Aviation Management Part 1

4

AviationManagement

Part1

Inthe landing slot auctions the contributions are given for everygroup. For group 1, the contribution was $769,559,375.00. In group 2,there was no contribution. In group 3, the contribution was$197,924,375.00. For group 4, the contribution was $13,775,000.00. Ingroup 5, there was no contribution. This brings the totalcontribution made in the landing slots auctions to $981,258,750.00.

Thevarious contributions that are realized in the airline aresignificant in a number of ways. First, through the contributions,the company can be able to invest properly by understanding itsmarket and knowing the right side of the venture. Given that there isgrowing imbalances between the demand for the transport activitiesand available airport capacities that can be supported to meet thevarious demands, such contributions are integral in understanding thebusiness (Le, et al., 2003). With the contributions in place, thevarious operational logistics can easily be taken into account andthe challenges that are likely to be met addressed. Usually, thecontributions and their various facets form the basis of advisory onthe area of the airline to invest more and the area to take slow.Thus through sound investment decision there are chances of revenueboost in the airlines.

Inorder to increase the revenue, we have to first assume that thenumber of seats for every flight is constant. With a fixed number ofseats in every flight, the airline company can consider increasingthe number flights per day and that translates to getting more slotsor bidding for more slots (Hong and Harker, 1992). In order to bidfor more slots, the airlines should consider also having thehub-and-spoke (HS) networks as a means or alternative of getting newslots and also a means of concentrating more flights in waves attheir hubs, that is, improving the flight waves in accordance tolower connecting time as well as considering expansion and increaseof number of transfer passengers. In ensuring that the venture isprofitable, the model could consider creating new flight schedulewhich is made of flights which are already operated by the airlineand at the same time the flights that are assigned to the new slotsin which the airline revenue has to be maximized and at the same timethe assumptions and operational constraints met (Jones, Viehoff andMarks, 1993).

Indoing so, the airline can consider having the flights assigned to newslots being chosen from a set of flights which are made of those withthe destinations that are usually not served by an airline. This inshort can be alluded to be route network expansion as a result ofintroduction of new route. The main points that must be noted includetwo factors which are slot price at secondary market and the changesin the realized revenue every year (Jones, Viehoff and Marks, 1993).The various issues which form the output that must be put intoconsideration include the new flight schedule, the number of yearsthat are necessary to recoup the initial purchasing outlay for thenew slots and the possible number of connections that each and everyairline can realize upon introduction of the new slots.

Part2 of Case Study

Introduction

Leadershipis the process that instills motivation, direction and support of agroup of followers to accomplish a common objective.There are two essentials for successful leaders first they must bepositive about what they want to do. Second, in scenarios ofpotential allies and hostile critics they must explain what they wantto do with them (Miller and Chen, 1994 p 6). In this case, study theessay is going to analyze the style of leadership that Juan Trippeused in the management of the pan-American airline, and how the stylecontributed to success. It will further describe the advantageairline took over the American government in the expansion of theiroperation. Finally, the paper will give the analysis and descriptionof the of the route network that airline set up.

Theleadership style Juan Trippe used in managing the pan-Americanairline is a benevolent autocrat. Benevolent Autocrat leadershipstyle is the one with characteristics of dedication, decisive,industrious and commitment. This style applies to the leaders whoevaluate the quality and the quantity of the job in advance. In linewith this, autocrats are only conscious on the company’s costsminimization, the projected and achieved profits and lastly, theyconsider if the sales target have been met. In this case, they arethe main pillar of the business hence they assist in developing andproposing the new ideas. The new ideas help in increasing theefficiency and effectiveness in productivity which guarantees betterresults (Faux, 2010 p 45).

Inthis case, Juan Trippe showed so many initiatives. For example, thefaith act from trippe in aeronautics happened to be the greatest everto be made by an airline in technology. Trippe shown development whenhe gained the courage to choose massive competition and beststrategies for pan Am airline to enter the domestic market in a majorway. This happened to be the first time in its history When theNational Airlines was the purchased.

