Phase 1

MKTG 361, Section 1

February 4, 2021

Team 11
Danny O’Neill
Dawson Smith
Evyn Elliott
Kai Zimmerman
Kama Wojnar
Sam Pileggi
Introduction

This analysis report will provide an overview of Southwest Airlines and will aid our team in creating a
business plan to further understand the company and its competitors within their industry. Specifically,
this report will dive deeper into an overview of the domestic airline industry, identifying the marketing
challenges, developing a SWOTT analysis, and determining its three primary target markets.

Company & Industry Overview

Air operations today are one of the most capital-intensive industries in the world. Between requiring
unscathed safety records, billions of dollars in equipment and financing, and agreements with airports,
unions, fuel suppliers, and other agencies, the complexity and cost of air transportation serve as a
significant barrier for entry for new competition in the space. This has resulted in significant
consolidation among air carriers. Today, the top four airlines control about ⅔ of the entire US passenger
market (See Figure 1).

Although previously, the international capacity of the network was a boasting point, COVID has shifted
the marketplace. Today, a focus on shorter-haul customer satisfaction is critical; across the board, flights
are down more than 40% year-over-year, but the market for long-haul routes is even more impaired
(“COVID-19 and the Aviation Industry”, 2021). This has the added impact of disproportionately
impacting carriers with greater international exposure (Delta, United) and being relatively less harmful to
domestic-focused carriers (Southwest, JetBlue, Spirit).

As Southwest is one of the leading domestic air carriers in the United States, their differentiation from
peer carriers defines their successes in the industry. The most recent IBISWorld data shows Southwest
trailing slightly bigger competitors with marginally more market share, with Southwest at 13% and Delta
and American at 19.2% each (Figure 1). Although Southwest isn’t necessarily the largest carrier by
volume, relative success is upheld through industry leading customer satisfaction, as well as strong
competition on pricing and the breadth of their air network (Woodyard, 2020).

SWOTT Analysis

Despite Southwest having the lowest market share in the airlines industry, they are the largest domestic
airline by the number of passengers and scheduled domestic departures (Kennedy, 2021, Competitive
Landscape). By valuing equal opportunities and low-cost air travel, Southwest is able to keep their
promise to their trusted and loyal customers and employees. Delta and American Airlines, Southwest’s
biggest competitors, provide international flights in major cities where Southwest does not. As a result,
due to Southwest having effective cost control and being able to efficiently adapt to the social distancing
protocols, they are able to attract more consumers with higher quality service. Refer to Figure 2 for a
more in depth SWOTT analysis.

Strengths
Southwest is well positioned to maintain its place leading the domestic airline industry as the largest
low-cost carrier in the United States. The greatest strength for Southwest is the ability to provide low-cost
travel and the demand for low-cost travel has surged over the past five years (Kennedy, 2021). Southwest
has adapted quickly to the pandemic and implemented social distancing measures such as keeping the
middle seat unsold and all personnel and passengers must wear a mask.

Weaknesses
Southwest is positioned less attractively to target higher-income and business travelers than some
competitors. Due to the lack of pricing differentiations among fare classes, Southwest is only specialized
in offering its core competency offering and not premium or business-focused offerings.

Opportunities
Southwest is positioned uniquely to bounce back quicker and more fully than competitors due to the
nature of the core competency offering (largely domestic, single fare class). In an environment where
business travelers are conducting Zoom meetings, and more families are saving money than pre-recession,
Southwest is positioned well to capitalize on the new market requirements.

Threats
As a result of COVID-19, the aviation industry's revenue had a net loss of more than $82 billion
(Kennedy, 2021, Industry Performance). Likewise, the industry will also lose profits from the increase in
jet fuel prices. As prices are expected to rise, it will cause air fares to increase by adding surcharges
making consumers not want to buy tickets (Buchholz, 2019). Although fuel efficiency is improving, air
travel still accounts for 2.5% of total carbon emissions which has negative consequences on climate
change (Tabuchi, 2019).

Trends
Peer carriers like Delta, American, and United have all engaged in significant consolidation within the last
decade (Martin, 2019). Additionally, alternatives to transport like rail and electric vehicles are increasing
in popularity and practicality. Southwest, like other airlines, is attracting their customers by offering low
fares and flexible rates. Southwest customers are able to choose their seat on the plane. The market price
of jet fuel in this industry is expected to stabilize in the near future, allowing domestic airlines to generate
additional revenue.

Three Target Markets

As airline travel increases after the COVID-19 pandemic, Southwest Airlines is targeting generation X,
middle class families, and Millenials. Given that Southwest is a leader in the airline industry, its primary
focus is to attract customers who are not traveling for pleasure (Target Marketing, 2020).

Primary Market: Generation X

Married males and females are the most frequent flyers so far. About 53% of females and 47% of males
are the most frequent fliers. Nearly 63% of these males and females are married. Generation X is looking
for fast and efficient ways to travel. Southwest offers low fares with and is more flexible than other
airlines (Southwest Airlines Demographics, 2019).
Generation X plans on spending around 5,400 dollars on travel each year (Leonhardt, 2019). They are not
only looking to travel for comfort, they are also traveling for business (Leonhardt, 2019). Southwest
recognizes and seeks to capitalize on their low fares and flexible rates. This segment of airline travel is
often overlooked by other airlines. This allows Southwest to older generations looking to get somewhere
fast and efficient.

