Southwest Airlines Case Analysis

4195 WordsJul 28, 201117 Pages
Southwest Airlines  Executive Summary “The U.S. airline industry had lost money in 14 of the 28 years from 1980 through 2007, with combined annual losses exceeding combined annual profits by $15 billion. Yet in July 2008, Southwest reported record quarterly revenues, its 69th consecutive quarter of profitability, rising passenger traffic on its flights, and a record load factor.”5 With a brilliant strategy of ‘low cost/low fare/no frills’ Rollin King, along with Herb Kelleher, launched the most surprising success story in airline history. In 1966, King had an idea. “His business concept for the airline was simple: attract passengers by flying convenient schedules, get passengers to their destination on time, make sure they have a…show more content…
The Federal Aviation Administration (FAA) along with the Department of Transportation (DOT) controls every facet of aviation. The FAA regulates everything from pilot license requirements to new aircraft certification where “safety” is first 100% of the time. While this sounds good to normal people, the relentless pursuit of “safety” requires airlines to spend millions of dollars every year to keep up with new regulation and operating requirements. The statistics that show fatalities per flight mile traveled are infinitesimally small and have been since the 1960s. Often times the marginal cost of new FAA safety regulation as compared to the marginal benefit of those safety regulations measured in accident incidence per flight mile flown are statistically insignificant. Meaning the new safety regulations really don’t make flights any safer, but do cost the airlines millions of dollars. While the FAA regulatory system is a much needed check and balance, the consequence is that airlines must pass down the increased cost of complying with the safety regulations to the passengers As they continue to muddle through the labyrinth of new regulations on a continuing base, the airlines face a major concern for their bottom line going forward. An airlines largest single expense is jet fuel. The cyclical nature of oil prices causes major problems. Southwest Airlines has been fortunate in this
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