Airline Industry : Southwest Airlines

Southwest Airlines Co., established in 1971 by Rollin King and Herb Kelleher, began its operations with only three Boeing 737 aircrafts. It is headquartered in Dallas, Texas(Hawkins, Misra, & Tang, 2012). Southwest is well known as one of the largest low-cost carriers. With this strategy, the company has dramatically grown up and deeply rooted in the US airline industry. Now, Southwest Airlines Co. operates 633 aircrafts to 93 domestic cities and the highest number of passengers used Southwest Airlines to fly around U.S in Jan 2014 (Hawkins, Misra, & Tang, 2012). To accomplish more than 40th consecutive years of both profitability and competitiveness, Southwest Airlines Company is constantly trying to find the routes to differentiate itself from other domestic carriers (Hawkins, Misra, & Tang, 2012).

Southwest Airlines is one of the most successful airlines in America today. Although it was established much later than other airlines, the airline experienced numerous challenges, which negatively affected its performance. Established in 1967, Southwest Airlines could not operate for four years. They had a rough start following legal battles that derailed the start of their operation. Since the beginning of their regular operation in 1971, this airline has had the most consistent profitable record in the world. Their success highly depended on the management’s decision to embrace advanced management and operational strategies. Over the years, the airline has come up with various measures that have made them the leading carriers in the United States (Gittell, 2003). Several other companies in the world have since adopted their model of operation to increase their productivity. Their flexibility and willingness to try new methods has transformed the airline into the most popular airline in America today.

Economic, social-cultural, and technological forces are the external macro-environmental factors Southwest Airlines should be most concerned with. Weak economic growth reduces the purchasing power of an airline’s target market. Southwest, known for being a leader in low cost airline, provides flights at a higher frequency and capacity to attain profit. However, the company experienced increasing overhead through the lapse of long-standing fuel contracts, which previously helped provide a competitive advantage. This factor is also amplified by the growth the company experienced with success. Southwest is the fourth largest airline and has seen fuel cost skyrocket from 29 percent to 35 percent over a seven-year period.

Southwest Airlines is one of the most profitable airlines in the airline industry. During turbulent economic times Southwest has managed to continue strong revenue growth in a disastrous environment and has operated profitably for 39 consecutive years (Mintzmyer, 2012). Southwest Airlines has capitalized on the company’s strength of being the top low cost carrier by offering a simple and efficient business plan that prides itself on customer service. Southwest utilizes only the Boeing 737 to streamline their processes, and utilizes their award winning Southwest.com to drive ticket sales. Southwest has begun to capitalize on future market opportunities by purchasing AirTran airways and is now capable of not only

Southwest Airlines sells its tickets as an air traffic liability, meaning passenger revenue is only recognized once travel has been provided, though the majority of tickets purchased are non-refundable. The aviation transportation industry is one of the most competitive in the market. Southwest has made a number of recent changes to its business approach, allowing it to become even more competitive and its success more apparent than ever. One reason Southwest has an edge on its competitors is that it only flies one type of airline to transport its passengers—the Boeing 737. Using only one type of aircraft decreases maintenance costs and equipment needed the same throughout the company. It also means that the employed flight crews

Southwest Airlines Co. is a major domestic air carrier that is "the world 's only short-haul, high-frequency, low-fare, point-to-point carrier" according to the President and CEO Herb Kelleher. Southwest has always been able to quickly seize any strategic opportunities whenever they arise. Southwest is the only company to ever hold the Triple Crown for annual performance. Some of the key factors that contribute to Southwest 's success are its conservative growth pattern, cost-containment policy and the commitment of its employees. Southwest has made its mark by concentrating on flying large numbers of passengers on high frequency, short hops at bargain fares. Southwest flies out of smaller satellite fields rather

When on vacation, the first people you deal with are the airline companies, yes this is the dreaded trip to the airport. Way to often people have their happy vacations ruined by inconsistent and unreliable customer service, making them late for flights because of long lines, slow service, and unreliable technology that is difficult to use. However, Southwest airlines is one company that is standing out above all others. Known for their outstanding customer service and “Bags Fly Free” campaign, Southwest has held their ground against rising prices in airline travel and continued to expand its reaches while at the same time attracting many satisfied customers. Southwest Airlines was founded on June 18, 1971 by Rollen King and Herb Kellener. The very same year, Southwest began its flights servicing Dallas, Houston, and San Antonio. Southwest quickly climbed the ranks within airline the industry and became the fifth largest US air carrier by 1998, carrying an average of 50 million passengers a year across the United States. From then on, Southwest soared above the rest of the mid-range air carriers, and continues to do so to this day. Southwest quickly became known for its innovation when it comes to customer service and satisfaction, and it is still well known today for its simple and convenient customer service. Southwest has also been deeply involved when it comes to their social responsibilities, taking action to be ecofriendly whenever, and wherever possible. (Avstop)

