Southwest Airlines

Southwest Airlines

Length: 1483 words (4.2 double-spaced pages)

Rating: Excellent

Open Document

Essay Preview

More ↓
Strategic Issue
Southwest Airlines has never deviated from its niche: short-haul, high frequency, low-fare service, all delivered with award-winning customer service.1
-- Herbert D. Kelleher, Chairman, President, and CEO
Southwest's current strategy is to position itself as a cost leader with a focus strategy. The company's management and employees aim to cost-effectively and reliably fly large number of customers on short, non-stop flights, and to have fun doing it. They are devoted to making flying available to everyone. The company has been successful in implementing this strategy, having experienced strong growth and profitability. Southwest is now the 5th largest carrier in the U.S. in total customers. It has operated profitably for 24 consecutive years in an industry with a volatile earnings history. The main strategic issue facing Southwest at this time is to evaluate this strategy and determine its future course of action.

SWOT Analysis
An evaluation of the internal strengths and weaknesses, and the external opportunities and threats--based on the case study and additional references--is as follows:
1. Southwest has successfully adopted a cost leadership strategy.
• Southwest maintains operating expenses per available seat mile at 15-20% below average.
• The company has no baggage handling, no meals, no central reservations, and no assigned seats.
• Because all of its planes are Boeing 737s, maintenance, turnaround, and training costs are contained.
• The company has embraced technology that will reduce costs (e.g., ticketless travel).
1. The company has a reputation for great customer service.
• Southwest won the Department of Transportation's Triple Crown 5 years consecutively for ontime service, baggage handling, and least number of customer complaints.
• The company has topped the National Airline Quality Rating three years consecutively.
1. The company has a strong, fun-loving, employee-oriented culture. The company's mission statement focuses on these aspects of the business. The result is a loyal employee base that is willing to work hard to achieve the company's goals.
• Culture begins with strong leadership. CEO Herb Kelleher is known for his relaxed management style.
• Southwest was voted one of the "100 Best Companies to Work For in America" by Fortune magazine.
• Southwest implemented programs to retain employees, including the first profit sharing plan in the industry and a 401k plan that matches contributions dollar for dollar.
• Although 84% of the workforce is unionized, they share responsibilities (e.g., pilots handling baggage) and have flexible work schedules.
• Southwest shares information with all levels of employees so that they understand the company's goals.
2. The company is in a strong financial position. (Refer to Exhibit 1)

How to Cite this Page

MLA Citation:
"Southwest Airlines." 19 Nov 2019

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

The Factors Affecting Southwest Airlines Essay

- Not all of the external factors affecting Southwest Airlines are helpful, however. In terms of threats, Southwest Airlines faces several challenges. The airline industry is a highly competitive market and costs are continuing to rise (e.g. rapidly increasing fuel costs and labor costs). Unfortunately, these factors greatly increase the risk of another company emulating the strategies and core competencies of Southwest Airlines (Ross & Beath, 2007). Ross & Beath (2007) mention this threat in regards to JetBlue rapidly approaching innovative, low-cost operations....   [tags: Southwest Airlines, Airline, Management]

Research Papers
1773 words (5.1 pages)

Essay Organizational Structure At Southwest Airlines

- Introduction “Your employees come first and if you treat your employee’s right, guess what. Your customers come back, and that makes your shareholders happy. Start with employees and the rest follows from that.” This quote from Herb Kelleher, co-founder of Southwest Airlines, embodies the attitude of leadership at the airline. Southwest dares to be different from other airlines because their philosophy revolves around people both internal and external. Communication, culture, and leadership are the cornerstone of their success....   [tags: Southwest Airlines, Airline]

Research Papers
1125 words (3.2 pages)

Behind The Southwest Airlines Culture Essay

- Southwest airlines began in 1967 as Air Southwest Co. Based in Dallas. They began serving three major cities in Texas, with only three Boeing 737 aircrafts. March 29th, 1971 Air Southwest Co. changed its name to Southwest Airlines Co. The company began service on June 18, 1971 from Love Field in Dallas to Houston and San Antonio. Founders Rollin King and Herb Kelleher were inspired by their location to create an airline that was focused on the people. The LUV airline prides itself with exceptional employees and “no frill” customer service....   [tags: Southwest Airlines Analysis]

Research Papers
2810 words (8 pages)

Southwest Airlines : A Mission Statement Essay

- Southwest Airlines is one of the nations most successful airline travel companies. The company has implemented many measures to gain a positive public opinion. First of all at the foundation of Southwest Airlines is a fantastic mission statement its mission is “the dedication to provide the highest quality of customer service with a sense of warmth, friendliness, and upbeat business spirit.” By continuing with this mission, Southwest Airlines has achieved a stunning thirty-one years consecutive profitable years and many prestigious awards for the fewest complaints by many administrative organizations including the United States Department of Transportation....   [tags: Airline, Southwest Airlines, Herb Kelleher]

