Compare and Contrast Essay on US Airlines: Southwest, Delta and American Airlines

Introduction

United States of America is considered as one of the revolutionaries in the world whenever airline is the subject of discussion. Over the years, growth and development in this sector has been achieved due to flexibility of micro and macro environmental factors for instance technology and changes in the way the aviation industry is operated. From inception of this industry in the USA dating back to 1903 when flying was never embraced and was considered costly to having more that 15 airlines operating both domestically and across borders, we can deduce that airline has emerged as the best means of transport offered in the country. In fact, travelling by plane is considered as a source of affluence and a showcase of political prowess.

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Among the benefits that expansion of this industry has achieved are creations of employment opportunities, contribution towards growth in Gross domestic product of the nation growing from between 4-5% and stimulation of manufacturing activities enhancing trade over borders. Swift transport of commodities across the borders has tremendously reduced the duration perishable commodities would take to be transported easing trade. However, after deregulation of the industry in the 1970s it is prudent to point out that recession that hit USA affecting the state of air travel. The industry experienced challenges during such periods and had to develop measures to stay in business. There were several airlines in the industry but a slowdown in economic activity was experienced and demand for air travel fell immensely thereby increasing the cost of tickets to a point that most travelers were not able to afford [ Forbes, Oct 11, 2016].

Pricing of Delta, America and Southwest Airlines

Back to the focus of study, from over 15 airlines available in USA, the point guy [website] released annual position of the best and worst airlines in the U.S. The ranking was based on timelessness, cancellation, pricing, and customer satisfaction, among others and posted a standing of different airlines. For the purpose of this report, notable rankings were:

• Delta airlines
• Southwest airlines
• American airline

Prices of different airlines are set based on the cost of production and expected returns on the total cost. Expected return is calculated from a budget forecast prepared using available financial information from past to present. This information should be verified by the books of accounts that reflect the true and fair vies of financial position of a firm at a time. Other factors like the freight capacity, destination, and cost of energy and overhead costs are also considered to determine the price charged by an airline.

Setting prices is very important since it will reflect to customer satisfaction and project on the future. Prices also affect demand considering the law of demand and supply that states, all other factors held constant, at higher prices, the demand is lower and at lower prices, the demand is higher. Higher demand and increase in usage of a particular airline means increase in profitability thereby enhancing expansion. It is the practice of different airlines to encompass different tactics in price controls and during price wars taking into account factors of the environment like economic and demography. The airlines above can be compared as,[ Renzulli, Mar 8, 2018];

Delta

Average price of a roundtrip flight is $413, average price per kilometer flown is 0.29 and share of on- time arrivals are 90.725%.

Southwest

Average price of a roundtrip flight is $415, average price per kilometer flown is 0.29 and share of on-time arrivals 87.17%.

American

Average price of a roundtrip flight is $398, Average price per kilometer flown $0.29 and Share of on-time arrivals 87.41%.

From the above mentioned prices, we will consider American airlines to have the lowest prices followed by delta airlines and southwest airlines having the highest price in the market .American airlines is therefore considered to have developed a niche where customers will frequently board due to subsidized prices to reach their destinations . The criteria that were considered to arrive at the above prices included average fare prices charged by the players on a daily basis for both peak and of peak seasons, the changes experienced over the year in ticketing prices and the cost per kilometer charged to passengers on the distance that they travel. Among other factors were number of times the airlines arrived on time, number of flights that were cancelled, baggage fees that were charged, customer satisfaction ranging from reservation, check inns, flight crew, inflight services, seat comforts, social amenities and the overall value. The data was verified from trusted sources [J.D Power, SkyTrax, U.S department of transport].

Route Planning of Delta, Southwest and American Airlines

Route planning is the working out of best possible route to travel that will minimize cost and wastage of resources like time and the manpower required to handle a particular route. Route planning enhances effective management and helps avoid wastage of resource hence effectiveness in operation. For a route to be effectively planned, the following factors are considered;

Demand forecasting; by determining and projecting the number of travelers to a particular destination, route plans can be made more effectively.

Connectivity at the hub; route plans will also be effective depending on the number of cross border destinations that are shared by the airline. Having several cross border interaction where the plane would land before taking another route will expand the technologies that are to be used for the purpose of planning.

