Topic > Southwest Airlines Operational Improvements Analysis

Southwest Airlines Operational Improvements The airline industry has grown rapidly over the decades. Revenue has doubled in the last ten years. The greatest growth observed in the sector occurred in low-cost carriers. With all this growth, why have profit margins been so slim? There are a number of trends that suggest most of the profit is being taken up by overheads such as airports, manufacturers, salaries and service providers which all remain profitable as carriers struggle. There is another theory that the problem has been the continued increase in regulation. Not to mention natural disasters, terrorist threats and disease concerns all impact passenger attendance. Recognizing industry trends such as growth, pricing and consumption. Average from $296.60 in 1995 to $388.32 in 2015 (“Average Domestic Air,” 2015). While this seems to fit with an inflation-based rate increase, this is not the case. An inflation-adjusted U.S. average shows a decrease in fares per passenger from $463.03 in 1995 to $388.32 in 2015 (“Average Domestic Air,” 2015). As the inflation-adjusted cost per seat has dropped, what has happened is that the large operators have slowly adjusted prices that are now comparable to Southwest's. The 2013 price per seat mile provides a clear picture of each airline's position in the pricing rankings. Delta is currently the highest cost airline at $8.98 per seat mile, Allegiant is the low cost airline winner at $5.66, and Southwest is currently in the middle at $8.25 (Bachman, 2014) . This trend indicates that Southwest Airlines is no longer the low-cost leader in the airline industry. To stop this trend, Southwest Airlines may have to slow fare increases below its competitors in the coming years. Another option for Southwest is to change its slogan "bag fly free" to "one bag fly's free" to rake in some additional profit. Some additional costs could help Southwest lower fares” Thirty percent of Americans responding to a recent TripAdvisor survey said comfortable seating is the biggest improvement airlines could make, and 41% said stated that adding more legroom would be the greatest improvement" (Patterson, 2012) ). Southwest is taking a small step to meet this demand trend with the larger Boeing 737-800 aircraft. The newly ordered planes are said to be configured with newly designed seats. “The new aircraft seats are the widest Economy seats available on the single-aisle 737 market and offer a unique design that gives our customers what they have asked for: more space,” said Bob Jordan, executive vice president and chief commercial officer of Southwest (“Southwest Airlines,” n.d.). The airline that offers the most comfortable and largest coach seats will most likely gain a comparative advantage. With Southwest's 0.7-inch wider seats, customers will be more likely to choose a Southwest flight over the competition. However, the comparative advantage will most likely be minimal as only the new planes will be equipped with larger seats. Overhauling Southwest's existing fleet with larger seats is more than likely necessary to truly get a comparison