Southwest Airlines: SWOT Low-Cost Carrier Term Paper

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"Paying market prices for a third of its fuel needs could add as much as $600 million to its bill next year, according to an analysis by the federal Bureau of Transportation Statistics," almost twice "the $313 million profit that the airline made in 2004, and well above the $440 million analysts expect it to earn this year," meaning that Southwest's main competitive threat really comes from the end of its previous business strategy. However, "Southwest is planning for the day when things get even worse. The airline is already looking at 2010, when its fuel hedges completely disappear, leaving it with a fuel bill that would be $1.4 billion higher than in 2005 - an increase equal to 20% of its current revenue - if prices stay the same as they are today. Southwest's fuel costs now average $15 a passenger, according to a study by the federal statistics bureau that will be released this week. That compares with $9 a passenger in 2000." (Maynard, 2005)

However, Southwest is reluctant to raise fares, as it has branded itself as a budget airline, and it has no real perks to eliminate for passenger or staff.

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Some industry analysts suggest it has a little wiggle room with salaries, but will that lead to the labor disputes that blighted the major carriers?

Southwest seems wise to continue its branding as a low cost carrier. But in the face of JetBlue's potential use of its marketing strategies, and the end of its fuel protections, the airline may have to accept advertising on the side of its planes. JetBlue has done so on its 100-person carrier crafts from Boeing. For this industry pioneer to flourish, given the demise of the fuel-hedging component of its business strategy, and to capitalize upon the major carrier's current weaknesses, JetBlue may have to take a cue from its competitors.

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