Mr.

Threats to the success of Southwest Airlines

Threats

Southwest Airlines is the only U.S. carrier to be profitable every year since 1972.

Southwest's business model of targeting new cities where the competition is weak and

the costs are low has been very prosperous for the company. But in this post 9-11

environment, with the additional security procedures at airports, increased fuel costs,

labor unions demanding more from management, and other external factors on the

industry as a whole. It will be tough on Southwest to continue to turn a profit, and

continued success won't be so easy.

Opportunities for growth

Southwest Airlines, however, is not without weaknesses. No matter how successful,

Southwest Airlines serves only 29 states and cannot compete against the bigger

companies that serve nationally or even internationally. Furthermore, Southwest Airlines

does not utilize a hub system that allows for bigger competitors to reach further out.

The old strategy of focusing on good climates and smaller less congested airports has

contributed to Southwest's low costs. Expanding to more northern routes will be subject

to weather and the weather conditions can effect the airlines ability to maintain on-time

performance and can significantly effect down-line operations such as paying people

while they cannot service a plane. A schedule based on quick turn around, leaves little

room for any type of flight delays. "This puts a limit on growth because there are only a

finite number of markets that can satisfy these criteria" (Jackson & Randall, 2006, p.

650).

Moving into Denver is one of the bigger risks the airline is taking as it tries to

grow before other airlines catch up. Frontier and United already have matched the low

fares Southwest announced for its flights from Denver. With comparable fares,

passengers will be able to choose between Southwest's no-frills and two airlines that

unlike Southwest offer assigned seating and premium features such as first-class sections,

and in-flight entertainment. For some passengers, that might be enough to keep them

flying Frontier and United. Saving a few dollars might not be worth giving up all the

little extras the competitors are giving to passengers. When a comparatively small, new

company is able to take on major players in an extremely competitive industry, gain

market share, please customers and employees alike, it is time for others to take notice.

Southwest Airlines' strategy has proven so effective, it will be duplicated and

emulated by its competitors to a point where it would lose the originality. This could

result in competitors offering low rates to the areas covered by Southwest and beyond,

making Southwest Airlines' range and limitations more obvious.

Probably one of the biggest weaknesses is how Southwest has started to emulate many

of the features the bigger carriers use to support their large networks. The hub and spoke

system to enable long range traffic failed, sponsorships, and national advertising all seem

to drain a lot of money needed for day to day operations. These tactics originally did not

work for the larger carriers, and Southwest will find out the same in their rush to gain

more markets.

Outdated 737's

Another weakness of Southwest Airlines is their choice of using Boeing 737s

exclusively. Southwest owns the biggest Boeing 737 fleet in the world. "Being limited to

one type of airplane leaves them with little flexibility when

the model receives a bad reputation or a critical flaw is discovered" (Jackson & Randall,

2006, p. 650).

Boeing had a labor strike in 2005, this action threatened to delay the delivery of new

airplanes Southwest had ordered for 2006. If Southwest didn't get those planes, many

expansion cities could not get service off the ground limiting Southwest's ability to

compete with other carriers in these new markets. This could cripple Southwest's

profitability for the upcoming year, and limit their future growth.

If Southwest decides to enter the long-haul markets, they will have to decide whether

or not to introduce food service. If they go that way it would require galleys and onboard

services that would boost the cost of operations