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Airline Baggage Catherine Vitale BUS 620 Professor Patricia Ryan July 25, 2011

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Abstract This essay will consist of a company overview of both American Airlines & Southwest Airlines. An Executive Summary of a Marketing Plan will be included as well. The price comparison of a full service airline and a no-frills, bare bone airline will be discussed showing the difference in the level of products and services for both. In an economy where everything seems to be a la carte, exactly what services you are willing to do without, decides which carrier you will choose to fly on.

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In the beginning American Airlines is what many travelers still call a full service airline. It was founded in 1930, and was formerly called American Airways. This airline was a result of merging more than 80 other smaller airlines that were not surviving on their own. By 1934, they were a huge corporation, and officially became American Airlines. They have five cities that they maintain a hub in and this is the cornerstone of their market. New York, Chicago, Los Angeles, Dallas/Ft Worth and Miami. These five cities remain the most important centers for business travelers and a popular international gateway for foreigners. By, 2009, 38.8% of Americans flying was international. They have almost 900 aircraft, and carry 85.7 million passengers, that is about equal to one-third of the US population. The contender, Southwest airlines is a low-cost, no-reserved seats approach to travelling. They started a unique marketing program to sell their low fare flights anywhere in the US. The Airline was founded in 1971 and only started with three Boeing 737 aircraft that serviced only three Texas cities, Dallas, San Antonio and Houston (Capozzi, 2001). This is a meager start for an airline that now services 72 cities throughout the continental United Stated and operated 550 Boeing 737 planes. American Airlines initially started their flights with a full service in-flight menu, assigned seats, both first class and coach. These flights were also extremely expensive and out of the median household incomes budget. Southwest Airlines saw the opportunity for an alacarte type flying and in the process of this saving costs on in-flight meals, larger planes with both business and first class seating. Southwest only flys Boeing 737s which only have one seating level available for all passengers.

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Southwest has a marketing plan that is suited for and allows the airline to charge lower fares for flights by limiting the services provided on these flights. This is a business managers top priority with a changing market. It provides a business with the ability to conform to the demands of the market and the consumer. Their Marketing Plan reflects this style of business. One key mission of a manager is to divide customers into market segmentsdistinct subsets of people with similar needs, circumstances, and characteristics that lead them to respond in a similar way to a particular product or service offering or to a particular strategic marketing program (Mullins, 2010). The Company Mission Statement We are committed to provide our Employees a stable work environment with equal opportunity for learning and personal growth. Creativity and innovation are encouraged for improving the effectiveness of Southwest Airlines. Above all, Employees will be provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Southwest Customer (Southwest.com, 2011).

Executive Summary of Southwest Airlines Southwest airlines have been growing for the last 35 years. The low fare, few services, alacarte style flights provide passengers with friendly inexpensive flights. All of this has afforded Southwest with year after year sustainable growth in the market with profits for the last 33 years. Its current worth is $14 billion, and with continued growth (Capozzi, 2001). Despite Southwests growth in the market, other airlines have not been so lucky. Flights have dropped so much that five out of the ten largest airlines have filed for bankruptcy. Because they have a barebones style of flying, they are able to turn flights around quickly and increase volume with numerous flights daily. If Southwest is able to continue growth, they need to cut services even more with the concerns of the rising fuel costs.

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Recently, to offset these fuel costs, Airlines have started charging $25.00/bag in addition to any carryon luggage. This still does not hinder travelers in choosing a low fare, no service airline. Experts say that even after you pay for the extra bags, your fare is still going to be considerably less than flying with a full service carrier (Southwest.com, 2011).

Marketing Plan for Southwest Airlines

Analysis of the current situation: y The airlines are no stranger to financial problems, employee strikes, inflation and more recently the 911 terrorist attack. y Since 911 the airline industry lost an estimated $32 billion, and still looking at a possible $9-10 billion just in 2011 because of the economy. y In the recent economic problems, business travel, decreased mileage reimbursements, rising fuel costs, and several other factors will impact the airlines for years to come. In light of all this, Marketing for a product that is not considered necessary for some, will need all of the companys efforts. y Competitors are adopting the same practices of removing in flight meals, offering beverages only but for a minimal price and charging for additional baggage.

SWOT Analysis/Strengths Southwest Airlines has a unique SWOT analysis because they have a unique approach to business. They have always provided an environment that is employee friendly, employee specific, and employee focused. This is why they have such a low turnover in their upper and middle management staff.