Research Papers
728 words (2.1 pages)

Southwest Airlines : Customer Value Essay

- Customer Value Insights Southwest Airlines has managed to keep a profit year after year while keeping customers happy. According to Southwest airlines official website, they have a track record of 42 consecutive years of profitability and they have been on Fortune magazine’s list of the most admired companies in the world (Gary Kelly chairman, president and CEO Southwest Airlines). How does Southwest maintain such a stellar service. Most airlines provide the same services and products. A southwest airline differentiates itself from others by providing those services and products at a lower cost and with more professionalism, courtesy, and humor....   [tags: Southwest Airlines, Airline, Boeing 737]

Research Papers
708 words (2 pages)

Essay about Swot Analysis : Southwest Airlines

- In 1996, Rolling King, an entrepreneur who owned a small commuter air service, approached Herb Kelleher’s law office about a plan to start a low-cost/low-fare airline that would transport passengers between San Antonio, Dallas, and Houston. Southwest Airlines, Inc. (SWA), was founded in 1971, in Dallas Texas, flying Boeing B737 aircraft, is one of the largest airlines in the United States (Eroglu, O, 2015). Southwest together with AirTran and forty-one plus years of profitability covers more than ninety destinations throughout the United States, the District of Columbia, the Commonwealth of Puerto Rico, Mexico, Jamaica, The Bahamas, Aruba, and Dominican Republic (Southwest Airlines Co, 2015)...   [tags: Southwest Airlines, Airline, Boeing 737]

Research Papers
1103 words (3.2 pages)

Southwest Airlines : Mission And Vision Essay

- During the week for 1 hour in the evenings I join with a group of professionals of Cross-Fitters near Love Field Airport. Everyone is motivated to endure a tough workout that consists of a combination of fast paced burpees, push-ups and countless squats. What I discovered is most of the young and middle aged grouped participants work for Southwest Airlines. I’ve selected Southwest Airlines because of the uniqueness of the company’s business strategy and to know my Crossfit partners speak highly of Southwest Airlines....   [tags: Southwest Airlines, Airline, Dallas Love Field]

Research Papers
1417 words (4 pages)

Southwest Airlines And The Union Strike Essay

- Labor Relations This is an area where Southwest Airlines needs to focus more of their attention. Currently, Southwest Airlines, is approximately 85% unionized and the airline is trying to negotiate seven contracts concurrently. The ramp, operations and cargo unions have been working without a contract since 2011. The pilots and mechanics have not had a contract since 2012 and the flight attendants contract expired in 2013 (Leff, 2015). In a statement made by the president of Southwest Airlines’ Pilots Association, union representatives must do something while ongoing poor decisions are being made by management that are affecting our airlines passengers (Schlangenstein, 2016)....   [tags: Southwest Airlines, Low-cost carrier, Airline]

Research Papers
1468 words (4.2 pages)

History of Southwest Airlines Essay

- More than 32 years ago, Rollin King and Herb Kelleher got together and decided to start a different kind of airline. They began with one simple notion: If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline. And you know what. They were right. What began as a small Texas airline has grown to become one of the largest airlines in America. Today, Southwest Airlines flies more than 65 million passengers a year to 59 great cities (60 airports) all across the country, and they do it more than 2,800 times a day....   [tags: Voices of Southwest Airlines]

Free Essays
1181 words (3.4 pages)

Essay on The History of Southwest Airlines

- The History of Southwest Airlines Southwest Airlines (SWA) begins in June 18, 1971, when SWA first operated a first airline consul between Houston, Dallas and San Antonio. Rollin King and Herb Kelleher are the founders of the company. The end of 1971 SWA immediately began to expand. In 1972 all Houston service is transferred to Houston's Hobby Airport form Houston Intercontinental, that is make more convenient for people to fly. During the first year of operations the customers were the Southwest's first priority....   [tags: Southwest Airlines Aviation Airplanes Essays]

Research Papers
3808 words (10.9 pages)

• Southwest has consistently generated a profit for 24 consecutive years.
• It was even profitable in the years 1990-1992 when no other major airline had net income.
• Southwest has the highest credit rating from Standard & Poor's in the airline industry.
• The company has grown sales by 12.1% and 18.6% in 1997 and 1996, respectively.
• Net income has grown 13.53% and 53.26% in 1997 and 1996, respectively.
• The company has excess debt capacity, evidenced by its long-term debt to equity ratio of 0.31, to take advantage of opportunities.
1. The company's growth has been steady and planned. Southwest enters new markets only when they can achieve frequent flights.
2. The company's marketing focuses on its low prices and fun culture.

1. The company's mission statement is weak. Although there appears to be clear communication of the company's goals, the mission statement doesn't even mention what industry Southwest is in.
2. Southwest's competitors are offering shuttle services that compete directly with the company. They are also operating, investing in, and forming alliances with regional carriers.
3. As the result of its steady, planned growth strategy, Southwest flies to only 51 cities. There are numerous untapped domestic markets.

