Two Ways to Fly South: Lan Airlines and Southwest Airlines – Key Vocabulary

Vocabulary flashcards summarizing essential terms, metrics, and strategic concepts from the comparative case of Lan Airlines and Southwest Airlines.

Lan Airlines (LAN)

Chile-based full-service carrier operating passenger and cargo services across Latin America, North America, Europe, and the South Pacific.

Southwest Airlines (LUV)

U.S. low-fare, point-to-point carrier known for consistent profitability, single-aircraft fleet, and fun corporate culture.

Available Seat Miles (ASM)

Total number of passenger seats offered multiplied by the miles flown; common capacity metric for passenger airlines.

Available Ton Miles (ATM)

Total tons of capacity (passengers + cargo) multiplied by miles flown; Lan’s primary cost/ capacity metric.

Revenue Passenger Miles (RPM)

Number of revenue passengers carried multiplied by miles flown; measures passenger traffic.

Revenue Ton Miles (RTM)

Tons of revenue cargo carried multiplied by miles flown; measures cargo traffic.

Passenger Load Factor

RPMs expressed as a percentage of ASMs; indicates how full passenger flights are.

Cargo Load Factor

RTMs expressed as a percentage of ATMs; indicates utilization of cargo capacity.

Passenger Yield

Passenger revenue divided by RPMs; reflects average fare per mile.

Cargo Yield

Cargo revenue divided by RTMs; reflects average cargo price per ton-mile.

Point-to-Point Network

Route structure in which flights operate directly between city pairs without connecting through hubs; core to Southwest.

Local Hubs (LAN)

South American airports such as Santiago or Lima that collect regional demand before feeding international routes.

Turnaround Time

Ground time between an aircraft’s arrival and next departure; 24 minutes at Southwest, ~45–120 minutes at Lan.

Fleet Commonality

Use of a single aircraft family (e.g., Southwest’s all-Boeing 737 fleet) to reduce maintenance and training costs.

LAN Fleet Modernization

Gradual replacement of older Boeing 737s with Airbus A319/A320 for short-haul and Boeing 767/A340 for long-haul.

Fuel Hedging

Use of financial derivatives to lock in jet-fuel prices; aggressively practiced by Southwest, partly by LAN.

Yield Management

Dynamic pricing system that adjusts fares based on demand, booking time, and other factors; used by both airlines.

Code-Sharing

Agreement allowing airlines to sell seats on each other’s flights; Southwest partners with ATA, LAN with numerous carriers.

Oneworld Alliance

Global airline alliance that includes Lan, American, Iberia, Qantas, and others for coordinated scheduling and loyalty.

LanCargo

LAN’s dedicated cargo division contributing over one-third of company revenue via belly space and freighters.

SouthwestCargo

Southwest’s small freight unit offering services like Next Flight Guaranteed and U.S. Postal mail transport.

Award Ticket (Southwest)

Frequent-flyer reward giving one free round-trip after 16 one-way flights.

Companion Pass

Southwest perk allowing a chosen companion to fly free after 50 round-trips in 12 months.

LanPass

LAN’s frequent-flyer program enabling mileage accrual across oneworld partners.

Rapid Check-In

Southwest self-service kiosks and online tools for ticketless travel and baggage tagging.

Global Distribution System (GDS)

Reservation platforms (Sabre, Amadeus, Galileo, Worldspan) through which LAN sells tickets and pays fees.

Direct Sales Channels

Airline-controlled outlets such as websites, call centers, and airport counters; 65% of Southwest revenue, 33% of LAN.

Hot Pants Era

1970s marketing gimmick where Southwest attendants wore shorts and boots, reinforcing the ‘Love Airline’ image.

Performance-Based Pay (LAN)

Bonus system linking 90% of employees’ compensation to individual, team, and company results.

Profit Sharing (Southwest)

Company-wide employee program distributing a share of annual profits and stock options.

Belly Cargo

Freight carried in the lower hold of passenger aircraft; key to LAN’s integrated passenger-cargo model.

737-700

Newest Southwest workhorse model offering greater fuel efficiency and range compared with earlier 737 variants.

Airbus A340

LAN’s ultra-long-haul aircraft capable of nonstop Santiago–Auckland flights.

Cost per ASM

Operating cost divided by available seat miles; 7.94 cents for Southwest in 2005, industry’s lowest among majors.

Cost per ATM

Operating cost divided by available ton miles; 62.4 cents for LAN in 2005, reflects mixed passenger-cargo operations.

Next Flight Guaranteed

SouthwestCargo service promising delivery on the next available flight or a full refund.

On-Board Service (LAN)

Formal two-class or three-class cabins with assigned seating, multilingual entertainment, and complimentary meals.

On-Board Service (Southwest)

Single-class cabin, open seating, humorous announcements, and free peanuts/Wheat Thins only.

‘Love’ Branding

Southwest’s historic marketing theme referencing Dallas Love Field and promoting a fun, friendly flying experience.