Southwest airlines Assignment Example | Topics and Well Written Essays - 500 words

Southwest airlines - Assignment Example To understand the results of the deregulation, it is vital to apply Porter’s Five Forces analysis of the company. The extent to which rivalry thrives usually affects the general profitability of the airline. The concentration of the market is a major issue which affects rivalry. Routes, hubs and airports operated by several carriers experienced strong rivalry Ahlstrom and Bruton (2009). Factors contributing to this rivalry include high and fixed costs, price wars, excess capacity, easily accessible prices through the Internet and low differentiation. Among the competitors of Southwest Airlines include AMR Corporation, Air France-KLM, United Continental Holdings, Inc., British Airways Plc, Delta Air Lines Inc., and Continental Airlines, Inc.. The competitors have seen the Southwest Airline’s fare prices and prit margines godown as they have cut a share of the company’s market. During the first about ten years of deregulation, the airline industry experienced a lot of entrants with 22 new airlines being established according to Desai, Patel and Quach. This entrance of new airlines implied that the airline industry was to experience inefficient economies of scales hence couldn’t support a lot of new entrants. Economists predicted fewer barriers to entry in the market and new firms were likely to organize airlines and new assets to new routes. However it was later observed that there could only exist eight major carriers. The increase the major carriers to eleven would lead to eight of them filing for bankruptcy, disappearing or merging. The various substitutes to air travel include road transport, trail transport, and water transport. However, the significance of trains, ships, and buses as airline substitutes has significantly declined over time. Exchanging costs between air travel and others substitutes are literally low according to Duggan (2003).