Southwest Airlines Case Analysis

EXECUTIVE SUMMARY

Southwest Airlines provides short haul, high frequency, point-to-point, low-fare services to and from 58 cities across the United States. The company is known for its low-cost fares and superior customer service in the airline industry. The company was started in 1971 with a motto still lived by today, "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." This motto has been effective for the company because they recently reported their 58th straight quarterly profit.

SWOT Analysis

The SWOT analysis describes the internal strengths and weaknesses, opportunities and threats of a company. The strengths of Southwest include its market leadership, its low-cost business model, and its strong financial performance. Weaknesses are the poor short-term liquidity situation, having only one established alliance, and the declining passenger revenue yields. Opportunities for the company include its new services, the new code-sharing agreement with ATA Airlines, and the overall positive outlook for the airline industry. Threats to Southwest include the increasing jet fuel costs, uncertainty in demand, and an increase in competition.

Corporate and Business-level Strategies

Southwest's corporate level is to focus on obtaining more of the low-fare market of the airline industry rather than to enter into other aspects of the airline industry. The business level strategy is to continue focusing on the current customer market, that which is looking for a low-cost airline to get them where they want to go at a reasonable price. Southwest is only looking to improve its services to make each customer's experience the best it can be.

Recommendation

Over the last thirty years, Southwest Airlines has been very successful and continues to grow and develop. Southwest has managed to stay ahead of its competition by implementing new products and services into the industry. Southwest has also maintained its mission to offer its customers the lowest fares possible and has been very profitable. The recommendation for your investment of $5 million is to invest all the money into Southwest Airlines.

Southwest Airlines is known to be a very successful company, but is it a company you would want to invest in? The following research will determine the reasons Southwest has been so successful and why. We will follow the history of the company to find out what the internal strengths and weaknesses and the external opportunities and threats are today. Using this information we will also analyze the company's corporate level-strategy, business-level strategy and the systems of structure and control. This information should draw a confident conclusion on whether Southwest Airlines will be successful in the future.

History, Development, and Growth

In 1971, Rollin King and Herb Kelleher started Southwest Airlines, headquartered in Dallas, Texas. Their motto was, "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." More than thirty years later that motto is still in effect and seems to have been proven very successful. The first services were between Dallas, Houston, and San Antonio. Southwest carried its millionth passenger in 1974 and by 1977 was carrying its five millionth passenger (Southwest 2005). Also in 1977, Southwest was first listed on the New York Stock Exchange.

Southwest, in 1984, was ranked the number one airline in terms of customer satisfaction for the fourth consecutive year. In May of 1988 the company won the coveted Triple Crown. It is an award for the best on-time record, best baggage handling, and fewest customer complaints. In 1990 the company reached one billion dollars in total revenues (Southwest 2005).

During the 1990s the company made many changes to increase the efficiency of its services. Southwest was the first major airline to introduce a ticket-less travel option. The company eliminated the need to print a paper ticket altogether. The company also began using a computer reservation system to provide ticketing and automated booking services to customers. Together, with the above programs, the company created Internet ticket-less travel sales (Southwest 2005).

By 1999 Southwest Airlines was the fifth largest major airline in the United States. In 2000 the company flew more than 57 million passengers a year to 60 cities in the United States.

The terrorist attacks of September 11, 2001 severely affected the airline. On the morning of September 11, 2001 the Federal Aviation Administration suspended all commercial airline flights and Southwest did not resume flight operations until September 14. During this time Southwest canceled about 9,000 flights. After flights were resumed, revenues were severely impacted and ticket refunds increased. To aid the airlines affected by the terrorist attacks, the Air Transportation Safety and System Stabilization Act provided some compensation to qualifying United States airlines to help compensate for the losses (Southwest 2005).

Southwest Airlines did not let the events of September 11, 2001 affect their goals and began operating new non-stop services in 2003. During 2004 the airline added new flight services and also began offering Walt Disney World Resort Tickets on southwest.com. Also during 2004, the company announced a bid was approved for various assets of ATA Airlines. By 2005 Southwest was offering code-shared flights with ATA Airlines (Southwest 2005).

The company announced a new "direct-link" to customers' computer desktops in February 2005 with a product called "DING!" which can be downloaded at southwest.com (Southwest 2005). The airline also offered many new nonstop flights during 2005.

Today, Southwest is the fourth largest major airline in America, flying more than 64 million passengers a year to 58 cities in the United States. It makes more than 2700 flights a day. Since 1988, Southwest has won the Triple Crown more than thirty times, including five consecutive years.

Internal Strengths and Weaknesses

Southwest Airline's competitive advantage comes from being the low-cost leader in the low-fare airlines industry. Southwest provides short haul,