1. In what ways might airline customers be segmented?

Which segments
or niches would you consider Southwests prime targets? Which
segments probably would not be?
They can be segmented on a number of different types of things; such as
age, gender, location, buying behavior, and demographics. Southwests
prime targets would be that of business and leisure travelers. Business
travelers are less price sensitive than leisure travelers. They often travel on
much shorter notice than leisure travelers. With the price of fuel rising
companies have been urging their employees to reduce air fares and this
factor attracted a lot of them to Southwest. Leisure travelers have always
shopped around for reasonable prices. The fact that discount rates were
offered and the whole family could go on a well planned trip was a plus to
the leisure traveler. Long-hauls with high-fares. They dont provide additional
amenities such as ordering special meals and drinks. Southwest didnt even
transfer baggage to other carriers that were the passengers responsibility
because this kind of customer service would be less acceptable on longer
flights.
2. Discuss the pros and cons for expansion of Southwest beyond short
hauls. Which arguments do you see as most compelling?
One of the biggest benefits for Southwest to embark on long haul trips would
be to build a strong customer based relationship because they would be able
give reward miles which would give customers an incentive to use Southwest
again. Making longer hauls would also better Southwest's chances of always
having a full plane. It would be more consistent in numbers because when
its a longer haul many people are in need maybe for a vacation rather than
a short haul which may only be for a business trip or for a customers using
Southwest for a rare occasion. This would make them more accessible to a
wider range of customers. With expansion brings some downsides, one
would be the cost of operation. Southwest would have to expand their
engines, more amenities and other features would have to be added to these
planes like TVs, food services, and powered outlets. Also, the side effect
would be that they would be losing their focus on their niche market. When
no business is directly catering to this niche or is likely to do so it makes for a
great window of opportunity. While other airlines set up hub and spoke
systems in which passengers were shunted to a few major hubs and then
they were transferred to another plane going to their destination. Since all of
Southwests planes were Boeing 737 cost of training, maintenance, and
inventory could be reduced and as the airplane earns revenues only flying,
Southwest was able to achieve faster turnaround time on the ground than
any other airline. I believe expansion would make things more complicated,
and what made them successful was their simplicity so why not keep doing
was best, and keep providing to the niche market.
3. Evaluate the effectiveness of Southwests unions?

Kelleher was able to achieve a sense of pride unmatched by other airlines

despite the fact that Southwest employees were unionized. His relationship
with the union was not conflicting which allowed for Southwest to negotiate
flexible working rules with attendants and even pilots helping with plane
cleanup. This resulted in a high productivity from the employees even
though they were slim with staff. What made Kelleher so effective was the
employees felt a feeling of security and loyalty with Kelleher. So even if times
were good, he wouldn't hire extravagantly which would result in fewer layoffs
in leaner times. This low-key attitude and sense of fun helped employees
enjoy their work more and resulted in more productive work.
4. On August 18, 1993, a fare war erupted. To initiate its new service
between Cleveland and Baltimore, Southwest announced a $49 fare (a
sizable reduction from the then standard rate of $300). Its rivals,
Continental and US Air, retaliated. Before long, the price was $19, not
much more than the tank of gas it would then take to drive between
the two cities-and the airlines also supplied a free soft drink. Evaluate
the implications of such a price war for the three airlines.
For Southwest there must have been a lost in profit during this time, but their
effectiveness would continue to surpass all rivals in productivity ratios as
cost per available seat mile, passengers per employee, and employees per
craft. Compared to Continental and US Air, Southwest would remain
profitable among the big airliners. This is Southwest plan which is to drive
down airfares and pressure airliners like Continental and US Air to back away
from some lucrative market. The other airliners cannot cut costs enough to
compete. Their alternative then was either to pull out of these short-haul
markets or be content to let Southwest have its market share while they
tried to hold onto other customers by first-class seating, flyer programs, and
other in-flight amenities.
5. A price cut is the most easily matched marketing strategy, and usually
provides in lasting advantage to any competitor. Identify any
circumstances where you see it desirable to initiate a price cut and
potential price war.
In a situation where the California market has over eight million passengers
each year that fly between five airports in metropolitan Los Angeles and
three in the San Francisco Bay area would make for a good time to initiate a
price war especially because its the busiest corridor in the United States.
AirCal and Pacific States both allow for low fares which takes Southwest out
of the picture. So, in this situation Southwest should charge low fares and
frequent flights. Competitors would suffer because Southwest would beat
their prices. Many competitors would cut their services, and quit flying to
places like San-Diego, Sacramento, and Oakland which would allow
Southwest to build up their service.

6. Do you think it likely that Southwest will remain dominant in its niche
despite the array of discount carriers? Why or why not?
Yes, I do believe Southwest will remain dominant even with competitors like
Allegiant Air because when comparing them Southwest looks a lot more
enticing. For example, Southwest has a smart rating of 88 compared to
Allegiant's 63 rating. Allegiant may beat them in number of destinations with
over 99 plus, but Southwest baggage policy and other amenities exceed
Allegiant. The first and second bags checked in with Southwest are free while
each bag with Allegiant is an additional $20 dollars. Only the third bag with
Southwest would cost a flyer $75 dollars. Even though Southwest has shorthaul flights it offers award options like hotel, flights, rental cars, and gift
cards, and they also have special check-ins for unique items one can bring
on the plane. Allegiant doesn't offer any of these amenities. I believe this is
why Southwest will continue to remain the dominant airliner in this market.
7. What is your forecast for the competitive environment of the airline industry ten years
from now?
Overall, I expect the airline industry to have more airlines providing short-haul, and while trying
to provide inexpensive flights, but I believe this will actually hurt the industry. All airlines are
going to be trying to match competitive prices from other airlines which will hurt more than it
would benefit them due to cost of operation. Profits will be down due to having a low competing
price. Plus customers will have it in their heads that all flights should be cheap while in reality
the airlines cant lower the price to what customers expect it to be. Also, in ten years more people
are going to be flying than before. With all the advancements in the world and our environmental
issues especially with the pollution and cost of oil it will be hard to keep a low competitive price.
I believe prices will soon rise due to the operation of cost. Airlines will get themselves in
problem if they keep trying to offer low prices all the time especially in the future with all the
factors coming into play.
8. How would you ensure that no lapse in inspection and maintenance ever occur again? Be
as specific as you can. Can you absolutely guarantee no lapses?
There needs to be a system set up to ensure there will be no lapse. I would
have the airplanes checked after every flight. Even if there is just a little
hole, or some malfunction that could possibly put Southwest passengers
endanger then it would be fixed before leaving. To ensure this, I would have a
checklist of all the key things that need to be checked for flying again. After
the pilot and crew checks these things, they will have to sign off to ensure
that everything is up to Southwests requirements. When you have people
sign off, it makes them want to do the best job they possibly can because

they are fully responsible and the blame is all on them. It holds people
accountable.