Southwest Airlines Case Study

Problem Statement: Southwest Airlines has grown from an upstart in the airline industry and has grown over the years to become the airline serving the most U.S. customers with the most flights and seats serving 64 cities. The management team is presently contemplating whether the investment of $7.5 million for bidding the acquisition of slots and gates that the bankrupt ATA Airlines had vacated at LaGuardia terminal in New York City fits in to its planned growth strategy of increasing revenues in the face of rising costs, stiffer low-fare competition, and changing Customer needs and behaviors.

Analysis: The opportunity to start service out of LaGuardia airport presents unique combinations of challenges that include operational concerns, flight delays due to congestions and higher costs from landing fees and wages. The new technology systems in place at Southwest in 2008 should be used as an efficient tool to allow management to examine a wide range of strategic initiatives, such as the impact of new routes and changes in operating procedures, like the boarding process. Southwest can leverage its lessons learned of operating out of high congestion Philadelphia airport to mitigate flight delays that may occur at LaGuardia terminal. The company should also take advantage by bringing in veteran employees to the LaGuardia terminal operation to aid in effective operational management and tackle delay situations. The acquisition of 13 new Boeing 737 aircraft due for delivery in 2009 should allay any fears for the required added capacity for operations out of LaGuardia airport and underutilization of its aircraft fleet. The potential new service from New York can also take advantage of the code-sharing agreements of servicing customers from WestJet & Volaris. Finally the financial analysis on investment of $7.5 million for the bidding appears to be low risk as this move could generate enough revenue from eight flights daily to cover costs, merely by spending a