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Their marketing strengths are: y y y y y It is the most well-known low fare carrier in the industry. 3100 flights a day is standard. Short trips, less fuel, no in flight service keeps costs low. The Teamwork environment makes for higher ticket sales. The standard Boeing 737 is the only plane they fly saves costs on training pilots on a number of planes. y Ticketless travel, senior citizen discounts and catering to military families makes it popular with those demographic groups. y TV show aided in its popularity.

All of these strengths combined make it a formidable competitor in the airline business. The airlines do have some weaknesses, as with all businesses but that is the importance of marketing plans, to identify them. It has been proven that market-oriented firms have shown to be among the more profitable and successful at maintaining strong competitive positions in their industries over time. (Mullins, 2010). SWOT Analysis/Weaknesses Strengths and weaknesses help your business focus on issues that affect it internally. It can illuminate what your company is capable of doing, and what it should not be doing. Many are good at looking inward but fail to look outside at the external factors that are affecting your business. Threats and opportunities are external, and imperative to focus on the issues of the real world. This is what the SWOT analysis does. It challenges businesses to see beyond the walls to determine what opportunities are out there for your company and how to capitalize on the strengths. (Capozzi, 2001).

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The Marketing Weaknesses: y Seating is not assigned and if you are traveling with someone there are no guarantees you will be able to sit together. y y Only offering domestic flights. They do not have direct non-stop long flights; you have to change planes on short flights. y y y y y Online booking is difficult to navigate. No refunds, causes people to lose money if flight is cancelled. Only uses one type of aircraft. no first class or seat upgrades are even an option. No in flight services, drinks even cost money.

These weakness may seem like they can cause a business trouble, but these are what keep Southwest Airlines the leading low-fare airline.

SWOT Analysis/Opportunities All businesses are influenced by external factors, political, religious, legal, technological and other factors. It is important to imagine what could make a business obsolete, and what could possibly replace it. Threats can become opportunities, and vice versa. Understanding the nature and attractiveness of any opportunity requires an examination of the external environment, including the markets to be served and the industry of which the firm is a part (Mullins, 2010). Southwest Airlines Opportunities; y y Online options are expanding. Longer flights are being tested.

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y y

More people are flying because prices are more affordable. Because their success continues they are buying larger planes which allow more people to fly which increases revenue.

y y

Other airlines are not doing as well and a merger may be in their future. Operating costs 48% lower than in foreign markets.

Threats are the holy grail of a business marketing plan. Many managers feel that if you eliminate the threats, you will have automatic success. That of course is not the case. Southwest Airlines threats are as follows: y Other Airlines are servicing the wealthier flyer, and people are paying for comfort. y y y y Airlines are faced with the rising cost of fuel. Political instability causes concern for the airlines as a whole. Legal issues are a costly reality for any business. Their ability to meet growth demands.

Description of the Target Market Because Southwest Airlines prides itself on a no frill, low cost, passenger friendly company, this approach attracts mostly families, and travelers that are willing to forgo the frills for saving a few dollars. This demographic choice allows Southwest to offer their target market a great service and affordable prices by rewarding ticket holders who arrive early to choose their own seat assignment. Southwest Airlines also offers $99.00 roundtrip flights between certain cities, this keeps their volume up and their costs down (www.southwest.com ).

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Competitors

Southwest Airlines has several competitors in the airline business, but few that can compete with their low fares and customer service related experience. They have taken that idea to new levels with their reality show that is running on TLC. y Southwest airlines used branding strategies to compete with other airlines, they used their $99.00 flights and their TV shows (www.southwest.com). y Although Southwest Airlines is the United States only major short haul, low fare, high frequency, point to point carrier, it has the lowest average one way airfare at $75.00. y The average passenger trip length is 441 miles. It flies to 54 cities, 55 airports, in 28 states. They have a higher net income than the competitors, $433.3 million, total passengers carried 52.6 million.

Products and Services

Southwest Airlines is the leader in providing low cost in state flights for its customers.

It consistently offers frequent flights, inviting cabins, reliable service, and amazing customer service. Since every Southwest airplane is operated by 71 people, the lowest ever in their history, labor costs have decreased and those who are left are highly trained and specifically chosen.

The employees consistently deliver excellent customer service, in-flight refreshments for a low cost, and the ability to select your own seats.

