Duy Bui

Yifeng Chen
Sam Phillippe
Annie Gilbreath
Reece Weatherford
Our Situation

http://fortune.com/2015/09/23/southwest-airlines-business-travel/
Ps and Qs

Investors Customers Employees

Price Goes Up Happy Unhappy Unhappy

Quantity Goes Up Happy Happy Happy

Ps and Qs

Investors Customers Employees

Price Goes Up Happy Unhappy Unhappy

Quantity Goes Up Happy Happy Happy

How can we increase quantities?
What weve done: What we should do next:

All-new reservation Expand our operations

system to Canada
Latest 737 model - the Offer first-class fares
MAX 8 Sell with third party
travel sites
 Investment = Opportunity
Investment Opportunity

Cost: $500 million Save company millions of dollars in

loss due to system failure
Training 20,000 employees
Avoid canceling thousands of flights
Undergoing months of testing
Plan to recoup by 2020

Expect a contribution of $200

million in operating revenue in 2018
The New & Improved Reservation System

Improved fare Schedule variation

flexibility

Foreign currency
IROPS automation &
operation

Electronic Miscellaneous
Documents (EMDs) for
ancillary services
The 737-800 MAX

14% 40% 16 500 200

More fuel Quieter More miles in Aircraft on
Added seats
efficient engines range order
 The MAX-8 Effect
Investors Customers Employees
Lower fuel costs Quiet ride Reliable
Increased Entertainment New technology
customer Lower fares due Smooth
retention to lower costs transition : 80%
Lower New common parts
maintenance destinations with current
costs possible due to model
greater range
 Get in contact with
Expansion to Canada Oct.
2017
airports in each major
Canadian hub

Vancouver Toronto Decide which airports

Dec. to negotiate deals
Montreal 2017 with

Negotiate contract
with airports
2018

Budget:
Timeline: Advertise Southwest
$4,563,780 Nov. new flights to Canada
1 year 2018
(per airport)

Source: google images

Why offer First and Business Class?
Privacy
Network
Services
Company Policy
How much are First and Business Class Fares?

11.2x
Class Price
Economy $1,590
Business $5,736
Economy price (First Class)
First $17,730

3.6x
Economy price (Business Class)
 First and Business Class Effect

Investors Customers Employees

Increase in More options First class
revenue available seating when
Expansion of Possible for flying standby
market more people Opportunities
to buy to increase
salaries
Take Advantage of Travel Sites
Shareholder value/sales revenue ^^

$89.6 27% of our ticket sales are online

Take advantage to raise percentage

billion through other vendors

Competitive prices bring edge

in third
party ticket Small commission fee/competitive
prices
sales Benefits customers and shareholders
Third party websites
Channels for Communication
Investors Customers Employees
Send email once Announce through Keep them up to
Canadian contracts have new advertising date throughout
Expansion been negotiated campaign the process

Send email once Advertising and Inform before the

First and contracts have contracting with renovations began
Business Class been negotiated travel heavy firms

Send email once Will be notified Train ground

Online contracts have when visiting personnel on new
Marketing been negotiated booking sites booking avenue
In Conclusion...
CANADA

RASM
Revenue
FIRST THIRD
CLASS PARTIES
 BREAKDOWN
CANADIAN BUDGET
Fees per airport Per unit Total

Fee per U.S. bound Passenger $2.09 $131,670.00

Rate per international originating passenger $9.25 $582,750.00

Common Use Counter $15.00 - $5.00 $5760.00

Public Address System (per month/ line) $10.00 $3,600.00

Destination fee per passenger $20.00 $2,520,000.00

Annual Rental Rate $200.00 $720,000.00

Max.Gate Cost $300,000.00 $600,000.00

Total Costs per airport $4,563,780.00

(Calculations for one airport)

Budget for First and Business Class
Budget for Marketing with Third Parties
Delta Southwest

Sample flight price $1019.60 $542.00

Expedia price $924.70 -

% Difference 9.3% -

Cost to airline (1 fare) $94.90 $50.95 (expected)