Southwest Financial Analysis

Loyal customers, like myself, rely on Southwest for majority of our travel experiences because of their transparency as a company. I want to learn how a company can successfully cater to the customer experience while also supporting surrounding communities in which Southwest flies. The positive and caring spirit of Southwest would not be possible without the trust its customers have in the company. Ultimately, I want to work for Southwest because I want to be encouraged to have integrity for myself and my

Liquidity ratios measure the short term ability of a company to pay its obligations and meet their needs for maintaining cash. According to Cagle, Campbell & Jones (2013), “A good assessment of a company’s liquidity is important because a decline in liquidity leads to a greater risk of bankruptcy” (p. 44). Creditors, investors and analysts alike are all interested in a company’s liquidity. After computing liquidity

This internal business analysis is on Southwest Airlines, which was founded in 1967 by Rollin King and Herb Kelleher. The main focus for Southwest Airlines was to provide low cost flights for their customers, and also have exceptional customer satisfaction. Southwest is a leading airline company that continues to do well in an industry that has been historically challenging. For instance, in the span of two years (2005-2007) five major airlines have filed for bankruptcy. The challenges are great in the airline industry, because competitors are trying to imitate the “low-cost” offering of Southwest. Many companies have tried to do what Southwest has done, and many have failed to stay

Southwest’s strategic perspective begins with a low-cost business model, which has been consistent for the last 42 years (Rothman, 2016). Even during volatile times and when the economy was at its lowest, Southwest continued to remain profitable (Rothman, 2016). Further, Southwest’s operations are managed by a Board of Directors, which has adopted Corporate Governance Guidelines to further its goal of providing effective oversight of the business to ensure a maximum benefit for the shareholders, employees, and customers (Southwest, 2016).

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

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.

Jet Blue managers have not managed the company 's assets efficiently and effectively. Because of the September 11 terrorists attack, Jet Blue 's Return on Assets (ROA) has drastically dropped from 2003 to 2004. It is very far from showing profitability and best use of its assets. Southwest Airlines also experienced a drop from 2001 to 2002 but has sufficiently recovered and is on an upward trend. Their increase from 2002 to 2003 was at 35%. It is showing profit and increasing its ROA. Jet Blue 's performance shows that the company is currently improving and may be stronger in its future performance. Southwest Airlines shows that their current performance and future performance expectations are good.

The safest way to travel in the United States is through U.S. commercial airplanes. There are only .06 deaths per billion miles, which is tremendously better than cars and motorcycles who’s are 5.67 and 217 per billion miles (CNN 2015). Southwest Airlines is one of the major airlines in the US and the one of the world 's largest low-cost carrier. The airline was created by Herb Kelleher in 1967. Their headquarters are in Dallas, Texas. By using the PESTEL analysis, Value Chain Analysis, and the Return Of Sales (ROS), I will analyze Southwest. It will compare them to their competitors such as Jet Blue, Delta, and American Airlines.

Southwest turned its first annual profit in 1973, and has done so every year since — a record unmatched by any other commercial airline.[17] Southwest has used financial techniques such as fuel hedging to bolster its profitability and counteract many of the fiscal disadvantages of operating an airline.

For Southwest Airlines, the decrease in fuel costs has led to a major boost in profits. In 2015, fuel costs for Southwest were the lowest percentage of operating costs they have been since 2006 (See Appendix 1). Southwest’s stock price, compared to other major airlines, comes in at second: United Continental Holdings has a higher stock price by about

Southwest will aim to turn weaknesses into strengths, and threats into opportunities. It’s important to have different options to match internal strengths with external opportunities. The outcome should be an increase in value for customers, which hopefully will improve our competitive advantage and help with these weaknesses and threats. There has been a threat that other airlines are trying to imitate Southwest strategies. This is a huge concern for Southwest, since the airlines won’t be as unique when other airlines are trying to compete. There shouldn’t be

Southwest Airlines Co. was established in 1967 when it was started with only three Boeing 737 aircraft that serve three largest Texas cities namely Dallas, Houston and San Antonio. In 1989, Southwest Airlines became a major airline when it surpassed the billion dollar revenue mark. Each year, millions of people fly with Southwest Airlines making them the nation’s largest carrier of domestic passengers. With 43 years of exceptional service Southwest Airlines continues to expand and serve 93 destinations in 40 states with more than 3,600 flights a day. This year Southwest launched their international flight service to five nearby countries by Air Tran Airways, a wholly owned subsidiary which was acquired in May 2011.

Southwest is ranked as the fourth largest airline in America concerning domestic traveler miles flown. The following factors accounts for Southwest Airlines success. Firstly, the organization is very serious about keeping their costs down. Secondly, Southwest employees have never gone on strike. Thirdly, Southwest dominates airline industry in on-time performance. Additionally, its unique culture maintains the morale of the employees elevated. Lastly, Southwest increased its stock price by 29 percent per annum in 2002. Southwest Airlines is glued together by its corporate culture. King and Kelleher founded it in 1971. Their major objective was to offer regular, cheap airline service in eventful

Southwest airlines is or was viewed as the yardstick in the airline industry for its operational excellence. They offered short haul, low cost, point to point service between cities and airports. They avoided bog airports and did not fly long distances. They had a wide variety of customers, which included, business professionals, families, and students. Southwest had low fares and recurrent departures, this attracted customers. Southwest airlines channeled all its activities to provide low cost, expedient services. Through fast turnaround times of 15 minutes at the gates, they were able to keep their planes flying for longer hours. (2002). Southwest had a discrete advantage over their rivals by implementing an active and well-organized operational strategy that was very important to its overall corporate strategy.

The cash ratio is the ratio of a company's total cash and cash equivalents to its current liabilities (Bethel University, 2017). The cash ratio is normally a more traditional look at a company's capability to pay its liabilities. Subsequently, it is also known as liquid/ liquidity ratio which again measures the ability to pay liabilities also normally other assets, including accounts receivable, are left out of this equation. A company having a cash ratio of 1.00 and above means that business will be able to pay all its current liabilities in a short period of time. Based on information found on Southwest Airlines my calculations for my cash ratio was 0.25. I arrived at this total by adding cash and its equivalents which totaled 1680 then divided the current liability which was 6844 hence how I calculated my figure. In my opinion, Southwest Airlines are doing a poor job in maintaining funds to pay off its own obligations. Management should analyze new ways of generating cash to pay its debt while still keeping enough to reinvest in the company, plus this is a bonus because it gives the company the opportunity to generate more profits with these funds.