Case Study Summary - Southwest Airlines

Case Study Summary - Southwest Airlines
Service: First Six Months

• It began modestly with small teaser ads in the newspapers, containing provocative headlines such
as The 48-Minute Love Affair,” “A Fare to Remember” etc with a telephone number for the reader
to call.
• These ads increased telephone calls to approximately 25,000.
• Southwest airline started printing the tickets and introduced pedal oriented tape recorder to enter
names of the passengers.
• Display of bill boards on all the 3 major airports.
• This resulted in spending half of the year’s promotional budget in just first month of operation.
• Once the advertisement was done, Southwest inaugurated operations publicly.
• To compete with southwest airlines, the competitors Braniff and TI introduced price reduction
matching with south west and other offers like free beverages and increase in services.
South west response to competitors and
increase revenue
• South west responded to the competitors promotion saying “The Other Airlines May Have Met
Our Price But You Can’t Buy Love.” Thus indicating that it values the costumer comfort.
• It started with direct-mail campaign targeted 36,000influential business executives in Southwest’s
service areas. Each received a voucher worth half the cost of a round-trip ticket; about 1,700
vouchers were redeemed.
• A survey conducted by Southwest revealed that Passengers used William P. Hobby Airport in
Houston than Houston International Airport. Hence, Southwest shifted 7 of it 14 round trip flights
between Dallas and Houston were transferred to Hobby Airport.
• The 3rd leg of the route Houston-San Antonio was started by reducing 4 round trips from each
weekday of Dallas-San Antonio flights.
• Unprofitable Saturday flights were eliminated.
• All these steps helped the Airlines to increase it’s revenue in that quarter.
The Second Six months
• This is the second phase of advertising and the major object of it was to sustain southwest’s
presence in the market after 8 months of its service.
• Marketing activities included in this phase were:
 TV ad featuring the air hostesses, pocket time tables, point of sales materials for travel agents
& promotional brochures.
 Sales through trave agents – provided commission of 7% on credit card sales & 10 % on cash
sales.
 Corporate account – Company personnel who frequently used Southwest were provided with
ticket stock and singly monthly billing.
• The marketing strategies applied had increased the number of passengers form 18/flight to
26/flight. But it was still below the necessary to cover the rising total cost/trip.
Steps taken by South west to increase profit
• Considering the situation, the Southwest decided to serve only William P. Hobby Airport and not
Houston International Airport as the later had lesser passenger preference than the former.
• Introduced new schedule for flights operation on the Dallas – Houston route I,e 9:30AM to
3:30PM, as a result number of trips from 29 to 22 and flights flew in the interval of every 2 hours.
• After analyzing, southwest management realized that Dallas-Houston route needed only 2 flights
to provide service. Hence, one Boeing 737 flight was sold.
• Friday 9:00PM flight at $10 experiment was extended on daily 9:00PM flights. This helped in
attracting more travelers.
• Specialized promotion like provision of sweetheart stamp to each secretaries in southwest market
made reservation for the boss. For each 15 stamps, a free rode on southwest airlines was offered.
• All these helped the company to increase revenue and reduction in net loss.
Introduction of new fare price
• Southwest decided to increase the fare from $20 to $26 and roundtrip fare of $50.
• The introduction of new price to the customers was done by offering new amenities to the
passengers like increase in legroom by removing 2 rows of seat thereby reducing the capacity
from 112 to 104 and also offering free drinks to the passengers.
• Braniff took the advantage of the situation and increased services in all routes which southwest
serves.
• With introduction of Braniff’s services and increase in price of southwest flight, cutbacks in
southwest flights reduced passenger count of southwest.
• To cope with the situation, southwest again decided to go for 60 days half-fare flights($13 one
way, $ 25 roundtrip) on their major routes during the weekdays after 8:00PM.
• Saturday flights were reintroduced and all weekend prices were reduced to half.
• The above measures resulted in 12% increase in passenger traffic.
Southwest’s attention towards other existing problems
• The major source of profit to southwest is through Dallas to Houston route.

• Southwest experienced loss through Dallas & San Antonio route as the major portion of the
market is occupied by Braniff.
• The numbers are as follows:
Southwest:
• No. of passengers: 17/flight
• No. of flights : 8
Braniff:
• No. of flights: 48/flight.
• To increase the number of customers Southwest Airline introduced a 60 Days-half-price on Dallas-
San Antonio route.
• The above measure resulted in increase in passenger to 46/flight.

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Case Study Summary - Southwest Airlines

Service: First Six Months

• The major source of profit to southwest is through Dallas to Houston route.

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