. He suffered from psoriasis from the beginning of his employment. He was always allowed to take leave under Family Medical Leave Act two to three times each month. However, in 2005, Carmona took more additional days on his leave in which the company did not excuse him under Family Medical Leave Act (Kalbaugh, 2012). He was issued with a written warning by the company on May 10, 2005. After injuring his thumb on June 22, 2005, he missed work for four days. These absences made him to accumulate more than twelve absence points in total. The company on July 2005 terminated Carmona’s employment because he had exceeded twelve absence points permitted by collective bargaining agreement. Carmona’s termination was upheld by Board of Adjustment in which he had sought review. He filed discrimination charge with the commission on Equal Employment Opportunity. The claims were dismissed and he was issued by “right to sue” letter. He immediately filed the case citing sex discrimination. The company filed a motion dismissing his claims stating that the court has no jurisdiction in September 2006. The motion was denied by district court in November 2006. Southwest company filed motion of summary judgment in May 2006. The court concluded that the claims by Carmona were precluded in Railway labor act. It also dismissed Carmona’s actions because of lack of subject matter. He filed a notice of appeal in which decisions of the district court were reversed and remanded back for merits consideration. This case could have been altogether avoided if Southwest Airline Company could have thoroughly considered Carmona’s situation. I think he should not have been dismissed considering he was employed having psoriatic condition. The case may have negative consequences in future for the company in that; qualified employees may feel as not part of the company based on their disabilities. They may also come at time when potential qualified employees refused to work for the company based on its handling of disability cases such as of Carmona’s. The issue could have been prevented and handled in a better way by evaluating Carmona’s condition and determining his worth to the company. The company should also have not filed a motion in the courts but sought out of court agreement with Carmona. In May 22, 2009 AirTran together with Delta Air Lines were faced with antitrust lawsuit held in the United States District Court of Georgia. The alleged complaint was AirTran and Delta Airlines attempted to monopolize the air travel market by imposing a fee of $15 per checked first item bag which is in violation of Sherman act, section 1. The complaint sought treble damages for fees paid directly to AirTran and/or Delta in the United States on domestic flights which began on December 2008. The plaintiffs also allege AirTran and Delta collude leading to higher prices causing suffering to consumers. This was alleged to be done through series of earning calls together with industry analysts at industry conferences. The plaintiffs alleged Delta accepted invitation from AirTran to conduct anticompetitive actions by increasing prices through imposition of first-bag fee and capacity reductions. The first collusion was alleged to be done on April 22, 2008 during the earnings call of the first quarter. There were subsequent lawsuits filed at district courts in Las Vegas, Orlando and Atlanta following the filing of this complaint. All these complaints were consolidated before an Atlanta federal district court judge. The consolidated amended complaint broadened the charges to include allegations that AirTran and Delta airlines conspired to raise prices by reducing capacity in competitive routes which is in violation of Sherman act, section 1. The amended consolidated complaint seeks attorney's fees as well as injunctive relief from alleged anticompetitive activities. The court dismissed claims of violation of Sherman act by AirTran and Delta Airlines on August 2, 2010 but claims of conspiracy in relation to imposition of first bag fee, pricing decisions and airlines capacity were let to stand. This case is about violation of antitrust laws by AirTran which is part of Southwest airlines and Delta airlines who both operates and competes to and from Atlanta. They both used Hartsfield-Jackson international Airport as their principal hub. They both account for ninety two percent of air traffic at the Hartsfield-Jackson airport. The AirTran has historically maintains that Atlanta is their core strength market (Mann, 2009). Delta airlines compete with AirTran on a hundred percent routes served by AirTran to and from Hartsfield-Jackson airport. Delta airlines have managed to match AirTran's low prices. The southwest airlines company handled well this case and was able to convince the court it has never conspired with Delta airlines. The company may have suffered competitive measures put by its main rival Delta Airlines. In any case, Southwest Airlines will have undoubtedly many legal challenges in the future due to its kind of the business. The first case between American Airlines and department of transportation in the United States fifth circuit court is about administrative agency problem (Michelin, 2004). The Southwest airline company was faced by judicial cases concerning the love field. The company still used Love Field and has managed to put a project in this area. This case has been beneficial to the company and the continued used would boost its business. The second legal issue is about breach of contract. The employee of fourteen years, Edward Carmona sued the company for terminating his services in 2005. Southwest Airline Company was able to argue this case successfully but its discrimination claims put negative image to the company. The third legal issue discussed is about antitrust The Company was sued together with Delta airlines for several reasons including conspiracy to monopolized air travel. The violation of Sherman act claims were rejected but conspiracy allegations has not been concluded by United States district court (Smith & Robertson, 2013). The three legal issues discussed above are among the many lawsuits against the company. The company has demonstrated that they have good legal structures in the way it handled these cases. The airline industry faces various challenges as being labor intensive, technology intensive, highly regulated, energy intensive, heavily taxed, cynical and extremely competitive. Southwest airlines have to cope with all these challenges and maintain their market share. The airline industry is prone to events like natural disasters, poor weather and terrorism which affect their operations. The company has been faced in the recent years by uncertain economic condition, volatile and high fuel prices. According to Miller (2012), these challenges contributed to unpredictable demand and pricing challenges in air travel. The low-cost structure adopted by the company has been challenged by its main rival Delta airlines which have steadily embraced this structure. Southwest Airline Company will surely have a brighter future as predicted by its recent profitable years. The airline industry also operates in a highly regulated environment. It has to comply with many laws governing the industry. Southwest has to comply with operational, safety and health regulation which are under jurisdiction of Federal aviation airline under department of transportation. Southwest has to obtain certificate of airworthiness, operating among others from Federal aviation airline (Smith & Robertson, 2013). It also has to put security measures in place to comply with aviation and transportation security act which touches on civil aviation security. Clean water act, comprehensive environment response are some of environment federal laws and regulation. International regulation needs also to be observed by the airline company. The company must also obtain insurance to protect its property in compliance with federal laws. The legal environment of business is to ensure the business complies with certain laws and regulations. The four main types of laws which affect business are environmental laws, consumer protection laws, antitrust laws and the laws protecting the public general interest (Mann, 2009). These laws are aimed at streamlining business operations with a view to protect consumers and eliminate monopoly. References Bureau of National Affairs, (2010). Daily labor report. Washington, D.C: Bureau of National Affairs. Cohen, A. I., Lender, D. J., & Kalbaugh, G. E. (2012). Electronic discovery: Law and practice. New York: Wolters Kluwer Law & Business. Cross, F. B., Miller, R. L. R., Cross, F. B., & Cross, F. B. (2012). The legal environment of business: Mason, OH: South-Western Cengage Learning. Lau, T., & Johnson, L. (2013). The legal and ethical environment of business. Lauer, C. (2010). Southwest Airlines. Santa Barbara, Calif: Greenwood. Mann, R. A., & Roberts, B. S. (2013). Essentials of business law and the legal environment. Mason, OH: South-Western Cengage Learning. Mann, R. A., Roberts, B. S., & Smith, L. Y. (2009). Smith & Roberson's business law. Mason, OH: South-Western Cengage Learning. Michelin M. (2004). Southwest Comes Calling, and a Race Begins. NY: New York Times Southwest Airlines Co. (2012). Annual Report. http://www.southwest.com/investor_relations/2012, accessed November 25, 2013 United States. (2007). Reforming the Wright Amendment. Washington: U.S. G.P.O. Read More