A Discussion of Three Core Competencies in the Airline Industry Essay

During the past few years the airline industry has had its shares of ups and downs as the economy has fluctuated, specifically in regards to jet fuel prices. Southwest Airlines has stuck by their core competencies that provide it a competitive advantage in certain areas and for certain customer segments. This paper will discuss three key core competencies the reduction of operating costs and improved efficiency, human resource management, and company culture. These core competencies will be weighed against the companys financial results and compared to its leading competition throughout the industry.Core Competency 1 Reduction of Operating Costs and Improved EfficiencyOver the years the airline industry has taken many financial hits and had had to continually try to maintain sustainable growth through rough conditions. Southwest Airlines has continued to implement several core competencies that have placed them on par and above many of its major competitors. One of the core competencies in which Southwest has succeeded in is the reduction of operating costs and improving efficiency, primarily with reducing the costs of fuel Between 1991 and 2008, Southwest Airlines paid 3.5 billion below the industry average for jet fuel by using aggressive fuel hedging (Reed, 2008). Hedging is a type of gamble set against future prices of jet fuel if an airline, such as Southwest, believes that the cost of fuel will go up in the future they will work on signing a long term contract to lock in the current price. These contracts are typically signed for 6-12 months if fuel prices increase, the company saves money, but if fuel prices decrease, they are now locked in at a higher rate and will lose money (Srinivasan, 2005). Successful speculation of future fuel prices has allowed Southwest to create a competitive advantage which allows them to set lower fare prices, without regards or worry to fluctuating fuel prices.Another key criteria in reducing the costs of operating and improving efficiency is point-to-point service, Southwest operates its...

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