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Comprehensive Case

- Niche operators like Southwest can survive without international connections if they keep operations minimal and do not expand too much. - However, the document notes that Southwest has recently announced some codeshare agreements, showing that even niche players recognize the benefits of alliances in today's industry environment where costs have risen and competition increased. - International alliances allow airlines to reduce costs through revenue sharing and promoting each other's flights.

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Xènia Bellet Navarro
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248 views

Comprehensive Case

- Niche operators like Southwest can survive without international connections if they keep operations minimal and do not expand too much. - However, the document notes that Southwest has recently announced some codeshare agreements, showing that even niche players recognize the benefits of alliances in today's industry environment where costs have risen and competition increased. - International alliances allow airlines to reduce costs through revenue sharing and promoting each other's flights.

Uploaded by

Xènia Bellet Navarro
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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2.

Some airlines, such as Southwest, have survived as niche players without


extensive international connections. Can they continue this strategy?

Yes, they can continue. Here are the possible things to consider this- 
 
 Niche operators can survive in an operational mode that does not attempt to expand and/or
modify their operations too much. As we know, when there is sufficient traffic on a route,
there is little need to have feeder or connecting routes for an airline to be  profitable. So,
Southwest and Alaska air can operate their businesses from isolated or smaller airports
without the need for hubs to make connections. 
 
They can avoid the costs associated with the transfer of bags to connecting flights and the
payment of overnight expenses to passengers who miss connections on bigger hubs. And
these airlines can overcome disadvantages from small-scale operations by targeting their
promotion to regional and niche groups and by running low-cost operations that charge low
fares. 

No. Nowadays it is essential for airlines to make international


connections in order to survive in the industry because of the need of
regulatory, costs and competitive factors. For instance, costs have risen because
oil prices have risen and more security measures are needed after the 9/11.
As a consequence; Airlines have stablished many alliances such as the
One world Alliance, the Trans-Atlantic Joint Venture, the AA-JAL Joint
venture, Star Alliance and Sky team in order to reduce operating costs.
Another example is the fact that international alliances enables the airlines
to sell and promote space on flights operated by each other, divide revenues, offer
lower prices and schedule connecting flights; which they cannot do by themselves.
It is important to mention that current consumers have the tendency and ability to
look for better prices in flights, airlines connections that make their journeys
shorter, destinations with checked luggage and so on. Thus, airlines work together
in order to cut costs and be able to satisfy the passenger’s needs.

Southwest is one of the very few airlines that are consistently profitable. There are
several reasons for this profitability and their model has been widely copied by
other low-fare carriers, particularly in Europe. Recently Southwest has announced
some codeshare agreements with WestJet of Canada and Volaris of Mexico. The
implementation of these agreements has yet to be completed. This does show that
even a niche player like Southwest recognizes the benefits of alliances. (LO: 2,
Learning Outcome: To comprehend why and how companies make foreign direct
investments, AACSB: Analytical Skills)
Yes...
 Possible to survives, as long as operations within the company are kept
minimal
 For example, Southwest possess a minimal number of aircrafts and engage
in marketing schemes such as ‘bags fly free’
 Smaller airlines succeed by keeping their airlines domestic

But...
 These companies show interest in flying internationally and engaging in
alliances

When there is sufficient traffic on a route, there is little need to have feeder or connecting routes for an
airline to be profitable.
Without the need for hubs to make connections, such airlines can operate from smaller/isolated airports.
They avoid the costs associated with the transfer of bags to connecting flights and the payment of
overnight expenses to passengers who miss connections on bigger hubs. Such airlines can overcome
disadvantages from smallscale operations by targeting their promotion to regional and niche groups and
by running low-cost operations that charge low fares. Conclusion. Niche operators can survive in an
operational mode that does not attempt to expand and/or modify their operations too much. Era Business
School, New AJ/ Ajay K Raina, PGDM

Southwest is one of the very few airlines that are consistently profitable.  There are several
reasons for this profitability and their model has been widely copied by other low fare
carriers, particularly in Europe.  Recently Southwest has announced some codeshare
agreements with WestJet of Canada and Volaris of Mexico.  The implementation of these
agreements has yet to be completed.  This does show that even a niche player like
Southwest recognizes the benefits of alliances.
No. Hoy en día es esencial que las aerolíneas hagan conexiones internacionales
para sobrevivir en el sector debido a la necesidad de factores regulatorios, de
costes y de competencia. Por ejemplo, los costes han aumentado porque los
precios del petróleo han subido y se necesitan más medidas de seguridad tras el
11-S. Otro ejemplo es el hecho de que las alianzas internacionales permiten a las
aerolíneas vender y promocionar espacios en los vuelos operados por las demás,
dividir los ingresos, ofrecer precios más bajos y programar vuelos de conexión,
algo que no pueden hacer por sí mismas. Es importante mencionar que los
consumidores actuales tienen la tendencia y la capacidad de buscar mejores
precios en los vuelos, conexiones de aerolíneas que hagan sus viajes más cortos,
destinos con equipaje facturado, etc. Así, las compañías aéreas trabajan juntas
para reducir costes y poder satisfacer las necesidades de los pasajeros.

Los operadores de nicho pueden sobrevivir si éste no intenta ampliar y/o modificar
demasiado sus operaciones. Estas aerolíneas pueden superar las desventajas de
las operaciones a pequeña escala dirigiendo su promoción a grupos regionales o y
realizando operaciones de bajo coste que cobran a tarifas bajas.

Pero en nuestra opinión, la compañía tendrá muchas dificultades para continuar


existiendo.
En primer lugar los costes se han incrementado durante estos años por el
aumento del precio del los carburantes y de los gastos en las medidas de
seguridad. En segundo lugar se ha ampliado enormemente la competencia con la
aparición de las compañías de low cost y de las rutas entre aeropurtos
secundarios.
La formula para compartir y reducir gastos y evitar competencias innecesarias
aprovechando rutas y aeropuertos ha llevado a la mayor parte de las compañías
aéreas a establecer alianzas entre ellas.
Mediante los vuelos y rutas compartidas incrementan su capacidad de oferta de
destinos y consolidan su presencia en el mercado. Ofrecen a los pasajeros las
ventajas de coordinación de vuelos, de remisión directa de equipajes y de
ofrecimiento de precios mas asequibles. Igualmente con mayores garantías en
cuanto a cambios, cancelaciones o reprogramaciones al funcionar como una sola
compañía.

Para mantenerse como compañía regional debe combinar los vuelos domesticos
con la posibilidad de ofrecer conexiones internacionales mediante alianzas con
otras aerolíneas. Éstas también incrementarían sus ventajas al aprovechar su
despliegue en la region para aumentar sus destinos

Southwest se ha decantado por esta estrategia y ha anunciado algunos convenios


de código compartido con WestJet canadienses y Volaris de México. Esto muestra
que Southwest reconoce las ventajas de las alianzas.
Niche operators can survive if they do not try to expand and/or modify their
operations too much. These airlines can overcome the disadvantages of small-
scale operations by targeting their promotion to regional groups or low-cost
operations that charge low fares.

Today, airlines establishing International routes are essential to survive in the


industry due to costs and extensive competition.
Oil costs have increased over the years, and that means higher airfares. Interline
alliances have made it so that all those airlines can sell and promote wherever they
want and with connection. That makes them more powerful and more present in
the market. If Southwest were to continue with this strategy, it could lose a lot of
customers.

Recently, it has announced some codeshare agreements with Canada's WestJet


and Mexico's Volaris. This shows Southwest recognizes the advantages of
alliances.

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