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Essay: Southwest Airlines overview

Essay details:

  • Subject area(s): Business essays
  • Reading time: 4 minutes
  • Price: Free download
  • Published: September 15, 2019*
  • File format: Text
  • Words: 1,057 (approx)
  • Number of pages: 5 (approx)
  • Southwest Airlines overview
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Executive summary

Millions of people travel each day, some by sea, some by foot; when it comes to Southwest Airlines, they provide service between 58 cities in the United States.  The terrorist attacks from September 11 had a major hit on the airline business, many Americans were afraid to fly and chose different options for travel.  Now; you might ask yourself, what has kept this company above competitors while many declare bankruptcy?  I say, it’s their low price fares paired with excellent customer service, while others can match customer service many cannot match their low prices.

Past

Rollin King and Herb Kelleher started an airline in 1971in Texas with one simple goal in mind: “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” (Southwest, 2016).  

Overview and Mission

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 (Southwest, 2016). Their vision statement is to expand their locations to both domestic and overseas by being the largest and most profitable airline company, to achieve both short-and long-haul carriers efficiently and with low cost.  Also to be an airline carrier that has the most productive workforce, to guarantee the best flight possible for each and every passenger (Southwest, 2016).

Company Background

They started servicing the cities of Houston, Dallas and San Antonio with four Boeing 737 aircraft. Southwest Airline is now the U.S largest low fare airliner, serving more customers domestically than any other airline, they now operate more than 3,000 flights a day.  Here are a few numbers that will give a small insight into how the company operates.  In 2015 their gross profit ending in December was $3,565,000 with an operating income of $1,026,000 (Yahoo Finance, 2016).  In 2011, Southwest led the industry with more than 1,000 pieces of electric ground equipment which conserves fuel and reduces emissions.  In the same year Southwest acquired Air Trans Airways and completed the integration in 2015.  

Core Values

Company Culture

The company culture is driven by it’s excellent business strategy with focuses on low cost structure, which is designed to allow it to profitably charge low fares, free checked bags and in turn have loyal employees.  Founder Herb Kelleher is known to have a unorthodox leadership, which in turn gives a chance to everyone to make decisions in the company, whether on top or bottom of the corporate ladder.  The company has been said to lack structure but this hasn’t affected the way the operate, by giving their employees freedom to communicate and express themselves, they are able to gather ideas from all aspects of the company.  

In 1974 Southwest initiated a first-profit sharing plan and offers it to their employees to this day.  This initiative led to a record $138M in profit sharing, this was on top of a 14.2 percent tax-deferred compensation of the employee’s annual salary.  

Past Strategies

In 2007 76 percent of their revenue came from internet bookings, compared to 81 percent in 2011.  What has helped Southwest in the past is their dedication to offer the best customer experience in the travel business, they were very unique to begin with.  As a frequent Southwest flier I can’t help but to be biased as a write this paper, Southwest offers one of the most unique and most entertaining flying experiences.  These are just minimal examples as to why the company will continue to grow through their corporate strategy “If they are happy, satisfied, dedicated and energetic, they’ll take good care of the customers” (Southwest, 2016)

Key factors leading to company’s current position

Southwest maintained its position through offering affordable traveling options for those who chose not to fly due to high prices.  Their key factor was their short haul mentality, shorter flight routes allowed Southwest to offer more flights per day.  Their average is 10-12 flights per day, while industry competitors only completed 1-2.  Another key factor was the use of their 737 Boeing as the plane of choice for their fleet, this allowed for everyone to be trained with the same equipment, thus allowing different crews to operate simultaneously with out any lag or learning curve.  

Present

Internal & External Analysis

Key Internal Factors

Weights

Rating

Weighted Score

Internal Strengths

3 or 4

Only Airline with 1st and 2nd bags flying free within the U.S.

0.05

3

0.15

Is considered the largest airline carrying 104 million passengers in 2011 compared to its’ main competitor United Airlines at 96 million.

0.05

4

0.2

Has been in the airline industry for 40 plus years.

0.04

4

0.16

Strong brand image, Named tenth most admired Company in the world in FORTUNE magazine's survey of corporate reputations

0.04

4

0.16

Company is known for its great staff, loyal employees, and low turnover rate having laid off three people in the last 25 years; hiring them back almost immediately.

0.05

4

0.2

Southwest.com was the second-largest travel site.  The "look-to-book" ratio is twice that Travelocity and higher than any traditional retailer.

0.05

4

0.2

Southwest has high capacity usage due to its’ low turnaround time leading the industry at approximately 20 minutes attributed by point-to-point service versus hub-and-spoke.

0.04

4

0.16

Southwest is one of the 7 safest U.S. airlines

0.06

3

0.18

Largest domestic carrier with 698 aircraft owning roughly 71% or 499 of those aircraft outright and the remaining 29% (199) aircraft being leased.

0.05

4

0.2

Strong financial position and cash flow with roughly $3.1B in cash and short-term investments, $800M fully available in lines-of-credit, and debt-to-capital down roughly 3% with the acquisition of AirTran.

0.04

3

0.12

Key External Factors

Weights

Rating

Weighted Score

Opportunities

0.0 to 1.0

1 to 4

11 out 12 us airlines charge for Second checked bag

0.05

1

0.05

 Deregulation on global sky policies in international countries (Canada).

0.07

2

0.14

Business and leisure travel is beginning to increase due to the recovering US Economy.

0.06

2

0.12

9 out of 12 U.S. Airlines offers business/first class.

0.08

1

0.08

Traveler traffic is expected to grow by 3.5% through 2019 as the United States recovers from the recession.

0.03

3

0.09

Delta Partnered with 22 other airlines

0.04

2

0.08

Over 58 million US citizens travel to overseas in 2011

0.06

1

0.06

Boeings’ new plane models could burn 70% less fuel than conventional planes and travel farther.  

0.05

1

0.05

Research shows that that economy passengers are willing to spend up to $21 on onboard services( including food and entertainment

0.06

1

0.06

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