Southwest Airlines is a super successful company that is one of the

most loved and most flown domestic airlines in the United States. The

company was established in 1967 by Rollin King and Herb Kelleher with

the strategy of being the best low-cost airline in the United States.

Southwest began flights in 1971 with low fares and on-time travel

between Dallas, San Antonio, and Houston. Southwest, as of 2014, has a

fleet of 579 airplanes and flies between 93 destinations. Southwests

success is the result of using the latest innovations to make the airline

industry customer centered. This research paper will highlight some of

the important strategies that Southwest has enacted to bring about their

outstanding success.

SWOT Analysis

An evaluation of the internal strengths and weaknesses, and the

external opportunities and threats--based on the case study and additional

references--is as follows:

Strengths-Internal

Southwest had a 18.8% market share in January 2015 based on

domestic available seat miles, per the Centre for Aviation

More departures than any other US airline

Very well run business, fantastic upper management

 The best low-cost carrier in recent years

Few unfilled seats on flights

Stronghold on the short haul segment of the airline industry

One of the most profitable airlines, while many other airlines are

struggling

Good relationships with its unions

Its fun to fly on Southwest-Culture

Embraces technology

Superior Customer service

Loyal employee base that is willing to work hard to achieve the company's

goals

Implemented programs to retain employees, including the first profit

sharing plan in the industry and a 401k plan that matches contributions

dollar for dollar

Weaknesses-Internal

Few morning flights offered

No flights to international destinations

Dependent on a single type of aircraft - the Boeing 737

Most employees belong to a union

Only one class of seating is offered - coach

Booking flights is only available directly through SWA

 It does not offer frills such as airport lounges or on board movies

Can only carry a small amount of cargo and freight

Opportunities-External

Diverse population and the growing elderly generation = potential

markets

Air travel is predicted to increase rapidly this decade

International markets that are not yet served by Southwest and longer

flights

New technology - opportunities for new services and products

Better use of the Internet for marketing, ticketing, etc.

Threats-External

Cost trends can increase with rising fuel prices

Fuel price increases could reduce air travel

Decline of leisure travel due to terrorism and/or a depressed economy

New government regulations could make air travel costlier

High-speed rail could someday hurt short and medium length air travel

Increased competition would likely hurt industry profitability

One of the most impressive features of Southwest is their continued

efforts to keep fares low. Also, the fun company culture among the

Southwest employees is impressive. Southwests employees are truly

committed and engaged in doing their part to deliver great customer service

and to make the company successful. Southwests management has done a

great job with employee selection, training, and ongoing motivation, thus

making the workplace extremely attractive to job applicants. Southwest has

created a competitively powerful strategy that has been thought through

down to the last detail, producing a low-cost competitive advantage.

The management team at Southwest runs an extremely well-managed

company with Herb Kellehers leadership extremely instrumental in the

companys success. It is easy to give Southwests management a superior

rating in their company strategy. With their commitment of low-costs and

low-fares, they truly appeal to cost-conscious flyers. Southwest has grown

over the years to become the number one airline in terms of passengers

carried, a true testament to the market effectiveness of Southwests

strategy.

Southwest has put a lot of thought into its desire to be a low-cost

airline, having come up with a host of strategic plans to create and sustain a

low-cost advantage. These include maintenance, general administration,

and other cost saving operating expenses including fuel hedging. Southwest

has been able to gain profits with these strategies even when rival airlines

have lost revenue. Southwest has been able to prosper with its low-cost

provider strategy and appears to be able to sustain that even during poor

economic times. The company has enjoyed steady growth, making a profit

every year since 1973, suggesting that Southwests strategy is producing a

company that is built to last.

 The evidence presented in the case confirms that Southwest does have

a winning strategy. The strategy is right for the marketplace and has

delivered a competitive advantage. Southwests financial performance has

been the best in the U.S. airline industry over the long-term and short-term.

The following policies, procedures, operating practices, and core values

that stand out the most are Southwests strong conviction that their

employees come first and the customer comes second, this policy has been

a strong factor in the achievement of high customer satisfaction and high

employee productivity. Happy employees make happy customers! The

commitment to deliver high-quality customer service is another good policy,

as stated in Southwests mission statement: The mission of Southwest

Airlines is dedication to the highest quality of Customer Service delivered

with a sense of warmth, friendliness, individual pride, and Company Spirit.

Southwest managements policy to pursue low operating costs, led to

several cost saving practices. The company operated only one type of

aircraft, Boeing 737s, to minimize the size of spare parts inventories, simplify

the training of maintenance workers and repair personnel, and improve the

proficiency and speed of maintenance schedules. The policy of ticketless

travel and the ability for customers to purchase on the company website

were cost saving policies. Southwest also purposefully chose to avoid flights

to congested airports, only serving medium sized cities near the larger cities.

This policy helped produce better-than-average on-time performance and

helped reduce the fuel costs. Southwest has, though, in recent years, begun

serving more large city airports to help bring about larger company growth.

A few more impressive Southwest policies and procedures that were

real cost savers include their no first-class section in any of its planes,

regularly upgrading their technology to speed data flows, improving

operating efficiency, and ongoing strives to improve their customer service.

Southwest was also one of the first among major U.S. airlines to employ fuel

hedging to counteract rising prices for crude oil and jet fuel.

Southwests compensation policies and practices are as well

impressive, their pay scales are often above the industry average and

benefit packages compare well with other airlines. Southwest also has an

attractive profit-sharing plan, and the company relies heavily upon the

empowerment of their employees.

