Southwest does not offer meals, only peanuts and drinks.
Most flyers would expect fine food during their flight. Southwest does not interline with any other airlines. This leads to a decrease in a number of passengers on board and unable to reach all 50 states. Classic perception: low price, low quality. Many flyers still believe that Southwest provides a very low quality of service. Travel agents would not recommend flying on Southwest due to the low commissions.Southwest offers a ticket-less travel system to trim travel agents’ commissions, run its own reservation system, and sells a significant portion of reservations through its Web site. Unfortunately most flyers are used to traditional booking system: through travel agents.
The aging of the US population results in more interest in leisure travel not drinks, peanuts, and fast travel. Had approximately $1 billion in cash and cash equivalents on hand, enabling it to meet the severe demand on cash flow faced by all airlines as they began to restore service on September 14.Southwest had the strongest balance sheet and highest credit ratings in the U. S airline industry. This enabled it to quickly borrow, at reasonable rates, the cash is utilized to sustain operations, fund employee profit sharing commitments and meet contractually obligated capital expenditures. Although the company’s net income decreased 82. 3% in 2001, Southwest was the only major carrier to post a profit for the first quarter of 2002.
This because of the low operating expense and low airfares that attracted most flyers.Primarily due to an increase in sales growth, the profitability ratios of 2003 are beginning to return from their decline in late 2001 and 2002. Net income increased from 24 millions in 2003 to 26 millions in 2004. Effective December 15, 2003, the Company eliminated its travel agency commission, which will lower operating costs by approximately $40 million annually. Will give Reduction of expenditures and stay focus on existing aircraft (737) and beverages without spend more money on new development will help Boeing to increase their revenue and keep the employee working in good performance.Cons: It will be disaster for Southwest if other airline companies could provide better beverages and service on their airplane with lower price.
Southwest might loss its customers. International Growth Pros: By expand its market internationally like put some international route will lead Southwest to start competes against other foreign airline companies and also local competitors like American Airlines. If this strategy succeeds, Southwest’s revenue will increase more than before and will be able to hire more employees and help all college students that are looking for job. Cons: Southwest will spend more money for go international.
Southwest have to buy new aircrafts and take risk for this strategy, if it’s failed, Southwest will loss a billion dollars for it. Another negative thing is Southwest’s competitor can take this chance to improve their sales while Southwest is too busy with the new improvement which is international growth. B. Recommendation We recommend Southwest to Starts international growth by putting new route to another country instead of domestic only.
For this strategy, Southwest needs to create a new advertisement that can assure all customers that Southwest provides the best services with the best aircraft and security.