Southwest Airline's Low Cost Fare Structure And Customer Service

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Southwest Airline’s low-cost fare structure and customer service has been its primary core-competency and has enabled the airline to maintain its market share while sustaining its competitive advantage over its rivals for over 40 years. This internal analysis will provide a review of the strengths and weaknesses of events that occur within the firm along with a financial analysis assessment and recommendation for future decisions.

Strengths and Weaknesses
Southwest’s business model is dependent upon labor as approximately 83% of the company’s employees are represented by labor unions. This makes the firm particularly exposed in the event of labor-related issues. The Company’s success is also dependent upon attracting and retaining qualified personnel. In the future, it may be necessary for Southwest to increase existing levels of compensation to retain its human capital. Currently, salaries, wages, and benefits represented approximately 41% of the company’s operating expenses for the year ended December 31, 2015. In terms of operating expenses, fuel and oil comprised 23% of the airline 's totals in 2015. Southwest Airlines had first unhedged its 2015 fuel consumption however, later in the year as crude prices increased, new hedging positions were added in response to expectations of increased fuel prices in the future. If the oil prices, in fact, rise later in 2016 the airline will see a decrease in its operating expense and an increase in capacity and

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