The rule making was shifted to the FAA and it had control of the air routes, the airline safety and air traffic controls. The Airline Deregulation Act was passed in 1978 and falls in the category of Federal Law. It eliminated the governmental authority over determination of service fares and control of routes and new airlines entry into/exist from the airline industry. As a result of the act, the CAB was dissolved in 1984. The FAA was not eliminated and it remained in control of airline safety and air traffic intro (United States Government Accountability Office, 2006).
This Amendment came into force in 1979 and comes within the category of federal law. It manages the air traffic at Dallas Airfield in Texas. Initially, this amendment posed such restrictions on nonstop flights that their routes got limited to Texas and its neighboring states only. However, the restrictions were taken off in 1997 and 2005. The Amendment was revoked in 2006 but some restrictions will expire in 2014.
Soon after the passage of the Airline Deregulation Act of 1978, Southwest was about to begin interstate flights.
But extinctions were imposed by the Congress and the airline was disqualified to ticket/operate flights beyond Texas and the states touching its borders. A number of economic constraints are also there in the environment that have their relative impacts on Southwest’s operations. These include: Higher unemployment rates, which Southwest had been challenging by refusing to lay off employees even during surging unemployment. Increase in operating costs. Instable credit market and capital market.
Social factors influencing performance include an increase air pollution caused by the airline industry as a whole; gases are emitted in upper atmosphere causing an increase of around three percent of greenhouse emissions globally. Also, fuel efficiency has increased significantly from the past three decades. The airline industry has been divided into labor unions which include several types of unions such as the Flight Attendants’ unions, the Machinists’ Unions, and the Pilots’ Unions. The majority of the employees are part of such unions which has led to an increase in labor costs for the entire airline industry.
Fuel efficiency is increasing. Aircrafts that are more fuel efficient are being developed and the engines are being redesigned to cater to this change. The Air Transportation System has been reformed by the introduction of the Next Generation Air Transportation System (Next). This system is supposed to be implemented in the country by 2025. The system revises air routes and updates it to satellite system management; the promotion of usage of GAPS technology for navigation, route length shortening time reduction, and fuel saving, etc.
The JOB (Joint Planning and Development Office) has been setup to facilitate he development of Next. Apart from that, the tracking system has been updated and routes have been improved significantly. Airline forecasting and algorithms have allowed improvements in prices and costs for airlines in the industry. The average age of an aircraft in the industry is around 13 years. The market is expected to grow and revenues are likely to increase. Southwest should take active measures to deal With all the above measured threats.
To combat with political threats of regulation, the Shelby agreement does help by providing expansion in a few routes. However, they are still less and the routes and areas served need to be expanded. Some sort of agreement should be made for that. To deal with its economic threats, Southwest is already implementing fuel cost saving strategies. It has already reduced its fares for the passengers, which provides it with a competitive edge. Southwest has adopted a no-layoff policy with reference to its employees, in the face of high unemployment rates.
Therefore it should work to control and ultimately minimize its operating costs. To deal with the social issues present in the industry, careful negotiations and dealings with the arioso kinds of unions should be done. Environmentally safe emissions of gas should be reviewed as well as alternate sources of energy. Technology is increasing in the industry. Southwest needs to be able to afford the latest technology so that it could Offer superior quality Of service than its competitors.