Hewas industrious and committed in the sense that, though the companybegan to struggle with its immense debt, Trippe, on the other hand,believed that still the gamble for the firm’s future was stillsensible. Because of his commitment, Trippe stepped down from theactive management of Pan Am time but still the future of Pan Americanairline still looked more promising. Notable, Trippe was risk takerhe secured funds for the new equipment, through loan agreements. Hisrisk nature was also seen when he decided to invest in larger jetsthat could accommodate more passengers and fly at accelerated speeds.

Trippewas bold his bold tactics had their effect on foreign aircraftcarriers. Additionally, he dogged his gambles when he ordered threeadvanced ideal Comets for Pan American. Many American airline chiefexecutive officers protested the move on the ground that the cost ofbuying and maintaining jets deteriorated their economy in the longrun and short-term (Lynesand Dredge, 2006 p 121).

Trippe’seffort was continuous,he developed many new ideas and had been acontinuous innovator, at his competitive age he had done so much toshape the Pan Am: but the unfortunate thing is that he failed totrain the new leaders who would have taken over the company for thefuture consistent growth. In line with this, there are twoessentials for successful leaders first they must be positive aboutwhat they want to do. Second, in scenarios of potential allies andhostile critics they must explain what they want to do with them(Lynesand Dredge, 2006 p 121).

Theairline took the advantage of American government to expand infollowing ways. Firstly, although many management teams feared andprotested the costs of purchasing and maintaining the jet. The fearwas due to the losses in future- the airline took that advantage andbought the airline with largest passenger capacity which saved theeconomy than propeller driven aircraft. While the manufacturers ofAmerica refused to accept and fulfill airline deeds. Even somefactory managers were not interested in making the Jets. Aircraft hada deal to accomplish that is a plan for the jet craft. The airlinecompanies did research on the jet engines. They decided to go for thepowerful version that powered the air force crafts. These enginesalso powered larger planes during the war (Lynesand Dredge, 2006 p 121).

TheAmerican government failed to support single chosen instrument. TheAmerican state did not support the airline interests first. However,other foreigners fed their traffic into the airline. For this reason,the many airlines in America were at odds they did not care thecompleting airline flag on the foreign flag. This made trippe designa plan that could consolidate three airlines into a new line calledCommunity Company. Conversely, the community plan faced manychallenges especially when it became a bill in Senate. Many senatorsopposed the bill that made it to fail.

Thecompetition for international passengers increased number ofairlines. However, the American government failed to support the moveby international air transport association (I.A.T.A) to increaseairline and regulate the fares. Other countries in Europe saw theneed but America objected the proposal from triple. This issue led tostagnation of overall travel from the US, which led to the expansionof airline to cater for higher demand.

WorldWar caused Europe to need a lot of cooperation in socio-economic fromAmerica. However, America appeared to be obstructing the low fare forthe common man. The airline went ahead to introduce new low-cost farein public traveling, Pan Am presence was expanded to buy airlineoverseas from America. This made American Airways change topan-American world ways(Lynes and Dredge, 2006 p 121).

Indescribing the route network that airline set up. The route inconsideration includes the number airline from America serving theCalifornia to Hawaii route increased, and the number serving theOrient increased from two to four, the route also led to SouthPacific. Another route is York and London the fare were set at$572.88

Globaloperations made more routes in US and Europe during World War II.With, more of the routes were within war zones. There was a trip toSan Francisco and Hong Kong for public relations. Additionally, TheMartin Aircraft carried passengers in the longest route over theNorth Atlantic. The route was 2,000 miles between Newfoundland andIreland. Furthermore, there is a route in Macao, south of Shanghaiin mainland China. Lastly, the route that was American-run China, itwas created to save on cost at low fares.

Part3 of Case Study

SWOTanalysis of new airline in the market

SWOTin full Stands for Strength, Weakens, Opportunities and Threats. Themain focus of the SWOT analysis is to examine the micro and macroenvironment. After clear examination, the analysis provides thedecision to be made in strategic planning. Therefore, SWOT analysisprepares the companies on how to effectively do away with threats.Use the available strategies to pursue achievable opportunities.Maximize on their strength and eliminate any weakness detected. Forexample before the establishment of the airline business, the companyneeds to identify some of the competitive advantages it has over theother similar companies. It also needs to compare the internalweaknesses of the competitors. The viability of the project andexternal entities that may negatively affect the airline businessalso needs to be analyzed(Kajanus, Leskinen, Kurttila, and Kangas, 2012, p 5). This section,therefore, is going to discuss the SWOT analysis of airlinebusiness, and benefits of investing in this business.

