ESB 4: Southwest 1993(A)

ZLei

Economics of Strategic Behavior

Case Southwest Airlines 1993(A)

- What are the key elements underlying Southwest’s success?
- How are these related to growth strategy?
- Which of the three expansion alternatives – Phoenix-Detroit; Dayton or Baltimore would you recommend?

I guess everybody knows how Southwest Airlines makes its victory.  Started in Dallas. Dominated its hubs.  Acquired similar local-focused airlines, like Morris Air, co-founded by the founder of JetBlue.  Then filled routes in between them, Chicago, St. Louis…

1. Efficiency
a. Focus.
i. Short distance.
ii. Roll out strategy. Start small ad grow from hub to hub.  Dominate centers, then fill in.
iii. One plane model – easy to maintain.
b. Max Load, low price.  60% flights and 80% passengers of the airports it dominates.
c. 15-20 min turn-around. Most useful when a lot of planes come in.
d. articular segment.  Geography, non-biz; low-end.
Note: Delta and People Express were also extremely profitable when they operated in a very similar way, in Atlanta and Newark, respectively.
2. Customer services – friendly
3. Strong culture – very low turnover.

Expansion Options:
1. Detroit-Phoenix:
Revenue: (3.25 + 0.25) * 2 = 7 hours.  65% * 2 or 4 round trips * 137 (passengers/plane) * $250 = $90,000
Cost: Gates $3 /passenger * 2 *4(RTs) *90ps = $2160
  Turnaround: $2000
  Fly: 7.25 *4 *3200/hour = 83000
OI: 90000 -83000 – 2160 -2000 = $2500
2. Dayton: Add on Chicago. Scale at airport – 30 flights.
3. Baltimore: New hub. More planes needed.

What happened? ;)

Greenwald warning: If you say something intelligent in soft tone, you are in trouble (facing my pushy challenging)

[此贴子已经被作者于2007-3-25 11:46:25编辑过]