Introduction to International Business

Introduction to International Business

admin / December 27, 2018

Introduction

Southwest Airlines Co. is one of the largest passenger air-carriers in the United States. This company started its operations in the year 1971 with 3 Boeing aircrafts, whose operating points were Dallas, Houston and San Antonio cities.

By the year 2008, Southwest Airlines Co. had grown very large, as it was by then operating more than 500 Boeing 537 aircrafts. As it has been revealed, this company one of the major economic boosters in US, since it contributes about 30% tax revenue made from the airlines industry.

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More so, Southwest airlines Co. offers about 27,000 employment opportunities in the United States. One of the main advantages experienced by this company in terms of cost is that, it mainly relies on Boeing 537 aircrafts (Brown, 2010). This paper presents analysis of the legal issues facing Southwest Airlines Co.

As reported by Morrison & Winston (2006), government policies in the airline industry have largely been impacting on the Southwest operations.

With the establishment of competition law among business organizations, Southwest Airline Co. has been largely limited to form strategic alliances with other companies. Since the competition law considers market dominance through mergers and acquisitions as unhealthy practices, the company has for long been operating solely.

According to Belobaba (2009), the new law on competition considers monopolies as illegal, in which business organizations should limit their alliances to avoid market dominance. Certainly, this Act on Competition has been quite significant in the operations within the Southwest Airline Co in order to avoid unnecessary fines due to violation of the competition law.

Fiscal policies like high tax rates on the airline industry have impacted a lot in the industry. As a result, high air transport charges, as well as reduced salaries and wages in the airline industry have been experienced in the industry.

This has largely impacted negatively on Southwest Airlines Co since it was necessitated to retrench its employees as a result of the high taxes imposed by the government (Belobaba, 2009).

However, the government has credibly improved the airline infrastructure to facilitate efficiency in the industry. Particularly, the government has established sophisticated airports and hotel services to ensure provision of quality services in the industry.

Security systems have as well been reinforced to ensure safe air travels and counter terrorism successfully. According to Don (2007), the massive reinforcement of security in the airline industry has scarped off any fear that people had previously in the airlines as a result of terrorism. This reinforcement of security has created larger market for the services offered by Southwest Airline Co, resulting into increased profits.

It is important to note that, the company’s revenues declined by 40% after 09/11 attack, which resulted into huge losses. On this basis, the reinforcement of security in the international airports within US has facilitated increased income in the Southwest Airlines Co (Brown, 2010).

Conclusion

As it has been observed in the Southwest Airlines government and legal policies have largely been impacting its operations. With the establishment of the competition law, the company is largely limited to form mergers or acquire other companies to enhance its high market share through dominance and monopoly power.

More so, fiscal policies like high taxes imposed in the airline companies have adversely affected the Southwest Airlines. Further, the reinforcement of security in the airports by the government has impacted positively in the Southwest Airlines Co.

References

Belobaba, P. (2009). The Global Airline Industry (Aerospace Series). Washington, DC: Wiley Publishers.

Brown, J. (2010). The Southwest Airlines’ Strategy. International Airlines Journal, 72(5): 342-357.

Don, P. (2007). Southwest Airlines Trends after 2009 Crisis. Business Quarterly, 21(7): 57-83.

Morrison, S. & Winston, C. (2006). The Trends in the Airline Industry. San Francisco:
Brookings Institution Press.

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