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

Low-Cost US Airline - Southwest - Research Paper ExampleThis is chiefly because of the fact that Southwest origin hose has adopted various low-cost strategies such as Website reservations and ticketless travel, employee buyout programs, low disparagement 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 dreaded response in the domestic US market where sales increased considerably because of repeat customers who constantly enjoy the experience by travelling through Southwest Airlines. The company usually adds 1-2 new cities every(prenominal) year as part of an expansion and sustainable development strategy.After thoroughly reading the case, the detective has discovered the following three managerial and strategic issues that need to be addressed for betterment and sweetener of South wests business in upcoming years.The first major issue is increasing in oil prices in the international market followed by economic recession after the credit grate and a debacle of US subprime property mortgage scheme. It is worthwhile to mention that Southwest Airlines would have to cheek bleak scenario and an extremely challenging business environment in upcoming quarters of 2008 2009 because the higher bad-mannered oil prices increased inflation followed by the decline in real purchasing power of US consumers. Obviously, this later would lead to production and habit, 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 non be able to maintain its load factor, average fare revenue per customer and current direct 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.