Strength

Theanalysis was carried out to check if the new airline could functionwell in the market. Several factors such as the economy, level ofemployment and transport cost were put into consideration (Kajanus,et al., 2012 p 6).The investigation was done on the price of purchasing an aircraft andthe minimum fare that could be incurred in the process oftransporting passengers and cargo. Other analysis includes thecompetitive strategies such as online booking, the training servicesneeded to its employees, the office front help to customers andsponsor of major sports to promote its brand. The need to determineemployees training, performance program of the new airline was noted. There was an analysis of the customers’ relationship to airlineowners this was done to confirm if the relationship can build aworldwide partnership. Moreover, experts analyzed, the number of jetsa new airline company needs and to which parts are required to fly.

Variousinvestigations were also done by a team selected by management toexamine the number of airlines to be put in place, and if the numberof airlines can meet the demand of people. Additionally, the analysiswas also done with the wastes produced. If possible could the fewerwastes maximize the companies’ outputs and minimize the inputs.Furthermore, the chief executive officer in his proposal recommendedthe team involved in the analysis to research the market anddetermines the strategies that a new airline company need in order tohave competitive edge over the existing one, likewise if the same canbe reduced.

Finally,the analysis was carried out to check if the requirement of newtechnology such as latest computer model, the amount of suchtechnology and initial capital. The test was also done on fuel, laborcosts and other expenses. In line with this, the need to determinethe number of airports and all charges was put into consideration.

Weakness

Severalanalysis was done. They include, first, the high cost of operationand implementation of new technology. secondly, experts analysed ifprices of its tickets will be high compared to other airline, and ifnew airline is planning to be a member of the airline bodies such asUAE. At some point, the need to know if the technology was affordablewas raised. Furthermore, through examination was done on theestablishment of the young airline(Houben, Lenie and Vanhoof, 1999, p 128).The analysis included lack of the confidence to invest fully, and thefears the manager may be facing to avoid taking risks. Poor employeemorale, the employee motivation was a key factor it established whatthe cause’s low performances were and why most CEO resignedfrequently. Other weaknesses analysis, include loss of customersthrough negligence and stiff competition from other companies.Finally, experts analyzed plane crashes and bankruptcy.

Opportunity

Themarket expansion analysis was carried out to determine if the newairline would pick up well in the existing segmented markets. Theexperts analyzed if a lot of investment will be made by developingthe old airport. A population census was done in the country andcategorized into classes(Sevkli, et al., 2012, p 16).

Thenumber of who travellers who could access the internet was analyzed.Moreover, the market research on the travelers and tourists forecastthe need for their annual growth. The experts examined number ofdistribution channels, market segmentation and productdifferentiation, tact’s that could help the new airline survive inthe market. Middle-class people were interviewed about their airlinepreferences and if they can afford the coming one (Houben,Lenie, and Vanhoof, 1999 p 130).The satellite demand and its effects in future were done to avoid abacklog.

Threat

Threatsof new entrants, the analysis, were carried out on services andproducts the company could offer. The challenges such as capitalrequirement the budget and the amount to buy aircraft and barriers ofnew companies were done. Also, the need to determine the brand tocompete with existing entrants was analyzed with main emphasis put onfamous one. The threat of other substitutes that defer in theinternational airline, the analysis was done in comparison of airtransport with other transport (Ahmed, Zairi and Almarri, 2006 p 160)

Inaddition, the research was carried out to determine the variety ofairline companies that offer best services to customers and theavailability of expansion in the market. Furthermore, the rules andregulation were considered and their effect on the company and how todefend its budgets. The corrective measures of the airline to counteraircraft crash were analyzed. This was done majorly to determine ifthe new airline were air worth before they started operating fully.The experts investigated the level of breaches such as unproceduralmanufacturing process. Finally, the laws regarding airline industrywere also carried out and its operation(Houben, Lenie, and Vanhoof, 1999 p 127).

