Southwest Airlines Case Analysis

Comprehensive Case Analysis

Southwest Airlines:

WhatÐŽ¦s Next?

April 11, 2000

They Took a Great Idea and Made It Fly

Southwest Airlines Company is a domestic airline that provides primarily short-haul, high-frequency, point-point, low-fare service to 53 airports in 52 cities in26 states throughout the United States. Southwest focuses primarily on point-to-point service, providing more direct nonstop routes for short-haul customers and, therefore, minimizing connections, delays and total trip time. The companyÐŽ¦s average trip length is 441 miles with an average flight time of approximately one-hour.

It was Rollin KingÐŽ¦s and Herb KelleherÐŽ¦s vision to start an airline that with a mission to get its passengers to their destinations when they want to get there, on time, and to provide this service at the lowest fare possible. On February 40, 1968 the Texas Aeronautical Commission approved Herb Kelleher and Rollin KingÐŽ¦s plans for Air Southwest Company to provide service for the three major cities in Texas. This approval was soon opposed and blocked by three major airlines. After 3 years of legal battles, broke, deep in debt and with four airplanes, Southwest Airline began service in June of 1971. In 1973 Southwest made itÐŽ¦s first profit and has never looked back. It has made an annual profit each consecutive year thereafter.

Southwest grew steadily, by 1975 it had operations in eight cities in Texas, and by 1980, it was the leader in the Texas region. It was attractive to customers that wanted frequent departures and low prices. With the low prices and its no frills philosophy, it quickly dominated every market it entered. In some markets, it entered competitors soon surrendered to Southwest allowing the airline to grow more quickly than estimated. Competitors often referred to Southwest as the ÐŽ§ 500-pound cockroach that is was too big to stamp out.ЎЁ As airfare continued to fall, passenger traffic increased drastically, but its competitors were losing money.

Within 28 years, Southwest Airlines had become the fifth largest major airline in the United States. Southwest flies to 56 airports in 56 cities, carrying more than 52 million passengers a year.

In May 1988 Southwest was the first to win the Triple Crown ÐŽV Best On-time Record, Best Baggage Handling, and Fewest Customer Complaints -- for a month, since then they have won it more than 30 times and have won five annual Triple Crowns 1992, 1993, 1994, 1994, and 1995.

It is said that no other airline has contributed more to the advancement of the commercial airline industry. Southwest was the first to establish a frequent flyer program. They also offer Fun Fares, Fun Packs, ticketless travel, senior citizen discounts and many other programs for passengers.

MISSION STATEMENT, OBJECTIVES, STRATEGIES

Current Mission Statement

The current mission statement for Southwest Airlines reads as follows:

The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride and Company Spirit.

Evaluation Matrix of Mission Statement

Customers Products/Services Markets Technology Concern for Survival, Growth, and Profitability Philosophy Self-concept Concern for Public Image Concern for Employees

No Yes No No No Yes No Yes No

Revised Mission Statement

The current mission statement of Southwest Airlines does not satisfactorily address each component of the Evaluation Matrix of Mission Statements and therefore should be revised. I have revised the mission statement and believe the revision below better addresses each given area.

The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride and Company Spirit and delivered in a way that is consistent with the values of our customers, shareholders, employees, and the communities in which we operate.

Objectives

„h To make a profit

„h To achieve job security for every employee

„h To make flying affordable for more people

Strategies

Southwest Airlines hopes to accomplish these objectives by quickly seizing strategic opportunities wherever they may arise, maintaining a conservative pattern of growth, maintaining a strong cost-containment policy, and maintaining the commitment of itÐŽ¦s employees. Southwest Airlines is looking to expand its services into more eastern markets and adding more long-haul routes.

EXTERNAL OPPORTUNITIES AND THREATS

The external audit focuses on identifying and evaluating trends and events beyond the control of a single firm. An external audit reveals essential opportunities and threats confronting an organization so that managers can formulate strategies to take advantage of the opportunities and avoid or reduce the impact of threats.

Opportunities

„h The point-to-point niche market remains a growth market

„h Adding more long-haul routes

„h International expansion into Canada, Mexico, or the Caribbean

„h Expanding Eastern U.S. short haul-routes

„h Stable economy

Threats

„h Competitive fare wars and customer incentive plans

„h Economic recessions

„h High fuel prices

„h Corporate cost-saving measures

„h Airline AlliancesÐŽXcode sharing agreements, scheduling and marketing agreements

COMPETITIVE PROFILE MATRIX

This Competitive Profile Matrix identifies Southwest Airlines major competitors and their particular strengths