Southwest Airlines (indonesian)

Assignment #7: Questions for Rapid Rewards at Southwest Airlines

1. Should Southwest save a few low-numbered boarding cards for its most frequent fliers? What is the key motivation for your opinion? What are the tradeoffs that Southwest must consider in making this decision?

2. Should Southwest allow its most frequent fliers that have missed their flight to take the next available flight with an empty seat or should these customers have to wait for the next available flight with an empty seat within the same fare class? What drives your decision?

3. What is Southwest Airline's value proposition? What are its sources of competitive advantage? How important are these advantage's economically?

4. Consider the economics of the airline industry. How important are frequent fliers to financial performance?

5. In what instances do you advocate firms offer tiered or differentiated service to its customers? What guidelines do you propose firms use in making this decision?

Rapid Rewards at Southwest Airlines Case Write-up

1. In my opinion, Southwest should not save low-numbered boarding cards for its most frequent fliers. First of all, that would go against the idea of having simplicity in its operations systems. If Southwest reserved their low number boarding cards for its most frequent fliers, the airline would run into complications with customer seating preferences or disagreements. This would cause the established simple system of Southwest to be ineffective if certain exceptions would be made for frequent fliers. Not only does Southwest stand for simplicity but also egalitarianism. It would be contradictory for Southwest Airlines to stand for equality while at the same time offering preferential treatment to its most frequent fliers. In order to continue to be "the best short-haul, no-nonsense, low-fills utilitarian airline" Southwest should not implement saving low-numbered boarding cards for their frequent fliers. A tradeoff for this egalitarian mentality is the loss of those frequent fliers who feel that their loyalty should be rewarded for preferential treatment. Airlines that offer first-class and business class seats have the potential to lure away customers who feel that an important requirement to them remaining loyal is to be given first priority in seats. Many customers would rather pay extra in order to get better treatment in compensation for the money they invest in flying frequently. If Southwest begins to reserve low numbers for their frequent fliers, they might end up not only experiencing a decrease in efficiency when it comes to boarding, but complaints from customers who chose Southwest strictly due to their "first come first serve policy".

2. In my opinion, Southwest should allow frequent fliers to take the next available flight with an empty seat versus having these customers wait for the next available flight within the same fare class. My decision is based upon the fact that an empty seat is already a sunk cost, and that way frequent fliers could be rewarded for their loyalty without having to go against their egalitarian mindset. It would also be more efficient in the sense that a flight has to depart despite the fact that not all their seats have been sold. Lastly, customers who had missed their flight would not have to wait extra for an appropriate flight which matches their fare, which could in-turn reduce the amount of complaints the airline experiences about restricted fares preventing them in reusing their ticket. If Southwest begins to allow their frequent fliers to go sit in an empty seat, they could gain a competitive advantage against those airlines that impose service charges on top of letting passengers use their ticket on a later flight.

3. Southwest Airlines have a vast amount of sources, which contribute to their competitive advantage. Firstly, Southwest is more affordable because they brand themselves as a short-haul airline. By only offering short-duration flight times, Southwest Airlines are able to cut many of their service costs, an example being the absence of meals. Southwest chooses to fly to locations with smaller airports, giving them the competitive advantage of reduced congestion, reduced traffic delays and an increased convenience for customers who needed to fly to smaller towns remote from big international airports. All these factors allow Southwest to have the competitive advantage of having the lowest operating expenses per available seat miles. By flying one type of aircraft, Southwest is able to lower training costs for maintenance and flight crews. This gives the airline the competitive advantage of developing an increased knowledge about the technical difficulties that may occur with this specific model of aircraft, along with being able to maximize the utilization of the aircraft. By flying point-to -point as opposed to hubs, Southwest is able to minimize the issue of constantly connecting their flights. This gives the airline the competitive advantage of needing the use of reservation systems to coordinate smaller cities and hub cities. By framing their operations strategy on how race cars are serviced and fueled, Southwest was able to reduce their turnaround time by 50%, giving them the competitive advantage of having their turnaround time to be 30 minutes faster than the industry average. A "first come first serve" basis seating system gives the airline a competitive advantage regarding the efficiency of pre-boarding and boarding procedures. This way complications arising in seating are eliminated which allows for quicker departure time. Low-employee turnover has given Southwest the competitive advantage of allowing employees to build a relationship with passengers who fly frequently and saving costs of training programs. In addition, low-employee turnover has given Southwest the competitive advantage of securing a sense of trust with their employees, which increases work productivity by their employees wanting to work harder to the best of their ability and focusing on the shared sense of commitment Southwest enforces in its policy. This allows employees to enhance the overall operation by being able to share responsibilities and functions among one another, giving Southwest the competitive advantage of their employees being multi-functional, which lowers the cost which arises from having to employ people to undertake specific operations. The rapid rewards program gives Southwest the competitive advantage of giving their customers a fueled incentive to continue to fly with Southwest to receive free tickets and flights, which allows them to profit on sales with a smaller chance of seats remaining empty. As the leading airline with the fewest customer complaints,