Southwest Airlines is one of the largest airlines in the United States by number of passengers carried each year (Inkpen, 2013). The company had been profitable for decades unlink other major competitors and also was able to weather 2008-09 recession (Inkpen, 2013). At southwest, leadership philosophy is to manage well at good times to prosper through bad times (Inkpen, 2013). The airlines we found by Herb Kelleher and San Antonio in the year 1970. Southwest began flying in year 1971 in three Texas cities with three aircrafts and 25 employees. Its initial focus: Short-haul, point-to-point flights, a fleet of Boeing 737s, low fares and high-frequency flights (Inkpen, 2013). In year 2012, 81% of its passengers booked tickets via

Southwest Airlines is a major passenger airline that provides scheduled air transportation in the United States and near international markets. For the 43rd consecutive year, the Company was profitable, earning $2.2 billion in net income (10K part 1 2015). SW started its service in 1971 with three Boeing 737 and as of 2015 has a total of 704 Boeing aircrafts. The company as of 2015 services 97 destinations in 40 states, including seven near continental destinations. SW principally provides a point-to-point service rather than the hub-and-spoke service provided by most other airlines. Southwest Airlines is a high-frequency, short nonstop hauler; this is its diversification asset in the industry. The key component of its strategy has always been its low-cost structure. Moving forward the PESTEL-Analysis will be engaged to provide illumination into what makes SW a 43 times winner.

One of the major external factors that helped Southwest Airlines in it 's expansion in during the latest years, is the fact that the managers of the company took advantage on the decrease in fuel costs in 1998. Travel demand increased in 1998 and the Southwest Airlines among most of the other airline companies reported operating profits. The match of those two parameters, low oil prices and increase in traveling demand had a superior outcome for the company. On the other hand fuel may be an enemy for the Southwest Airlines in the future. Oil prices are surely not predictable and there is no safety provided for any downturns or upturns in the demand and correspondingly the price of it in the near or far future.

In 2007, while the airline industry responded to a hike in fuel costs and a decline in commercial air travel with leaner domestic flight schedules, SWA optimized their flight schedules and routes to offer a preferred, more robust network for customers despite no year-over-year growth in available seat miles (Southwest

Southwest maintains high profit earnings despite being heavily unionized. Using high level aircraft/employee productivity and minimizing costs by reducing aircraft turnaround time at the gate, Southwest was able to generate an operating revenue of 17.7 billion dollars and an average passenger load of 80.1 percent (Southwest, 2014). A major contributor to the airline’s success is fuel hedging. Fuel hedging is a contractual tool used to mitigate rising fuel costs. Fuel hedging allows Southwest to establish a fixed or capped cost, via a commodity swap or option. When buying a fuel swap, if the price of fuel drops, then the company will be forced to pay the above market rate. When purchasing a fuel call option and the price increases, the company will receive a return that offsets their actual costs. Some fuel call options require an upfront cost. In the previous scenario, if the cost of fuel decreases the company will not receive a return on the option, but will benefit from buying fuel at the lower cost. Southwest Airlines has leveraged this technique and in doing so avoids high fuel costs; drastically important to a company whose annual fuel consumption in 2012 topped approximately 1.9 Billion gallons (Southwest, 2014)!

While discussing about marketing success stories, Southwest Airlines name is bound to come. The company is a perfect example of customer focused marketing that helped it become Number 1 airline and currently serves almost 18.2% of the market share. Southwest is the only airline to win “triple crown” for five consecutive years between 1992 and 1996 for customer satisfaction, on-time arrival and lowest level of lost baggage. Being an upstart company starting in 1971, the way Southwest has maintained growth and consistent profitability record in a highly competitive market like airline is commendable.

The Airline industry has been around for decades, but in the long run it is still a pretty new type of industry. Therefore, there are still growing pains that need to be worked out. There are many small companies, but the major Southwest competitors are Delta/Northwest, Continental/United, JetBlue, and Allegiant.

Although Southwest is smaller than some of the major airlines, it is pursuing a market share leadership strategy. The example in the case of its success in the Oakland market versus US Airways indicates that even though it may not be the biggest overall airline, it tries to dominate any particular market it enters through its low-price strategy. Thus even though it is entering the Philadelphia market with only 14 flights per day, US Airways should expect it to expand its number of flights quickly if it is successful in getting a start in the market. Southwest is not pursuing a current profit maximization strategy, even though it has been highly profitable. Low prices do not necessarily result in lower