Thursday, May 28, 2009
Woe the airline that convinces itself that an LCC is not a competitor
Southwest will begin service to Milwaukee in the fall. Milwaukee hometown airline, Midwest Airlines, says that its focus on the business segment will insulate it from Southwest as it has a different customer base. This is basic management theory. 2 companies may be in the same industry and market, but if they target different customer segments then they will not get in each others way. However, the airline industry does not have such distinct customer segments; they are diffuse and overlapping. Therefore, Midwest's belief that Southwest only targets leisure travel and discretionary income may come back to haunt them. It is dangerous to assume that a competitor is focusing specifically on a different customer segment than one's own. Southwest has a strong business travel focus at a competitive price with a wide-reaching network. Midwest may also have a strong business focus with different products than Southwest's. Time will only tell who can win attractive market share and profit.