Viabilityof airline business

Itis therefore, good to invest in this business because, according toSWOT analysis strength and opportunities outweigh the weaknesses andthreats as discussed below. The airline industry has a large market.It is a business that operates internationally. The business usesSWOT analysis provided favorable micro and macro environment toinvest in the airline business. After clear examination, theanalysis provided the major decisions that are needed strategicplanning. Therefore, SWOT analysis prepared the companies on how toeffectively do away with threats. In the airline industry, it wasdiscovered that the new airline could function well in the market.Several factors such as the economy, level of employment andtransport cost were the major ones contributions.

Theinvestigation done on the price of purchasing an aircraft confirmedthat aircrafts varied in the prices, some were cheap compared toothers. The report also confirmed that less fare could be incurred inthe process of transporting passengers and cargo. Contrary to thisthe airline business had some few weaknesses, first, the high cost ofoperation and implementation of new technology. Also, prices of itstickets were high compared to other airline, and new business was notplanning to be a member of the airline bodies such as UAE. At somepoint, the technology was affordable was but hard to maintain. Themarket expansion analysis confirmed new airline would pick up well inthe existing segmented markets. The expert’s recommended that a lotof investment will be made by developing the old airport. Apopulation census done in the country people categorized into classesproved that many people were middle class could use aircraft at leasttwice a week.

Inthreats, new entrants were great challenge however, they were few. It was confirmed that competition was on services and products thecompany offered. The other challenges such as capital requirement,the budget and the amount to buy aircraft and barriers of newcompanies proved to slow down the airline operation. Also, lack ofbranding denied the possibility of entrant airline to compete withexisting ones. The existing ones especially the famous ones gavestiff competition to entrants because they had done marketing well.Finally, the threat of other substitutes that defer in theinternational airline

Conclusion

Theairline industry has a large market. It is a business that operatesinternationally. It was discovered that the new airline couldfunction well in the market. In line with this, the price ofpurchasing an aircraft varied in the prices, some were cheap comparedto others. Contrary to this the airline business had some fewweaknesses, such as the high cost of operation and implementation ofnew technology. Finally, high capital requirement, the budget and theamount to buy aircraft and barriers of new companies proved to slowdown the airline operation.

Theleadership style Juan Trippe used in managing the pan-Americanairline is a benevolent autocrat. Benevolent Autocrat leadershipstyle is the one with characteristics of dedication, decisive,industrious and commitment. This style applies to the leaders whoevaluate the quality and the quantity of the job in advance. They areonly conscious on the company’s costs minimization, the projectedand achieved profits and lastly, they consider if the sales targethave been met. The airline took the advantage of American governmentto expand in a number of ways. Even though many management teamsfeared and protested the costs of purchasing and maintaining the jetdue to the losses in future.

ReferenceList

Ahmed,A. M., Zairi, M., &amp Almarri, K. S. 2006, SWOT analysis for AirChina performance and its experience with quality, Benchmarking:An International Journal,13(1/2),160-173.

Faux,J. 2010, Theglobal class war: how America`s bipartisan elite lost our future-andwhat it will take to win it back,John Wiley &amp Sons.

Hong,S., &amp Harker, P. T., 1992. Air traffic network equilibrium:toward frequency, price and slot priority analysis,&nbspTransportationResearch Part B: Methodological,&nbsp26(4),307-323.

Houben,G., Lenie, K., &amp Vanhoof, K. 1999, A knowledge-basedSWOT-analysis system as an instrument for strategic planning in smalland medium-sized enterprises, Decisionsupport systems,26(2),125-135.

Jones,I., Viehoff, I., &amp Marks, P., 1993. The economics of airportslots,&nbspFiscalstudies,&nbsp14(4),37-57.

Kajanus,M., Leskinen, P., Kurttila, M., &amp Kangas, J. 2012, Making use ofMCDS methods in SWOT analysis—Lessons learned in strategic naturalresources management, ForestPolicy and Economics,20,1-9.

Le,L., Kholfi, S., Donohue, G., &amp Chen, C. H., 2003, June. Proposalfor demand management using auction-based arrival slot allocation,InProceedingsof the 5th USA/Europe Air Traffic Management R&ampD Seminar,Budapest, Hungary.

