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Your assignment is to prepare and submit a paper on the airline business in the twenty-first century.
Your assignment is to prepare and submit a paper on the airline business in the twenty-first century. The company’s financial planning model is a major reason why Southwest Airlines has remained profitable every year since its inception in the 1960s. In order to effectively carry out flight operations, an airline needs pilots, cabin crews planes that can take-off and land on the landing slots, and sales-point coordination. It is quite difficult to make these resources sustainable sources of competitiveness, as they are now much more accessible due to the development of the international markets. (Butler, G.F., and Keller, M.R. 2000). Southwest created an advantage by planning to price their fares at 60 percent below the prevailing airfares in the market. “When Southwest launched its Florida intra-state services in 1996, it offered some advanced purchase fares for as low as $29. Also, when the airline opened a Chicago-to-Cleveland route, its lowest unrestricted one-way fare was as low as $59, while those of other airlines were around $310.” (Doganis R. 2001). With this plan, the airline has been able to divert a substantial number of passengers from the road thus ensuring that the yields achieved are relatively high when measured in terms of revenue per passenger-kilometer because the fares are all point-to-point
The airline’s financial success comes from the company’s ability to operate at costs that are lower than the revenue generated by the airline’s operations. Although southwest’s unit revenues are not much lower than those of other competing airlines, operating on the same routes, southwest has enjoyed an advantage in the unit cost, by operating at cost levels that are as much as 40 percent below those of its major competitors. (Doganis R. 2001)
Despite the economic downturn that has been experienced in the United States, Southwest Airlines has remained financially stable and ahead of its competitors in the industry.
