Why do you think the major airlines so badly overlooked the possibilities in short hauls at low prices?

A strategic window is an opportunity in the marketplace, one not at present well served by competitors, that fits well with the firm’s competencies. Strategic windows often last for only a short time (although Southwest’s strategic window has been much more durable) before they are filled by alert competitors.
Strategic windows are usually found by systematically analyzing the environment, examining the threats and opportunities it holds. The competencies of the firm, its physical, financial, and people resources—management and employees and their strengths and weaknesses—should also be assessed. The objective is to determine what actions might or might not be appropriate for that particular enterprise and its orientation. This is commonly known as a SWOT analysis: analyzing the strengths and weaknesses of the firm, and assessing the opportunities and threats in the environment.
The analysis may be a formal part of the planning process or it may also be informal and even intuitive. We suspect that Herb Kelleher instinctively sensed a strategic window in short hauls and lowest prices. Although he must have recognized the danger that his bigger competitors would try to match his prices, he believed that with his simplicity of operation he would be able to make a profit while bigger airlines were racking up losses.