I didn't mention it here on 

BNET when it was first announced

that Southwest was planning to buy its way into New York's
LaGuardia airport, but now that the slot sale has been confirmed, I
thought it would be worthwhile to discuss how they might be used.
There are a few different ways they could go here.

The first question is whether this is really just a beachhead into a

much larger presence in New York. Some think that's the case, and if
so, Delta, JetBlue, American, and Continental should be concerned.
I tend to think this is highly unlikely. New York is a very competitive
market, and its three main airports are operating near capacity.
Without an airline failure or an acquisition, Southwest is not going to
be able to develop a very large presence.

More likely is that this is just a very important spoke for the airline.
Southwest does a great job of getting people in Texas, California, and
many other places to just about everywhere they need to go in the US.
But when those people need to go to New York, they have to fly
someone else unless they want to fly into Islip on Long Island and
take the train all the way in to Manhattan. That's just not practical for
a business traveler in any way.

So, by going into LaGuardia, Southwest can now fly everyone that is
loyal to the airline to the most convenient airport in New York. It can
also help the airline to get corporate agreements. Many businesses
have such a large business in New York that they need a corporate
agreement with someone else for that business. The often precludes
Southwest from getting comprehensive corporate business, because
the businesses are required to give a certain amount of flying to the
contracted airline in order to keep the deal. If Southwest can get
people to New York, it enables them to earn more business.

Now the question is, where will they go? Southwest has only acquired
slots for 7 roundtrip flights a day, so that's not much with which to
work. My guess is that they'll throw all of those into Chicago/Midway
where they can then have a very healthy business schedule as well as
connections throughout the country. Florida is too much of a leisure
market and doesn't allow for connections elsewhere, so that doesn't
make sense. A couple of flights to Baltimore might work in that it
feeds the rest of the system, but there isn't enough local traffic there to
support a big operation.

Houston is always a possibility for a couple flights since that would

get people directly into the airline's home state, but there are still
restrictions preventing them from flying nonstop from Dallas/Love
Field, and Austin and San Antonio are just beyond the 1,500 mile
perimeter rule at LaGuardia.

For years, Southwest Airlines has been experiencing stable costs, low fares and traffic
stimulation. However, the latest changes in the marketplace (See Exhibit 1: SWOT Analysis),
including the higher energy costs and the entrance of new low fare/cost carriers are threatening
the future of the airline. As a result, LUV needs to decide whether or not to acquire the slots
and gates from the bankrupt ATA Airlines at LaGuardia (LGA) terminal in New York City
(NYC) in order to expand its capabilities.
Before to select the proper alternative, three alternatives were analysed and evaluated under
four decisions criteria: customer experience, cost, growth rate / market penetration and ease to
implementation (See Exhibit 2: Factor Analysis). Between all the alternatives, it was suggested
that Southwest Airlines enters to New York City by bidding the slots and gates at the LGA (See
Exhibit 3: Alternatives Analysis). This alternative sustains the challenge of changing the
customer experience which means adding more flights from and to the East; furthermore,
entering to new markets will reinforce “the power of the network” through LGA. At the same
time, this decision will allow signing more code-sharing agreements with other airlines flying
to international destinations and offer new products and services to LUV customers as loyalty
rewards, in-flight internet, onboard duty-free purchases, etc.; as a result of this, it will increase
passenger’s insights and experiences by flying with Southwest Airlines. Nevertheless, there is
potential risk by selecting this alternative, in the recent years the energy prices has had a huge
increase affecting costs, fares and even capacity needed, however Southwest Airlines has been
able to hedge fuel for decad...

... middle of paper ...

...e airport management. In the case of winning the slots and gates, LUV would negotiate the
gates and time slots with the airport authorities, start the recruitment and relocation process of
actual and new employees to LGA. Accordingly, the airline will need to use its IT department a
new infrastructure that will hold the latest updates in terms of code-sharing, booking, schedule,
online shopping, etc., to serve actual and potential customers. In essence, once the project is
complete, it will important to evaluate how successful the implementation process was and how
the service can be improved going forward. Finally, this process will take 14 months and once
the strategy has been implemented, Southwest will be able to maintain and improve its low fare
position, demand and customer service experience and the technological infrastructure in
commercial airline industry.