What's Happening at Southwest?

Southwest Airlines

Problem
How to respone to Braniffs one-half price fare furtherance for the Dallas-Fort Worth to Houston route from February through March.
Issues:
Can Southwest assume cutting fares for two months to meet Braniffs promotion?
What would be the effect on short-term and long-term market character if they dont cut prices or what is the effect on the Net Income (Loss) if they do?
What nonprice-based alternate(a)s to cutting fares are available?
How would the publicizing for a price cut or other alternative fit in with current promotions, ad and year advertising budget?
Industry/Market Analysis
Position Analysis:
oSouthwest is one of three major competitors in a Texas intrastate air service between Dallas-Fort Worth, Houston and San Antonio. Southwest presently (Feb 1st, 1973) is second in market share holding near 41.2% of the bring Market. (See Exhibit 1).
oSouthwest is considerably littler than both of the other competing airlines as far as planes (3 arrive compared to Braniffs 69 and TIs 45 total aircraft) which limited the amount of flights that could be increased in some(prenominal) one route.
Break/Even:
oThe initial B/E for opening operations was calculated at a $20 fare for 39 passengers per flight.



This meant Southwest had to produce norm revenue of $780 per flight.
oFor 1971, Southwest averaged only 17.6 passengers and for the first half of 1972 averaged only 26.6 passengers per flight. (Data taken from Exhibit 9, detailing passengers for regular and give the axe flights.)
oThis forced southwest to alter pricing in June 1972, raising fares to $26 one way / $50 bust trip. From Exhibit 8 we see that Operations and Maintenance in addition increased $18 so the revenue was needed was around $800 per flight. With the new fare, Southwest needed between 31 and 32 passengers per flight for a break even point (fare would be a mix of one-way and round-trip prices.)
Routes and Revenue:
oDallas-Houston:...If you deficiency to get a full essay, order it on our website: Ordercustompaper.com



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