Economic: INFLATION RATES

Concept: Inflation rates

Macro Trends: The Center on Budget and Policy Priorities CBPP (2022) indicates that the effects of the COVID-19 pandemic worsened the economic problems of most nations from across the world. It is important to note that to a large extent, the rising crude oil cost and supply chain disruptions resulted in the sustained increase in the cost of goods and services. Many industries, including the airline industry, were negatively impacted by consumers reduced purchasing power.

Trend/Issue: Consumers reduced purchasing power depressed certain segments of the industry, such as leisure travel. The problem was compounded further by high jet fuel prices which resulted in higher operational costs for most airlines. It is for this reason that Holzhauer (2022) indicates that ticket prices are near all-time highs at the moment.

Impact for Corporation: An increase in operating costs has resulted in reduced profitability for the corporation (Singh and Shivdas, 2021).

Impact for Business Unit: Leisure travel has been the worst hit segment. Going forward, this could result in weak holiday demand as we head into the festive season.

Conclusions: The industry as a whole is likely to rebound as governments from across the world put in place measures to rein in inflation. However, it would be prudent to note that operating costs are likely to prove difficult to contain given present geopolitical concerns impacting the supply of jet fuel.

Demographic: INCOME DISTRIBUTION

Concept: Income Distribution

Macro Trends: According to Chancel, Piketty and Salez (2022), data from across the world paints a grim picture in as far as income distribution is concerned. In the U.S. for example, income inequality has been on an upward trend over the last 40 years (Chancel, Piketty and Salez).

Trend/Issue: Impact distribution affects certain aspects of airlines operation including, but not limited to, airfare pricing. For instance, according to Jou, Lin and Wu (2009), passenger income distribution changes trigger airline ticket pricing adjustments.

Impact for Corporation: Income distribution shifts impact air passenger demand. The World Bank (2022) indicates that the ongoing COVID-19 pandemic has exacerbated global income inequality, partly reversing the decline of the previous two decades. To maintain customer demand and prevent its market share from shrinking, Southwest Airlines may need to revise airfare which could impact its profitability.

Impact for Business Unit: Focus may shift to enhanced...…lowest possible price. In the words of the authors, to reduce their costs, buyers bargain for higher quality, greater levels of service, and lower prices (Hitt, Ireland, and Hoskisson, 2017, p. 60).

Trend/Issue: Thanks to the establishment of various online ticketing enterprises, customers now have access to competitive rates from various airlines.

Impact for Corporation: Being a low-cost carrier, Southwest Airlines is able to stay competitive in this realm.

Impact for Business Unit: Southwest Airlines is likely to continue doing well in the Wanna Get Away and Anytime fare classes.

Conclusions: Buyer power remains strong in some categories such as business class.

Bargaining Power of Suppliers: COST OF SWITCHING FROM ONE SUPPLIER TO ANOTHER

Concept: Cost of switching from one supplier to another

Macro Trends: Suppliers use various means to exercise power over entities operating within a specific industry.

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