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Southwest Airlines uses a low-cost pricing system that is based on the lowest operational costs, lowest ticket prices, and the highest profit margins. For example, its cost per average seat mile in 2004 was 8.09 cents. This, compared to major carriers’ figure of between 9.42…
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Download file to see previous pages... The company has also locked out travel agents (Kotler and Bowen 21) and encourages its passengers to buy tickets directly from it. This has allowed it to eliminate the need to pay commissions, something that fits in with its cost-cutting strategy.
Southwest tends to avoid big airports that are riddled with bureaucracy and delays that reduce its overall efficiency (Kotler and Bowen 21). This was one of its dilemmas when it decided to go head-to-head with US Airways in Philadelphia, which embodies the red tape nature of America’s largest airports. Any form of delays lower efficiency and this is closely related to the company’s cost-cutting mantra. Despite everything, rivals have started to catch up with Southwest’s cost leadership strategy (Kotler and Bowen 21). The company is no longer the only budget airline in the US, and some rivals like JetBlue and AirTran are offering even lower prices. Southwest has now started experiencing the problems faced by large carriers; the same ones it exploited to take over their ...Download file to see next pagesRead More
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