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Southwest airlines also offers, e-ticketing, kiosk check-in, free bags if you carry them on, and low cost flights remain low.

Southwest Airlines marketing strategy encompasses their aggressive marketing approach that they are known for. Through these marketing strategies, Southwest Airlines tries to distinguish itself from the other airlines. Their marketing focuses on communicating to the customer that they offer real value without cutting customer service. They promote themselves as offering safe, reliable, low-cost fare with outstanding service. Rather than competing with other carriers for existing travelers, Southwest targets a different set of passengers. Southwest says that there are two types of travelers, convenience, time oriented travelers, and price sensitive leisure travelers. Their goal is to cater to both groups without disappointing either. Marketing Budget & Pricing Strategy Southwest Airlines marketing budget and pricing strategy are bundled together. Their executives felt that if your prices are low, people will fly your airline (D'Aurizio, 2008). Southwest also does not allow their ticket prices to be advertised on the discount ticket sites like www.orbitz.com, www.expedia.com and www.kayak.com. Southwest Airlines wanted their customers to visit their website which also advertises when they view ticket prices. They also do not participate in any pricing strategies like keeping taxes and FAA fees hidden out of the ticket prices. Southwest Airlines, on the other hand creates a ticket price that includes the baggage fees, taxes and fees, so you can see the true price you are paying. Other airlines hide these to make their ticker prices look cheaper than they really are.

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Summary and Implementation Plan Southwest Airlines has grown to be a huge contributor to domestic flights and an award winning national airlines. It maintains a cost effective, low fare, point to point airlines carrier that keeps a basic cost structure. They have never serviced meals, or accepted reservations for seats in advance. It continues a basic linear route, short flights and no in flight services (D'Aurizio, 2008). To keep it this way they still only fly one type of aircraft and make that a priority to keep their standards consistent. They operate at a very efficient pace, they have dedicated, motivated employees. The end result of this strategy is a sustainable, competitive advantage and superior profitability (D'Aurizio, 2008). The implementation of their marketing strategy has proven to be successful for the present time. In the future it will be necessary to implement a plan that is consistent with supply and demand and whatever the market needs are. Airlines that compete with Southwest Airlines are challenging them because their ticket prices resemble their own because they are omitting costs of taxes, but customers only see that price. Any successful marketing plan requires effective communication within all levels of an organization (Mullins, 2010). This includes research and development, engineering, production and marketing. Each department relies on the expertise of the people specifically trained in those areas of the plan. Most importantly, all departments must agree on the marketing plan and implement it collectively. Although Southwest Airlines has a solid customer base and loyal consumers, thrifty shoppers will go where the deal is, and hidden fees are an afterthought. In a competitive market it is imperative to stay on the cutting edge in planning and implementation. Because there may

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be a number of ways to achieve the specified objectives, any business must know the overall marketing strategy that needs to be pursued and the marketing strategy of their competitors (Mullins, 2010).

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References

Capozzi, John M. (2001). A Spirit of Greatness. JMC Southwest Airline Website: Company History, http://southwest.com/about_swa/airborne.html Feb. 8, 2006 (pg 1, p 2)(pg 2, p 3)(pg 6, p 2) D'Aurizio, P.. (2008). Southwest Airlines: Lessons in Loyalty. Nursing Economics, 26(6), 38992. Retrieved July 23, 2011, from Research Library. (Document ID: 1627190631).(pg 11, p 1,2) Citigroup Analyst Report: Light, Andrew. Southwest Airlines Co (LUV) Fact Sheet: Jan. 31, 2006 Mullins, J. W., & Walker, O. C.Jr. (2010). Marketing Marketing: A Strategic Decision-Making Approach (7th ed.). New York: McGraw-Hill/Irwin(pg 4, p 1) (pg 6, p 1)(pg 11, p 4, 5) Pender, K. 2001. Southwest Sets Standard for Success in Depressed Airline Industry. Southwest Airlines Fact Sheet, http://www.southwest.com new approach by Southwest Airlines targets business fliers. (2011, February 22). Tribune - Review / Pittsburgh Tribune Review,***[insert pages]***. Retrieved July 25, 2011, from ProQuest Newsstand. (Document ID: 2273412271). www.southwest.com (pg 2, p 2, 4)(pg 7, p, 2)(pg 8, p, 2)(pg, 9, line 2) Southwest Airlines 2005 10-K, Securities and Exchange Commission File No. 1-7259