I. Current Situation
Following the Deregulation in 1978, a competitive price war ensued among the airline industry as a direct result of the new freedom for airlines to set their own fares as well as route entry and exits. This gave rise to the operating structure of the airlines as it exists today, consisting of the point-to-point system and the hub and spoke system. With this came the change of focus for major airlines to non-stop, cross-country routes in densely populated cities, which, in a regulated environment, would be profitable. This resulted in the obvious outcome of increased competition, thus lowering the average industry prices for non-stop cross country routes which were profitable. This caused operating costs to increase, narrowing the profit margins. During the mid 80's, acquisition led to eight airlines capturing a disproportionate share of domestic traffic. Due to a recession and increasing fuel prices in the 90's, bankruptcy and collapse were common to many carriers. As a direct result, new airlines were formed, and now position themselves as low fare, no frill airlines.
As a culture, American consumers seem to follow one obvious trend; the need and desire for maximum safety. This trend has seen a rapid rise in the wake of 9/11, and seems to show no sign of a decline. This can be further observed in the form of advanced airport/airline security measures and regulations.
In accordance with this, Southwest has always prided themselves on being the safest airline in the industry, adapting to the rapidly changing times. This has helped them soar over competition.
A. Industry
1. Industry Defined and Total Volume< ...