1. There are opportunities for expansion to new markets.
• More than 100 cities have encouraged Southwest to fly to them.
• The new Boeing 737-700 has the ability to fly longer distances non-stop, which may change the definition of "short haul".
• Enplanements for regional carriers are expected to increase 200% from 1996 to 2008.
1. Demographic trends appear favorable to an airline focusing on price and reliability.
• The consumer continues to seek convenience and time savings. Flying, rather than driving, will meet that need if the price is right and the airline is reliable.
• The aging of the US population results in more interest in leisure travel.
1. The competition is looking to international, rather than domestic markets, for growth opportunities.
• International enplanements are projected to be up 2X from 1996 to 2008.
• Decreased government control in Europe and Asia has led to increased competition in these markets.
1. Improved computer technology will allow more ticketless transactions and reservations made by PC.
2. There are barriers to entry for other competitors in the airline industry.
• A large capital investment is needed to begin operations.
• Existing airlines launch counterattacks such as significantly lowering fares in response to new competitors.

1. Southwest's ability to hold the line on costs will impact its cost leadership position. (Exhibit 2)
• The largest cost component (36.9% of expenses) is labor. This cost could be impacted by union actions, which cover 84% of Southwest's workforce.
• The second largest cost component is fuel (11.2%), which could be negatively impacted by economic or political events.
1. Government regulation could hinder Southwest's ability to control costs, control fares, or enter new markets.
• Recent government crackdown on safety (e.g., insulation, cargo fire detection) means costly retrofits.
• Proposed re-regulation would limit existing firm's ability to respond to underpricing by new companies.
• Prior to deregulation in 1978, carriers were limited in their ability to enter new markets.
• The government recently proposed an increase in facility tax rates, which would have resulted in higher costs.
1. Improved telecommunications may lower demand for air travel, or may lower demand for "discount" airlines.
• E-mail and teleconferencing can result in less need to travel.
• Consumers may demand "personal" technology on planes, such as movies, phones, games, etc.
1. Alternative forms of transportation, such as a high-speed railway, could weaken demand for air travel. Also, if the economy weakens, people may choose to drive rather than fly.
2. The consolidation in the industry--where large carriers buy competitors and regionals--enables them to gain access to markets without investing in aircraft or employees.
3. Southwest would be hurt if the public perception were that low price equates to low quality. An incident like the ValuJet crash could reinforce this perception.

Recommended Strategy
Southwest Airlines strategy has been successfully implemented, and the above SWOT analysis does not indicate that a major shift in strategy should be made at this time. They should continue utilizing a cost leadership strategy to underprice competitors and gain market share. This strategy has not only resulted in increased market share, but has also increased overall demand for air travel. Southwest should continue its market development strategy, focusing domestically. There are numerous untapped markets in the U.S., many of which are actively seeking Southwest's presence. Additionally, competitors are now focusing on foreign markets, and deregulation there could result in price wars and increased competition.
In expanding domestically, Southwest should continue its focus strategy of providing frequent, "point to point" flights. The expansion into new cities should be at a moderate pace to ensure adequate coverage of new markets. Ideal new cities will allow for non-stop flights. As the range of the aircraft expands, the potential markets will also expand.
Southwest should strengthen its mission statement--simply by writing it down. The employees' commitment to action described in the case indicates that the mission of the airline is clear: to be a low-price, frequent flight, short haul, reliable carrier. However, this is not evident by reading the mission statement. Still, Southwest should avoid creating too formal a mission statement, which would be at odds with its culture.
Southwest should continue to embrace new technologies such as ticketless travel and PC reservations. New technology also includes a commitment to new aircraft, which will result in a young, safe fleet of jets with longer range. All of these new technologies will permit Southwest to contain costs, to expand to more markets, and to maintain its image as a safe and reliable carrier.
And finally, Southwest should continue to foster its remarkable culture. The company's fun-loving attitude and dedication to its employees have contributed both tangible and intangible benefits. It is a true competitive advantage.

Since 1997, Southwest has continued to profitably expand domestically. Some key financial results measured as of the end of 1998:
• Net income for 1998 was $433.4 million, an increase of 36.40% over 1997.
• Net profit margin was 10.41% vs. 1997's 8.33% and an industry average of 7.35%.
• Return on assets is estimated at 9.77% vs. 1997's 7.48% and an industry average of 7.45%.
The continued growth in sales and net income reflect the ongoing steady growth into new markets. The company now serves 52 cities in 26 states. The company has added flights to and from Islip, New York. From this base, they have been able to test non-stop flights from New York to Los Angeles due to the new Boeing 737-700's abilities. The company has also continued to pursue technology such as ticketless travel, available on its Web site. In summary, Southwest has maintained its successful course.
Return to