Marketing Research Paper on What environmental factors have affected the types of costs in the airline industry after 2001?

The Marketing Environment

What environmental factors have affected the types of costs in the airline industry after 2001?

The external environment has not been that conducive for the airline industry after the terror attacks on 9/11. The rate of market growth plummeted for three years before regaining momentum. Terror threats and fluctuating oil prices due to uncertainties in the Middle East made air travel a bit expensive, putting off potential customers. Rising oil prices drove up the cost of fuels diminishing the profit margins of the airlines. The economic downturn of 2008 also affected the airlines badly. There is little differentiation between the airlines, which makes the competition stiff. This is because buyers are subjected to low switching costs. New entrants in airline travel face a great challenge competing against veteran and established brands. The new regulations put in place after the September 11 attack make it even more costly to conduct business. The alternative means of transport, such as trains, cars and buses are preferred more by customers in need of cheaper transport, and those that travel shorter distances. The alternative means of transport therefore tend to present a great challenge to the airline industry. Purchase of aircrafts is expensive as it requires specialized mechanics for each model. The workers of airlines are unionized and this compromises the revenues of the firm having to give in to their demands. From the look of things, the best tactic is to increase the market share. Most of the big airlines have tried this by having mergers.   

What specific tactics has Southwest deployed to blunt or exploit these environmental factors?

Southwest airline has focused on a market segment of flying point to point within America while utilizing the underused airports located near cities and metropolitans. This helps in keeping the fare low priced and in reducing the turnaround time in these airports. The airline has stopped offering meals to clients in order to save on costs. They have a fleet of only one model of aircraft in order to save on maintenance costs. Clients are never charged extra for their luggage, unlike in the other airlines. The prices are kept constant even when the demand for travel increases for the sake of reliability. Instead of hiking the prices, this airline increases the frequency of flights, which ends up earning extra revenues as would be the case if fare were increased. The passengers do not get preferential treatment or classes. There even is no assignment of seats.

How have these factors influenced Southwest Airline’s marketing strategy?

Southwest airline plans to increase its market share by 5% through acquisition of JetBlue airline. This will also enable it to diversify its destination to the Caribbean. The major clients of southwest airline are businesspersons and retirees. This firm plans to appeal to college students, young professionals and new retirees through rigorous advertisement on social networks and the mainstream media. It has the objective of increasing the offerings given to the current customers in order to increase loyalty and reduce their chances of crossing over. This may be done by having partnerships with other brands that provide shuttle services, cab services and hotel accommodation. This would help in increasing the revenue gained from clients while enriching their experience. The firm also aims to sell ancillary services to the travellers as one of the ways to increase revenue while minting a quality travel experience.