Southwest Airlines As more and more consumers cut back on spending, perhaps no industry has been hit harder than the airline industry. Even Southwest Airlines, which has posted profits in every one of its 37 years of operation, has felt the pinch. Although Southwest Airlines has suffered less than other airlines, recent passenger traffic has declined, driving down revenues in each of the last two years, which has also hit the company’s profits and stock price. So what’s Southwest Airlines doing? For starters, it is expanding beyond the 70-plus cities it now serves and is beginning new flights to heavily trafficked airports. It is also attempting to sweeten the ride by boosting wine and coffee service and rolling out onboard Wi-Fi. But perhaps more important is what no-frills Southwest Air lines isn’t doing—adding fees. Other airlines are generating millions of dollars in revenues by charging for basics, such as checking baggage, sitting in aisle seats, or using pillows. But Southwest Airlines insists that such fees are no way to grow an airline. Other attempts to jump-start demand include an ad campaign urging consumers to continue traveling despite the still-sluggish economy and a companywide fare sale with one-way rates as low as $49. It hopes that these efforts will bring customers back and curb the revenue slide. 1. Consider every tactic that Southwest Airlines is employing to curtail slumping sales. Evaluate the degree to which each is effective at accomplishing its goal.
Southwest Airlines As more and more consumers cut back on spending, perhaps no industry has been hit harder than the airline industry. Even Southwest Airlines, which has posted profits in every one of its 37 years of operation, has felt the pinch. Although Southwest Airlines has suffered less than other airlines, recent passenger traffic has declined, driving down revenues in each of the last two years, which has also hit the company’s profits and stock price. So what’s Southwest Airlines doing? For starters, it is expanding beyond the 70-plus cities it now serves and is beginning new flights to heavily trafficked airports. It is also attempting to sweeten the ride by boosting wine and coffee service and rolling out onboard Wi-Fi. But perhaps more important is what no-frills Southwest Air
lines isn’t doing—adding fees. Other airlines are generating millions of dollars in revenues by charging for basics, such as checking baggage, sitting in aisle seats, or using pillows. But Southwest Airlines insists that such fees are no way to grow an airline. Other attempts to jump-start demand include an ad campaign urging consumers to continue traveling despite the still-sluggish economy and a companywide fare sale with one-way rates as low as $49. It hopes that these efforts will bring customers back and curb the revenue slide.
1. Consider every tactic that Southwest Airlines is employing to curtail slumping sales. Evaluate the degree to which each is effective at accomplishing its goal.
2. Are the company’s efforts enough? Is it possible for Southwest Airlines to reverse the effects of a strong industry slump?
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