Case Analysis on Southwest Airlines Co.
Southwest Airlines is now considered as one of the top players in the airline industry. But, like any other key performers, it faces a challenge of having continued success amidst other factors. The factors can either be internal or external in nature. Internal factors include loopholes in the company which can be seen from the company’s organizational system and structure. Although it has a strong foundation based from the management’s point of view, there are still unidentified loopholes. On the other hand, external factors include terrorist attacks, budding and existing competitors, operating costs and incoming trends.
Southwest provides pure transportation service but is somewhat venturing in the category of a service mix wherein such service is accompanied by certain goods. The said airline company has both strong and weak points which give rise to opportunities and threats. Strategies for the company’s growth were formulated according to the SWOT analysis. Case Analysis on Southwest Airlines Co. The birth of Southwest Airlines Co. in 1967 was from the great impulse of Rollin King and Herb Kelleher. The seed of the idea came form the air charter service owned by King.
John Parker, who is King’s banker, added fuel to the idea when he mentioned that he finds it hard to find a seat on airlines that is flying between small Texas cities. After that incident, King plainly asked Kelleher that two of them should put up an airline. Papers were processed and approved on February 20, 1968 and so Air Southwest Co. was born. The airline was later on named as Southwest Airlines Co. Southwest’s main routes are in the cities of Dallas, Houston and San Antonio. There have been problems encountered in these routes because of blocking of other major carriers.
But by year 1971, operation pushed through and it entered the states of Northwest, Midwest and California. . The organizational structure of the company consists of the Chairman of the Board, Herbert Kelleher who is the primary overseer of the company. He is followed by the Chief Executive Officer, Gary Kelly then the President who is Colleen Barrett. Vice presidents for certain operations are in the bottom line of the organizational chart. The major business of Southwest is basically inclined in providing short haul, point-to-point, low-fare and hassle-free service.
But eventually, long haul trips, even nonstop flights were introduced to the states of Nevada, California and Maryland. The headquarter of the airline is located at the Love Field Drive at Dallas, Texas. The ‘LUV’ stock exchange symbol of the company was to represent its location. The sales of the company from the year of 2005-2008 is fairly good but not for the year of 2007. In the year of 2005, the U. S airline industry lost some companies including Northwest and Delta because of bankruptcy and soaring energy prices. But, Southwest managed to survive and even continued its state of profitability with $ 548 million and $ .
67 per diluted share. For the year of 2006, the company gained $499 million and $. 61 per diluted share. The year 2007 is the year when the rise of jet fuel prices had an impact on the company since net income decreased by 41. 7 %. As for the current year, the effects of the changes made by the fuel hedging program are still ongoing. Southwest added more departures while the unproductive flights were taken away for efficiency reasons. Southwest Airlines face issues that may alter operations of the company but some current strategies were implemented to overcome the problems. The soaring jet fuel prices were countered by the hedging program:
Jet fuel prices have been rising every year for the last five years. Our fuel hedging program has consistently mitigated such price increases dating back to year 2000. Since then, in each year, we have striven to hedge at least 70 percent of our consumption. In 2007, we were approximately 90 percent protected at approximately $51 a barrel. That protection saved us $727 million last year and limited us to an 11. 3 percent increase in the economic cost per gallon, year-over-year. (Southwest Airlines Co. (2007). 2007 Report to Shareholders. Texas: Kelleher. ) Another issue is regarding the waiting line experiences by the passengers.
The company, since the day it started operating had an open seating system. So far, there were no negative feedbacks from the said system. Issues on lost baggages and time to check in were treated through computer-generated bag tags and streamlined processes. SWOT Analysis Southwest Airlines Co. was listed as part of the top 5 of on-time carriers, with the least complaints from passengers. It also holds the title of Triple Crown for its annual performance. These awards can attract possible employees in the near future. The company prioritizes its employees before its customers.
The executive committee of the company establishes a good working relationship with its employees even in simple ways like sending out birthday cards. The company believes that with good personnel management, it can have a strong foundation since the employees do provide a great part in the operation. The familiarity of the employees with the different models of the airlines aid in the efficiency of service when there is a need for shifting. Also, the way the company handles competitors is a good point. Knowing the airline models of the competitors will be of great help for further moves.
On the other hand, the company has a weak leg when it comes to expansion. The board only wants to expand when there are enough resources and transcontinental operations are not part of the plan. Because of these, additional income might not be incurred. One of the opportunities for the company can be taken from its marketing strategy. It was a wise decision to have a website since E-business is very accessible to many passengers. The company managed to dominate the Texas market and having established a name in this specific state, the company has an edge over other airlines.
Also, since travelling by plane is faster, there are always sure passengers. With the low fare costs and good accommodations, more customers would opt to book for flights in Southwest. A low fare airline like Southwest also has an edge over major airlines since it won’t be the target of the terrorists. In contrast, threats are also faced by the company. With the continuous rise of jet fuel, the hedge program, there might come a time that the said program may not be enough to counter the increase in prices. Although some top competitors withdrew from the industry, some players are still present.
And Southwest doesn’t know what kind of attack these airlines will do. The company may afford to purchase additional aircrafts but this means that more monitoring costs will be needed. For example, Southwest is now more held accountable for the safety of more passengers. Recommended Strategies Southwest does need to be with the flow of the airline industry to identify possible opportunities. But, the company should make sure that as it adopts with the trend, it should still have a unique selling proposition. The company should start by keeping its loyal flyers. An award can be given to the most frequent flyer for a specific month.
Discounts on fare or even having a free ride can be given to the chosen flyer. The company can also purchase aircraft models that are energy-saving. But these aircrafts should still be able to meet the original number of flights set by Southwest in a safe way. As for the marketing strategy, freebies like shirts or caps can be given to the passengers. These goods will serve as part of the airline publicity. The use of the media is also recommended. A jingle for the airline can be composed alongside with a TV advertisement. It may be costly but the media caters to a very big audience of possible passengers.
As for the internal operations of the company, team building camps must be given to the staff so to strengthen working relationships. The camps will also serve as a good training ground for the employees. The company should maintain good service quality through adhering with technical and functional quality and maintaining a good corporate image.
Southwest Airlines Co. (2007). 2007 Report to Shareholders. Texas: Kelleher. Southwest Airlines Co. (2006). 2006 Report to Shareholders. Texas: Kelleher. Kotler, P. : Marketing: An Introduction. Retrieved from http://www. scribd. com/doc/5357785/Introduction-to-Marketing-Management