Lynes,J. K., &amp Dredge, D. 2006, Going green: Motivations forenvironmental commitment in the airline industry, a case study ofScandinavian Airlines. Journalof sustainable tourism,14(2),116-138.

Miller,D., &amp Chen, M. J. 1994, Sources and consequences of competitiveinertia: A study of the US airline industry, AdministrativeScience Quarterly,1-23.

Sevkli,M., Oztekin, A., Uysal, O., Torlak, G., Turkyilmaz, A., &amp Delen,D. 2012, Development of a fuzzy ANP based SWOT analysis for theairline industry in Turkey, ExpertSystems with Applications,39(1),14-24.

Aviation management Part 1

14

AVIATION MANAGEMENT

Aviationmanagement

Part1

Inthe landing slots auction at the Hong King Airport, the designatedgroup was group 1. In the auction, all the ten landing slots wereauctioned and the slot allocated to the highest bidder. The maximuminvestment in the bidding was set at six billion dollars. In theauction, group 1 invested 2,215,000,005 dollars. This enabled use toearn five out of the ten slots on offer (slot 2, slot 4, slot 5, slot6 and slot 9).Our airlines was able to succeed significantly comparedto other airlines involved in the auction. With a contribution769,559,375 dollars, over 75 percent of the contribution came fromgroup one. This attracted a return on investment (ROI) of thirty fivepercent. According to the group, a thirty five percent return oninvestment is significantly high and is a measure of efficiency inoperations at the airport. The most important focus of our group wasto increase the revenue per available seat mile. Another factorconsidered in order to increase the revenues was pricing strategies.These factors influenced which slots we chose and the ones wedeclined to bid. Since group one is a full service airline, we weregiven special treatment in the binding process where we were give thefirst privilege of choosing the slots. A better return on investmentor profitability could have been realized if the group quoted a lowerprice in the bid. The lower auction price would have increased thepercentage profit (Butcher, 2012). However, with a 35 percent ROI andover 75 percent contribution, the group performed relatively well.

Part2

Inany business organization, a leader has a huge influence on thesuccess of a business organization. The success of a leader isinfluence by the qualities and leadership style adopted by theleader. The success of Smith at American airlines and the militaryduring the Second World War was largely influence by his leadershipstyle and quality. The most important success factor that stood outin Smith’s leadership was his ability to articulate his vision andact as a compass to the airline vision. He was able to inspire theAmerican Airlines to one of the biggest transcontinental airline. Herealized that his followers are not going to works towards thesuccess of the airline because he suggests what they need to do butbecause he is able to lead them to work (Hill&amp Jones, 2010). Forexample, despite his position in the airline, he did not have asecretary to answer phone or write memos. He believed that to buildthe airline, he has to get his hands dirty by working. As a result,he threatened to “fire any guy who thinks he’s an executive(Mayo, 2009). Another success factor that contributed to Smithsuccess as a leader at the American Airlines was his abilitycultivates trust from his followers, customers and business partners.Smith was tolerant and humble which enabled his to interact withdifferent people freely. He introduced himself to any one he metincluding ticker “agents and baggage handlers…stunned passengerson flights where he wandered up and down the aisle, mingling andpresenting himself as ‘president of this rodeo’” (Mayo, 2009).His ability to build and cultivate trust enabled his negotiate dealswith manufacturers and the government agencies which played animportant role in building the airline. Smith was also democratic andalways took informed action. This enabled his to always do the rightthing. As a result, his achievement in air transport was recognizedby the government during the Second World War where he was requestedto take a military post as Air Transport Command head. Although hehad the power to influence awarding of contract, he did not use hisinfluence to favor American Airlines. These qualities enabled hiscontributes to the building of American airlines and the developmentof the aviation industry in general (Szurovy, 2013).