Aircraft availability; number of flights available will determine whether an airline is able to venture into different of new destination.

Matching the competition; bringing competition into play, airline will determine the best cost effective route to follow so that they can maximize on the revenues. I would personally suggest that for effectiveness, airlines should try and venture into new markets that competitors have not identified rather than flooding the same market with minimum revenue.

Ranking the airlines in terms of the passenger capacity, American airlines are larger than delta and southwest airlines respectively. Therefore we will consider American airlines having a robust route panning structure than Delta and Southwest airlines. It is also important to note the fact that American airlines has a wider destination both domestically and over borders to China or Britain than these other airlines explain the value of work that goes in and about planning for the route to be used.

With American and delta announcing new routes for 2019, this will explain further the amount of resources that will be used to effectively plan for the route in order to yield favorable returns avid the cost.

Fleet Planning of Delta, Southwest and American Airlines

Fleet planning is the determination of planes that operate or fly within a certain route. This process is important for long term decision marking especially those results that would impact on planning and operation. This decision has significant impact on the ability of an airline to service routes profitably. A new airline that is to be introduced to a certain route will utterly be assessed on its ability to contribute to the general profitability of the airline and therefore robust evaluation is well thought-out. The following factors are considered before a fleet is included;

Forecast of expected traffic demand; this demand is determined by the number of passengers flying a particular route. If high then it means the fleet will be large and vice versa.

Planning on the time that is use to load a particular flight to a destination will also determine the kind of fleet that is required to manage that particular route

Productivity of an aircraft, if the output of an aircraft is high the results will be an increase in the number of aircraft to be acquired due to an increase in revenue. It will therefore mean a higher fleet managed.

Revenues received from a particular fleet has also to be measured against cost to determine adjustments that are to be made in order to establish and achieve the best mix of fleet for effective management.

When ranging airline on the basis of fleet management American airlines comes first followed by delta airlines then southwest as discussed below;

Americana airlines

This is the first ranked airline when it comes to fleet with over 950 aircraft. The airline is part of worldone alliance and flies 95 domestic destination and over 95 international destinations in 55 countries. It has agreements with other 30 airlines like Cathay Pacific. Most of the fleet consists of Airbus and Boeing planes with a mixture of Embraer and MCDonnel Douglas aircraft. Most of the flights are narrow bodied with the wide bodied Boeing being part of the fleet.

Delta airline

This is the second largest airline in terms of fleet with over 850 planes. They are a member of Skyteam alliance and have created solid partnerships with over 22 airlines as well; they own several Boeing series and MCDonnel douglas aircraft.

Southwest Airlines

This is the third largest airline according to our study, they own over 600 planes currently that fly over 90 destinations in above 30 states. They are the largest owners of Boeing series in the world that cover for the destinations.

Demand and Supply for Delta, Southwest and American Airline

Macro economical factors have always played key and major roles on the manner in which demand is forecasted in the airline industry. Ranging from economic situations in a country to political and foreign exchange rate factors to state but a few of the determinants. Airlines must therefore predict their demand effectively in order to avoid losses as it is a multimillion investment and investors should expect return on investment.

The main determinants of demand for airline are business travelers, leisure travelers, goods market and mail transport with business travelers accounting for high demand. However, demand for airline is also closely linked to the demand of other goods and services [Wing R. 2016, 512]

Supply of airline is the capacity to provide more space for travel needed by the passengers. Supply is determined by a number of factors that include;

The number of aircrafts available; the larger the number the higher the supply and the lower the number of planes the lower the supply

Frequency of the travel; the higher the frequency the higher the supply of aircraft

Number of routes and number of airports available; high number of routes and airports available for travel means a higher supply

From general theory of demand and supply [ Dutt, A.. 2006, 319,336], we study that other factors held constant, demand has an inverse relationship to price and that at higher prices, the demand is lower and at lower prices, the demand is higher. American airline has a lower price followed by Delta and then to Southwest airlines. It therefore means that the demand for these airlines will range from high to low in the order provided and that most customers prefer to use American airline as compared to these others.

From the study of fleet panning on this report, it is discovered that American airline has higher number of planes followed by Delta and Southwest airlines and therefore in relations to supply, factoring the determinants of supply [Joo, S.J& L. Fowler .K. 2014], it will be more prudent to deduce that the supply of Amer...