Southwest Airlines

Brief Introduction Airline industry hatful be split up into two sub-sectors. The first is conventional airlines such as American Airlines, United Airlines and Delta Airlines. These carriers have global air networks and serve both(prenominal) long- length and medium-distance routes. The second is let out- hail airlines such as sou-west Airlines and JetBlue, which mainly operate medium or short distance routes and only serve domestic clients. In today¡¯s competitive environment with high oil prices, most traditional airlines suffer huge losses while lost-cost carriers still put down sizable profits due to their unique strategy and pliant operations. southwestern Airlines epitomizes the business model of utter-cost airlines. Low approach and High Efficiency The most important asset of Southwest Airlines is its low operating cost, which is currently the lowest in the industry. Over the sometime(prenominal) thirty years air fare price has been retention going down and therefore a low cost structure places Southwest Airlines in a competitive advantage over its peers. It can price its fares at or as yet below industry level but still makes money. graph 1 compares its unit cost with other major carriers. Southwest Airlines¡¯ unit cost is only 8 cents per ASM, about 58% lower than Delta Airlines and 29% lower than JetBlue.

Given Southwest Airlines¡¯ low stage length, this cost saving is even more encouraging, signifying the companion¡¯s sound cost control. If we dig more deeply, we can compare Southwest Airlines¡¯ cost structure to that of JetBlue (Chart 2). Staff cost and fuel costs are the two largest expenditures. Due to winning oil hedging, fuel costs only account for 19% of Southwest Airlines¡¯ total expenditure while 29% of Jetblue¡¯s. In the high oil price environment, this cost savings translates into probative earning improvements. In the meanwhile, Southwest Airlines allocate more to staff costs, 40% of the total compared to only 26% of JetBlue. Higher employee compensations are respectable incentives... If you want to get a full essay, order it on our website: Orderessay

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