Southwest Airlines 1996 Annual Report Download - page 10

Download and view the complete annual report

Please find page 10 of the 1996 Southwest Airlines annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 56

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56

10
We’re not a low fare airline, we’re THE Low Fare
Airline. The difference isn’t just in our prices; it’s in our
philosophy.
Southwest’s unique operating philosophy is to provide safe, reliable, friendly air service at the
lowest fare. That’s a Customer commitment and critically important in our market niche. We’re a
shorthaul carrier. Our average aircraft trip is roughly 400 miles, or a little over an hour in
duration. Ground transportation is our most significant competitor and it always has been. We
have to have low fares to compete with ground transportation regardless of what our airline
competitors charge. As a result, we’ve become famous for low everyday, every seat fares. Our
fare structure is also simple, which makes it easy for Customers to understand and, as a result,
lowers our distribution costs. And our Customers respond enthusiastically. In new markets, we
typically charge fares that are two-thirds lower than fares prevailing prior to our entry. The
result? Traffic increases three- and four-fold compared to levels prior to Southwest service. Of
course, lower fares mean more Customers and, in our market niche, more revenues. Our
sophisticated and fully automated Revenue Management System enables us to maximize
revenues while still keeping fares low and profits high. We also offer a frequent number of flights
in the shorthaul markets we serve, again, to meet the needs of our shorthaul business Customers
so they can travel when they want instead of when the airline wants. As a result of the
combination of low fares, high frequencies, and our Triple Crown service, we dominate the
majority of the markets we serve. We consistently rank first in market share in approximately 80
to 90 percent of our top 100 city-pair markets and, in the aggregate, hold 60 to 65 percent of the
total market share. The U.S. Department of Transportation studied our unique operating strategy
of low fare/high frequency service and the resultant surge in Customer traffic and termed it “ the
Southwest Effect.” We call it giving our Customers the freedom to fly.
THE BATTLE BEGAN WHEN WE WERE JUST A YEAR OLD. THE BIG AIRLINES TRIED TO RUN US OUT OF
TOWN BY ACTUALLY UNDERCUTTING OUR LOW FARES. IT WAS AN UNPRECEDENTED ATTACK, AND
WE RESPONDED WITH AN UNPRECEDENTED OFFER. CUSTOMERS COULD PURCHASE OUR HALF-PRICE
TICKET, OR BUY OUR FULL-FARE TICKET AND RECEIVE A BOTTLE OF PREMIUM WHISKEY. THE
RESPONSE WAS HISTORIC. OUR PLANES WERE FULL, AND, FOR A SHORT TIME, WE WERE ONE OF
THE TOP LIQUOR DISTRIBUTORS IN THE STATE OF TEXAS. THE PROMOTION KEPT US IN THE AIR AND
LOW FARES ALIVE. TODAY, THE OFFER STILL HOLDS. FOR THE LOW FARES, THAT IS, NOT THE FREE
BOTTLE OF LIQUOR.