TheAmerican Airlines is one of the largest players in the Americanaviation industry. Throughout the history of the air transport, sincethe early 20thcentury, the American Airlines has played an important role in theindustry. Being the pioneering airlines, the American airlines tookthe advantage of incentives by the government of the United Statesand the situation in the industry to develop into a market leader.This includes corroboration with the aircraft manufacturers, themilitary, the government and other players in the industry. It isimportant to note that the first airlines in the United States wereestablished after the First World War in response to the UnitedStates government to increase the speed of mail delivery. This led tothe establishment of transcontinental airmail routes. The ContractAir Mail Act of 1925 gave the mail flying services to privateairlines. As a result of the interest in the aviation industry, whichattracted a lot of capital and investment, AVCO entered the industry.As the air mail industry developed, the American Airlines tookadvantage of the developments such as the 1934 executive order byPresident Franklin Roosevelt which canceled all existing air mailcontract. After the Air Mail Act of 1934 was enacted, the AmericanAirlines was restricted to enable it bid for the contracts.Additionally, the airline took advantage of transporting thepresident and his family of the United States in 1934 as a marketingstrategy. As a result, the fortune magazine reported that the airline“was the only transcontinental airline to come out of the postcancellation bidding with a better system than before”. Additionally, the airline took advantage of the technologicaldevelopment in aircraft manufacturing by partnering withmanufacturers. For example, the airline partnered with DouglasAircraft in the manufacture of the new aircrafts with larger capacitysuch as the DC3. Since the company did not have enough finance topurchase the new aircrafts, it took advantage of the government loansthrough the Reconstruction Finance Corporation. Later, the airlineestablished a similar aircraft development agreement in thedevelopment of the Convair aircrafts (Mayo, 2009).

Accordingto the “Transcontinental Routes of Primary Carriers: 1927-1930”,exhibit three, the three major airlines in the United States, unitedairlines, American airlines (know as American airways) and TWAconnected the city of New York and other cities mainly Los Angelesand San Francisco through the same flight route. The United Airlinestranscontinental route connected San Francisco to New York throughcities such as Cleveland, Chicago, Iowa City, Grand Island and RockSprings among other cites. The American airlines linked Los Angelesto NEW YORK through two alternative routes. The first route wentfrom Los Angeles to New York through garden city, Kansas City, St.Lois, Columbus to New York. Although there was no alternative routebetween Kansas City and New York, the airline has an alternativeroute between Los Angeles and Kansas City which went through OklahomaCity, Phoenix, and San Diego to Los Angeles. Although there werealternative routes, TWA transcontinental route moved from Los Angelesthrough Winslow (or Holbrook), Clovis, Waynoka, Kansas city, St Lous,Indianapolis, Columbus, Pennsylvania (or Pittsburgh) to New York. Among the three major airlines in the 1930, American airlines had themost ambitious route, for example with longer flights and alternativeroutes (Mayo, 2009).

Part3

SouthwestAirline

SouthwestAirline is a major airline in the United States and one of thelargest low cost carriers in the world. The airline was establishedin 1967 and has its headquarters in Dallas, Texas. With a fleet ofalmost 700 and over forty six thousand employees, the airline hasover 3,400 flights everyday, mostly domestic flights within theUnited States. In the United States, Southwest Airline is thelargest airline when volumes are considered transporting over 100million passengers every year to different parts of the United Statesand abroad. This is attributed to the fact that Southwest Airline isa low cost airline which is able to attract large number ofpassengers. Recently, in its long term strategic plan, the airlinehas acquired AirTran airlines in an attempt to solidify its dominancein the local market (Datamonitor, 2010).

Forover four decades, Southwest Airline has made consecutive profitsevery year. The business strategy that has been adopted by SouthwestAirline to maintain this trend has been selecting the most attractivedomestic routes. Additionally, the airline has strived to become theairline of choice in the United States by adopting efficientoperations and excellent customer services. Although the airline is aloc cost carrier, their customer services have remained competitive. These strategies have enabled the airline to sustain a stable growthevery year, irrespective of the challenges facing the economy.Although there are several changes that have taken place in therecent past that have an impact on the airline’s operations,maintaining the structure of a low cost carrier, which has been themost important strength of the airline, has remained an importantaspect of strategic management (Datamonitor, 2010). However, due tothe expansion of the airline activities, especially after itsoperations have been integrated with the AirTran operations,maintaining a world class customer service will be an importantchallenge. To retain their market share and perennial profitability,it is important to maintain good customer experience. Additionally,modernization of the fleets is also essential since it reducesmaintenance costs and improves efficiency (Hill et al, 2014, Lauer,2010).

