Solution to Southwest Airlines 1993 expansion.

From our point of view, the most important factor to Southwest mastery is that it carefully selects the type of markets they enter. Southwest typically chose only real dense, short and medium haul market, which allow Southwest to sweat economies of density and maintain a fleet comprised of a individual(a) aircraft type, thus minimizing maintenance, spare parts inventory and pilots training costs. In entering new markets, Southwest chooses airports that are readily accessible, sooner than large, crowded international airport, which saves median(a) of 15% to 25% of average the flight time and thus, saves operating costs.

Southwest selects new markets where air expire has often dwindled with too few flights as a issuing of uplifted fares and poor services. When they enter the market, they legal injury against ground conveyancing as much as against existing air services. Fares cut down by as much as 80%, piece number of passengers increases sharply. They can usually quadruple or quintuplet the number of passengers on a particular route. At the actually least, they can double it. This action often triggers a price war, which in turn benefits customers and increases traffic in that area, and expands the market tear down further. Early in the life of the creation, load factors are high and get hold of outpaces supply.



As it adds more services, eventually supply and demand start to balance, average load factor stabilize at about 65%.

We analyzed the pros and cons for each option. At runner glance, from those qualitative facts it seems that Dayton market is the most attractive one. However, market entry has to meet the condition, that is, expected post-entry profits must exceed the change posture costs. Therefore, the post-entry profitability plays the biggest role here. Profitability is determined by third major factors: market demand, low costs, and post-entry competition.

First, let us look...

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