Southwest Airlines was founded in 1967 by Rolling King and Herb Kelleher. It offers short, high-frequency, point-to-point, low-cost routes. Southwest was incorporated in Texas and began operations in 1971 with three Boeing 737s. It serves three Texas cities: Dallas, Houston and San Antonio. Southwest Airlines' mission is "dedication to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride and entrepreneurial spirit." Today, Southwest flies nearly 400 Boeing 737s to 59 U.S. cities. And it offers the best customer service rate. Factor That Impacts Industry Rivalry The degree of rivalry that exists within an industry will affect its overall profitability. Factors affecting rivalry include high fixed costs, excess capacity, low differentiation, slow growth, and high exit costs. In the 1970s, airline fixed costs were not low. There are costs for fuel, ground staff, captain, flight attendant, steward and airline rental or depreciation. To recover these fixed costs, airlines want to maximize their load factor by increasing revenue passenger miles (RPM). As there is currently excess capacity on many routes, price wars often result in customer attraction. Many airlines have tried to build customer loyalty by introducing loyalty programs. However, the number of membership plans held by passengers has diminished their effectiveness. Factor that explains barriers to entry Many new airlines have entered the airline industry since 1994. The wave of new airlines has suggested that the airline industry has inefficient economies of scale and could support many new entrants. Even though economists predicted that barriers to entry were low and the new fir...... middle of paper ...... averaged 11 hours a day (the average is 8 hours). With this, Southwest is able to spread its fixed costs across more seats. On the other hand, Southwest's fleet is made up entirely of Boeing 737s, which are more fuel efficient than larger planes. Because they only use one type of aircraft, they are able to reduce training costs, mechanical costs and parts inventory levels. Southwest's business strategy helps them differentiate themselves from their competitors. They actually attract new passengers to air travel, rather than competing with other carriers for existing travelers. Southwest uses different business strategies to successfully retain its customers. It's easy to imitate the Southwest strategy, but it's difficult to achieve the same productivity. It's easy to offer cheap tickets, but it's difficult to replicate the culture of the Southwest..