SWOTanalysis of Southwest Airline

Strengths

Operations

Large and efficient fleet

Dominance in the local market

Marketing

Weaknesses

Congestion

Declining profits

Dependence on passenger revenue

Opportunities

Economic recovery.

Acquisition and mergers

Recovery of domestic tourism

International expansion

Threats

Competition in the local market

Stiff regulations

Unstable crude oil prices

Strengths

  1. Operations

Themost important strength of Southwest Airline is the operationstrategy adopted by the airline. The airline was established as alow cost carrier, which has had a huge impact on the profitability ofthe airline. Additionally, the airline offers “point to pointservices” as opposed to “hub and spoke services” that arecommon among competitors in the local market (Gittell, 2003). Thisminimizes flight connections and total time spent on the trip andconsequently better consumer experience. The Southwest Airline alsoserves downtown airports which are less congested allowing theairline to tap on huge markets and maximize the utilization ofassets.

  1. Large and efficient fleet

SouthwestAirline has relatively large flight which is able to effectivelyhandle the large number of customers. In the early 2012, SouthwestAirline served 479 city pairs mainly in North America. Currently, theairline operates 685 aircrafts serving over 100 destinations. Overthe years, the airline has continuously modernized it fleet toincrease efficiency (Hawkins et al, 2012).

  1. Dominance in the local market

SouthwestAirline is the largest domestic airline in the industry with over 100million passengers every year. This has resulted into increasedeffectiveness in the use of resources and consequently profitability.Additionally, the dominance in the United States market as well asNorth America makes the operation of the airline easier since thecompany concentrates on improving customer services to maintain astrong brand presence (Hawkins et al, 2012).

  1. Marketing

Animportant strength of Southwest Airline which has had an impact onits operations has been the marketing strategies adopted by theairline. The main aim of the marketing strategies adopted by theairline has been differentiation from other airlines in the industry.For example, the “Bag Fly Free” campaign was one of the mostsuccessful marketing campaigns in the industry. The marketingstrategies and slogans associated with the airline have had a hugeimpact on customer reputation (Datamonitor, 2010).

Weaknesses

  1. Congestion

Therapid expansion of the Southwest Airline operation has resulted intoincreased congestion due to the high number of passengers handled bythe airline. This has a negative effect on consumer experience andefficiency. Integrating the operations of the AirTran operations hasfurther increased congestion in the airlines operation. This hasresulted into doubts on whether the airline will be able to maintainreliable services in the future (Hawkins et al, 2012).

  1. Declining profits

AlthoughSouthwest Airline has had over four decades of perennialprofitability, in the last ten years, the company has experiencedsome decline in profits. Between 2007 and 2010, the airline recordeda decline in profitability. Between 2007 and 2009, the profits in thecompany declined by up to 42 percent compounded annually. This wasattributed to the challenges that faced the United States economy inthe late 2000s as well as fluctuations in the global oil prices. Thissuggests that the airline profitability is affected by turbulence inthe local and global economy (Hawkins et al, 2012).

  1. Dependence on passenger revenues

SouthwestAirline largely depends on passenger revenues. Over 95 percent ofrevenues in the airline are derived from passenger revenues. Althoughthe airline has operated for over half a century, it has not beenable to tap into the cargo transport industry. Cargo revenues wouldhave a significant influence on the revenue stability in the airline.It is estimated that cargo revenues in the airline industry wouldcontinue to increase, a potential Southwest Airline has not been ableto leverage. This increases the risks of the airline industry due tothe numerous external factors such as fuel costs and economicchallenges that have a direct impact on revenues and profit margin(Hawkins et al, 2012).

Opportunities

  1. Economic recovery

Thechallenges that faced the United States economy in the late 2000s dueto the financial crisis had an impact on the profitability ofSouthwest Airline. As a result of the challenges, the airlinerecorded a decline in the annual profits. However, since the UnitedStates economy has recovered from the financial crisis, the airlinehas an opportunity to increase its profitability. In the 2014financial year, the company recorded an increase in profit, anindication that the economic recovery is impacting positively on theprofitability of the airline. It is estimated that as the UnitedStates economy continues to recover from the crisis, there will be asteady increase in the number of air transport passengers. Thisprovides a great opportunity for Southwest Airline (Hawkins et al,2012).