Southwests corporate culture is defined by their Spirit of Southwest

that has several important elements: A fun atmosphere and work

environment with a can do attitude! The company has done a super job

with using LUV to create a supportive culture and to sustain achievement of

the companys customer satisfaction objectives. They have a cost-saving

approach to operating, both management and employees are attentive to

keeping costs down and to operating in a lean fashion. This is a major

reason for Southwests success in implementing and executing its strategy.

Southwest formed a Culture Committee in 1990 to promote Positively

Outrageous Service and devise tributes, contests, and other celebrations

intended to perpetuate the Southwest Spirit and Living the Southwest Way.

Over the years, the committee has sponsored hundreds of ways to promote

the behaviors embedded in Living the Southwest Way. The important role of

the Culture Committee at Southwest was indicated by Herb Kellehers

statement that Were not big on Committees at Southwest, but of the

committees we do have, the Culture Committee is the most important.

Southwest also came up with a wide variety of ways to promote its

core values and continue its unique culture. There was an annual Heroes of

the Heart Award, a CoHearts mentoring program, a Day in the Field program

where employees spent time working in another area of the companys

operations, a Helping Hands program where volunteers from around the

system traveled to work two weekend shifts at other Southwest facilities that

were temporarily shorthanded or experiencing heavy workloads, and periodic

Culture Exchange meetings to celebrate the Southwest Spirit and company

milestones. Almost every event at Southwest was videotaped, which

provided footage for creating such multipurpose videos as Keepin the Spirit

Alive that could be shown at company events all over the system and used in

training courses. The concepts of LUV and fun were spotlighted in all the

companys training manuals and videos.

Southwests monthly newsletter, LUV Lines, often spotlighted the

experiences and deeds of employees, reprinted letters of praise from

customers, and reported company celebrations of milestones. A quarterly

news video, As the Plane Turns, was sent to all facilities to keep employees
up to date on company happenings, provide clips of special events, and

share messages from customers, employees, and executives. The company

also published a book for employees describing outrageous acts of service.

Southwests management deserves a grade of A+, it is hard to see

what Southwest could have done much better. The best examples being the

companys array of management practices and their strong commitment to

identifying and implementing ways to keep its costs low. Southwest is a

company with no glaring weaknesses or critical operating problems, but

there are some areas of concern. Southwest has lost some of its cost

advantages in recent years, rival airlines have been slashing costs to survive,

particularly in the areas of pilot and employee salaries. Southwest has also

been moving into airports with higher landing fees and more congestion.

The acquisition of AirTran is a great choice for Southwest. Air Tran is

also pursuing

a low-cost strategy, so this is a good fit for Southwest from the standpoint of

their competitive approaches. AirTran has flights to several attractive

geographic areas and airports not served by Southwest, offering a good

growth opportunity for Southwest. Southwests reputation and good

customer service should help it win added customer traffic in most of the

locations that AirTrans serves like Atlanta Hartsfield, an example where a

sizable market share may be won. AirTran flies mostly Boeing 737s (it also

has 86 Boeing 717s in its aircraft fleet) which matches Southwests strategy

of flying only 737s to help contain maintenance costs. The strategic issues
and problems Gary Kelly and Southwest executives need to address as they

proceed to close the AirTran deal would be integrating AirTran employees

into the culture of Southwest, implementing new flight schedules that both

airlines serve, growing the traffic in the new AirTran locations that were not

previously served by Southwest, and adapting AirTrans operations into the

Southwest way.

During this transition, Southwest should appoint some AirTran

executives to executive posts at Southwest. Gary Kelly and other Southwest

executives should be very visible at AirTran facilities following the closing of

the acquisition, meeting with all AirTran employees to talk about the

opportunities and benefits of merged operations, highlighting the Southwest

way of doing things. All AirTran employees should go through the Culture

Training classes and be trained in the Southwest policies, procedures, and

operating practices. A good idea would be to transfer AirTran employees to

fill new Southwest job openings rather than hiring new Southwest

employees. Southwest employees should be encouraged to help mentor

AirTran employees in the transition.

In conclusion, Southwest's current strategy is to continue its position as

a low-cost leader with a focused strategy. The companys management and

employees aim to fly large numbers of customers cost-effectively and

reliably on short, non-stop flights and to have fun doing it. Southwest has

been very successful implementing their strategy, experiencing strong

growth and profitability. Southwest is one of the largest carriers in the U.S. in
total customers, operating profitably for 32 consecutive years in a

competitive industry that has not always been profitable. The main strategic

issue facing Southwest now is to continue to evaluate this strategy and

determine its future course of action.

 References

Rothman, L. Adam. "Analyzing Southwest Airlines' Market Share

(LUV)." Investopedia. N.p., 12
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Southwest Airlines Airline Tickets, Flights, and Airfares. (n.d.). Retrieved

March 02, 2017, from
https://www.southwest.com/

Southwest Airlines Co. (n.d.). Retrieved March 02, 2017, from

http://www.encyclopedia.com/social-sciences-and-law/economics-
business-and-labor/businesses-and-occupations/southwest

Southwest Airlines Co Success Story. (n.d.). Retrieved March 05, 2017, from
https://successstory.com/companies/southwest-airlines-co

"Southwest Airlines SWOT Analysis - Business Assessments". Businesstune-

ups.com. N.p., 2017.
Web. 1 Mar. 2017.

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competitive advantage:

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