Secondary Market: Middle Class Families

With an average income of $48,500 to $145,500 per year Southwest tries to target families within this
income bracket (Bennett, Fry, and Kochhar, 2020). One of the main reasons behind this is the fact that
there isn’t any assigned seating on Southwest flights, meaning every seat is split up between boarding
groups A, B, and C. Another unique aspect of Southwest is that they offer family boarding first, without a
charge, appealing to the family market. If you are traveling with anyone six years or younger your family
gets to board right after group A so it is guaranteed you get seats together on the flight (Seemann, 2020).

Another promotion that Southwest does to make flying more affordable for middle class families is their
one bag policy. Southwest has a policy for every customer where you're allowed one free bag for each
flight. This makes traveling much cheaper than other airlines because you don’t have to pay a baggage
fee.

Tertiary Market: Millennials

Born between 1981 and 1994, the millennial generation from ages 25 to 40 years old ( Kasasa, 2021). As
a generation living through technology and social media, millennials are traveling wanting to share their
experiences with friends and family. Millennials aged 21 to 37 years old plan on taking roughly five trips
a year (Leonhardt, 2019). Although millennials are traveling more than other generations, they are
budgeting their travel efforts.

As individuals, Millennials are planning their trips responsibly. Millennials are easily influenced by others
sharing their vacation photos on social media. Overall in 2019 millennials planned to spend around
$4,400 on travel. In order to cater to this generation, Southwest provides low fares with regional and
international travel. This generation is a large target for cheap travel such as Southwest because of their
willingness to travel despite financial burdens (Leonhardt, 2019).

Summary
Southwest Airlines, despite being among the top four passenger air carriers in the United States, manages
to differentiate themselves by offering their core competency with an unmistakably effective value
proposition. Although the COVID pandemic has threatened the sustainability of passenger air operators
for many reasons, Southwest is poised for resilience and resurgence with the institution of COVID-safe
policies and market strategies to maximize current operations while preparing for a future in which air
travel returns to some form of normal. By maximizing customer value and satisfaction, especially in
regard to their Generation X, Middle Class Family, and Millennial target markets, Southwest can retain
their top-of-the-pack positioning in the domestic airline market. For any inquiries or follow-ups, please
direct email to or otherwise contact Team 11.
 References

Bennett, J., Fry, R., & Kochhar, R. (2020, July 30). Are you in the American middle CLASS? Find out
with our income calculator. Retrieved from
https://www.pewresearch.org/fact-tank/2020/07/23/are-you-in-the-american-middle-class/#:~:text=In%202
018%2C%20the%20national%20middle,(incomes%20in%202018%20dollars).

Buchholz, K. (2019, Sep 24). Infographic: Airlines Are Paying More for Fuel. Retrieved from
https://www-statista-com.ezproxy2.library.arizona.edu/chart/19452/fuel-price-and-fuel-consumption-by-airl
ines-worldwide/

COVID-19 and the Aviation Industry: Impact and Policy Responses. (2020, October 15). Retrieved from
http://www.oecd.org/coronavirus/policy-responses/covid-19-and-the-aviation-industry-impact-and-policy-r
esponses-26d521c1

Kasasa. (2021, Jan 13). Boomers, Gen X, Gen Y, and Gen Z Explained. Retrieved from
https://www.kasasa.com/articles/generations/gen-x-gen-y-gen-z

Katie Seemann (2020, December 01). Southwest airlines boarding process & groups [COMPLETE
Guide]. Retrieved, from https://upgradedpoints.com/southwest-airlines-boarding-process-groups

Kennedy, K. (2021, January). IBISWorld Industry Report 48111B. Domestic Airlines in the US.
Retrieved from IBISWorld Database.

Leonhardt, M. (2019, December 30). Millennials are making travel a priority more than previous
generations-that's not a bad thing. Retrieved from
https://www.cnbc.com/2019/08/30/millennials-making-travel-a-priority-more-than-previous-generations.ht
ml

Martin, G. (2019, July 28). Delta and United SURPASS American as largest carriers in The United States.
Retrieved February 07, 2021, from
https://www.forbes.com/sites/grantmartin/2019/07/28/delta-and-united-surpass-american-as-largest-carriers
-in-the-united-states/?sh=2607bb2e1058

Southwest Airlines Demographics. (2019). Retrieved from

https://talkbusiness360.com/southwest-airlines-demographics/

Tabuchi, H. (2019, Sep 20). “Worse Than Anyone Expected”: Air Travel Emissions Vastly
Outpace Predictions. The New York Times. Retrieved from
https://www.nytimes.com/2019/09/19/climate/air-travel-emissions.html

Targeted Marketing. (2020, Nov 28). Retrieved from

https://www.marketing-schools.org/types-of-marketing/targeted-marketing/#:~:text=Southwest%20Airlines
%20advertises%20itself%20as,short%20distances%2C%20and%20young%20adults

Woodyard, C. (2020, May 27). Before COVID-19 stopped the WORLD, Southwest was voted best airline
in this survey. Retrieved from
https://www.usatoday.com/story/travel/airline-news/2020/05/27/southwest-airlines-tops-new-j-d-power-cus
tomer-satisfaction-study/5261907002/
 Attachments

Figure 1: Competitive Market Share

(Kennedy, 2021, Industry at a Glance)

Figure 2: SWOTT Analysis