  1. Acquisition and mergers

Inthe last five years, Southwest Airline has pursued expansionstrategies through acquisitions which are aimed at supplementing theexisting business activities. For example, in 2010, the airlineentered into an agreement to acquire Air Tran airline. Theacquisition enabled the Southwest Airline to expand its low costscheduled frights in the United States. In addition to expansion, theacquisition will cushion the company from economic challenges andcompetition in the airline industry since it enabled the airline todiversify its markets in key areas such as Atlanta, New York andBoston. Further mergers and acquisition in the future will have asignificant impact in the profitability and market share of thecompany (Hawkins et al, 2012).

  1. Tourism

Thetourism industry in the United States suffered immensely from thefinancial crisis. This had an impact on local and internationaltravels and therefore, the airline industry. The recovery of theeconomy and thus the tourism industry is a huge opportunity forSouthwest Airline. Ecomomic surveys indicate that the tourismindustry in the United States will grow steady over the next onedecade. An expansion of the tourism industry has a huge impact on theairline industry. Due to its market position, especially in the localmarket, Southwest Airline will be the greatest beneficially of avibrant local and international tourism (Hawkins et al, 2012).

  1. International expansion

Recently,Southwest Airline has launched international flights mainly incentral and South America. For example, Southwest Airline haspartnered with Volaris to provide international flights to fiveMexico cities. The international market will further cushion theairline from challenges in the local market (Hawkins et al, 2012).

Threats

  1. Competition in the domestic market

AlthoughSouthwest Airline is a market leader in the United States domesticmarket, the industry is very competitive. Southwest Airline facesintense competition from other major airlines in the United Statesmarket. This remains an important threat to the airline operations.Airlines in the domestic and international market compete on thebases of passengers experience, price, efficiency, schedulingconvenience and frequency. In all its routes, Southwest Airline isfaced with competition from major airlines in the US market. Theseairlines have financial power, brand recognition and fleet thatenable them to be an important threat to Southwest Airline (Hawkinset al, 2012).

  1. Stiff industry regulations

Theairlines industry is high susceptible to sabotage. This has an impacton the national and international security. Since the September 11attack in the United States, the airline industry is a highlyregulated industry. In addition to the security related regulations,the Department of Transport and Federal Aviation Administration hasstrict regulations on domestic and international carriers, which havean impact on the operations of Southwest Airline. These regulationsinclude financial management, maintenance and operations, training ofcrew and flight attendants and communication facilities among others. These stiff regulations results into increased cost of operations,which have an impact on profitability (Hawkins et al, 2012).

  1. Unstable crude oil prices

Thevolatility of crude oil prices in the international market has animport on the entire transport industry. The airline industry ishighly sensitive to the prices as well as availability of petroleumproducts. Over the years, the international prices of crude oil havenot been stable. Due to demand and supply mechanism as well asgeopolitical factors such as instability in Middle East, the pricesand availability of crude oil is unpredictable and uncontrollable. Being the biggest operational expenditure in an airline, the trend isan important threat to Southwest Airline (Hawkins et al, 2012,O`Reilly &amp Pfeffer, 2000).

Conclusion

SouthwestAirline is the largest domestic low cost carrier in the UnitedStates. Based on the SWOT analysis of the airline, it would beadvisable to invest in Southwest Airline. Although there are someweakness as well as threats that have an impact on the airlineprofitability, the strengths and opportunities are immense. For overforty years, Southwest Airline has established itself as leadingairline recording profits every year. Air transport in the UnitedStates is very competitive. However, Southwest airline has remainedthe best low cost carrier. Due to the recent changes in theoperations of Southwest Airline, the airline is becoming morecompetitive and adaptive to emerging markets. The domestic andinternational expansion is some of the strengths of the airline. Thereliability of the Boeing 737 and excellent customer experience areimportant aspects of Southwest Airline operations. Therefore,investing in Southwest Airline is a good idea.

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