Low-Cost US Airline - Southwest Research Paper Example | Topics and Well Written Essays - 1500 words

Low-Cost US Airline - Southwest - Research Paper Example   This is mainly because of the fact that Southwest airline has adopted various low-cost strategies such as Website reservations and ticketless travel, employee buyout programs, low depreciation costs and administrative expenses, cancellation of flights at profitable routes due to unfilled capacity and use of similar planes at other destinations with temporary higher load factor and other practices etc. Indeed, the company has received the tremendous response in the domestic US market where sales increased considerably because of repeat customers who always enjoy the experience by travelling through Southwest Airlines. The company usually adds 1-2 new cities every year as part of an expansion and sustainable development strategy. After thoroughly reading the case, the researcher has discovered the following three managerial and strategic issues that need to be addressed for betterment and enhancement of Southwest’s business in upcoming years. The first major issue is increasing in oil prices in the international market followed by economic recession after the credit crunch and a debacle of US subprime property mortgage scheme. It is worthwhile to mention that Southwest Airlines would have to face bleak scenario and an extremely challenging business environment in upcoming quarters of 2008 – 2009 because the higher crude oil prices increased inflation followed by the decline in real purchasing power of US consumers. Obviously, this later would lead to production and consumption, thereby resulting in closures of industries. The unemployment would increase, shatter consumer confidence and adversely affect the airline industry for which survival had become the sole priority in 2008. In short, Southwest might not be able to maintain its load factor, average fare revenue per customer and current operating expense structure in 3rd quarter onwards. There is the greater probability that demand for air travel would decrease that might lead to losses to Southwest. An economic recession is an uncontrollable factor because unemployment increases and consumption falls during the recessionary cycle. For instance, the contraction in business activities also reduces the demand for business travelling followed by a steep decline in leisure travelling because of high price elasticity.  Ã‚