Solved: Effects of the General Environment for Southwest Airlines Political conditions

Effects of General environment for Southwest Airlines – PESTEL

PESTAL analysis is used to assess the macro-environment of Southwest Airlines.

Political and Legal conditions

The airline industry is widely impacted by regulations and restrictions related to international trade, tax policy, and competition. It’s also impacted by issues like war, terrorism, and the outbreak of diseases—such as Ebola. These issues are political. As a result, they require government intervention. The Airline Deregulation Act of 1978 removed all regulations governing the airline routes, airfares, entry, and exit of commercial airlines. After the Airline Deregulation Act, Southwest Airlines entered the larger passenger market with plans to start providing interstate service in 1979.

Southwest Airlines domestic operations are significantly influenced primarily by Federal Aviation Administration (FAA). Let’s take for instance, the ‘Wright Amendment’ of 1979. This amendment prohibited the airline to fly non-stop or provide a through-plane service from Dallas Love Field to any other than 7 permitted cities. Recently, a law has been passed to repeal the Wright Amendment to be in effect in 2014.

Southwest Airlines has on numerous occasions won legal battles against rivals in the US courts

Economic conditions

The Airline industry is severely affected by fuels costs. A rise in the price of oil has a major impact upon Southwest Airlines profitability. The future trends of oil prices are volatile and the fuels cost account for almost 40% of airlines operational costs.

Due to huge economic downturn, the demand of the customers’ for air travel has reduced due to cuts in personal and business expenses across the US. However, the consumer demand for low-fares no-frills air travel has remained undeterred and indeed undergone growth (Southwest, 2010).

Social & Cultural Conditions

The social conditions include: Beliefs, Values, Attitudes, Life style, Cultures etc. Social conditions are dynamic and can change the demand for a product. Southwest Airline has a strong commitment towards customer service. The overall viewpoint of Southwest Airlines’ is that the company is ‘in the customer service business — it just happens to fly airplanes.’ The company has a very good hiring policy. It  hires a customer service aspirant for employment based on their attitude, regardless of experience. It takes care of its employees well and ensures that they are driven with values and beliefs of the airlines industry.

Technological Conditions

Technological developments have both created new opportunities as well as threats for Southwest Airlines. The emergence of information and communication technologies has enabled robust communication and subsequently provided customers with an alternative for frequent travelling.

It has also enabled Southwest Airline to expand its outreach directly to consumers through e-commerce. For instance, Southwest Airlines was able to introduce ticketless travel through the use of technology.

Environmental conditions

The aircraft’s emissions have a higher impact to the environment as they travel several kilometers above the surface of the earth. Aircraft emissions can cause significant damage to the atmosphere. Secondly, the community noise is another major environmental concern. Noise from the air traffic is not the only reason for irritation and an unpleasant experience, but it also has serious health issues.