Southwest Airlines Harvard Case
Problem Identification
On February 1, 1973, Braniff International Airways announced that it was introducing a 60-day, half-price sale for flights between Dallas and Hobby, which is Southwest Airlines’ only profitable route. Southwest needs to determine how to respond to this threatening strategic pricing move by Braniff in order to continuously stay ahead of their losses, and possibly reduce or eliminate it further for that operating year.
Situational Analysis
3Cs: Competition Before Southwest was established, two airlines were servicing the geographic market - Braniff International Airways and Texas International (TI) Airlines. Though both provide intra-state transportation between the four fastest growing cities in Texas, they only “represented legs of much longer, interstate flights.”1 Services were, therefore, very poor for these routes as both focused primarily on their interstate flights. As such, an opportunity arose for Southwest from the stark and growing dissatisfaction of customers. At that point, Braniff held 86% of the market.
Braniff International Airways As a carrier, prior to Southwest’s entry, Braniff held the most Dallas-Houston route traffic, averaging 483 passengers per day in each direction. However, “there was so much interline traffic that most of the seats were occupied by [interstate passengers].While [they] had hourly service, there really weren’t many seats available for local passengers. People just avoided flying in this market.”2 In addition to this, its reputation for punctuality was very substandard that it was commonly known as the “World’s Largest Unscheduled Airline.”3 Braniff’s image in 1971 has changed from being fun, glamorous, and exciting to “a subtler, more conservative style”4 as they reduced advertising budget to $4 million, from more than $10 million in 1967. In 1967, Braniff serviced their greatest average number of daily local passengers of 416 out of 483 passengers (86.1% of the market) with only one
On February 1, 1973, Braniff International Airways announced that it was introducing a 60-day, half-price sale for flights between Dallas and Hobby, which is Southwest Airlines’ only profitable route. Southwest needs to determine how to respond to this threatening strategic pricing move by Braniff in order to continuously stay ahead of their losses, and possibly reduce or eliminate it further for that operating year.
Situational Analysis
3Cs: Competition Before Southwest was established, two airlines were servicing the geographic market - Braniff International Airways and Texas International (TI) Airlines. Though both provide intra-state transportation between the four fastest growing cities in Texas, they only “represented legs of much longer, interstate flights.”1 Services were, therefore, very poor for these routes as both focused primarily on their interstate flights. As such, an opportunity arose for Southwest from the stark and growing dissatisfaction of customers. At that point, Braniff held 86% of the market.
Braniff International Airways As a carrier, prior to Southwest’s entry, Braniff held the most Dallas-Houston route traffic, averaging 483 passengers per day in each direction. However, “there was so much interline traffic that most of the seats were occupied by [interstate passengers].While [they] had hourly service, there really weren’t many seats available for local passengers. People just avoided flying in this market.”2 In addition to this, its reputation for punctuality was very substandard that it was commonly known as the “World’s Largest Unscheduled Airline.”3 Braniff’s image in 1971 has changed from being fun, glamorous, and exciting to “a subtler, more conservative style”4 as they reduced advertising budget to $4 million, from more than $10 million in 1967. In 1967, Braniff serviced their greatest average number of daily local passengers of 416 out of 483 passengers (86.1% of the market) with only one