Southwestern Airlines: Business Model and Risk Analysis

This report analyzes Southwestern Airlines' business model, focusing on its low-cost pricing strategy, cost-saving measures, and operational efficiency. The report highlights the company's use of similar aircrafts to reduce training costs, fuel hedging to manage operational costs, and effective advertising through word-of-mouth. It also discusses the challenges and risks faced by the company, such as economic downturns affecting the number of flyers and the potential financial risks associated with fuel hedging. The report concludes by comparing Southwestern Airlines' model with those of other airlines and the challenges they may face in replicating the business model. The report uses two references from the provided sources.

Running head: SOUTHWESTERN AIRLINES
South Western Airlines
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Table of Contents
Answer to Question 1:................................................................................................................2
Answer to Question 2:................................................................................................................2
References:.................................................................................................................................4

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Answer to Question 1:
The airlines have mastered the low cost pricing model, which is sufficient as it is
highlighted by the financial results of the company. The cost savings for the company are
from the use of similar aircrafts to reduce the staff training cost as different models of
airplanes would create extra charges for the company to train the staff. The hedging of the
fuel in advance so as to reduce the overall cost of consumption of the fuel which is a major
operating cost and reducing the possibility of use of excess fuel by making minor changes
which have a significant impact.
This business model can be used by other airlines, however it would require
significant cost as initial investment for the other airlines. The company would need to
restructure its assets staff and all other policy which would require a huge amount of
investment. The company South western airlines is profitable with the current business model
and has its advertising being conducted through the word of mouth, the other airlines would
also need to significantly advertise the new change which they are offering which would
further lead to an increase in the initial investment. Thus, it is not feasible for other airlines to
mimic the business model of South Western Airlines (Goetz & Sutton 2017).
Answer to Question 2:
The risk which the company can face is the slowdown of the economy when the
number of flyers would reduce and the company would not be able to recover the operating
cost of operations. The frequent flights require frequent flyers and if the flyers reduce the
company would require to increase its fare which would be against the business model of the
company.

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Also the hedging of the fuels cost for years is a risky strategy as it is profitable when
the fuel cost increases, however if it decreases other airlines would be able to reduce cost but
not south-western airlines and is a financial and operational risk faced by the company
(Williams, 2017).

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References:
Goetz, A. R., & Sutton, C. J. (2017). US Airline Industry. Low Cost Carriers:" Emergence,
Expansion and Evolution, 199.
Williams, G. (2017). Airline competition: deregulation's mixed legacy. Taylor & Francis.