Case Analysis Southwest Airlines Co
Southwest Airlines Co. , founded by Rollin King and Herb Kelleher over 30 years ago, is the fourth largest major airline in America and the second largest in scheduled domestic departures. Southwest Airlines has numerously won the coveted Triple Crown for best on-time record, best baggage handling, and fewest customer complaints. They are well-known for their strategy of high frequency, short-haul, point-to-point, low-fare services. Southwest averages more than 64 million passengers a year in flights to 58 different cities all over the southwest.
Being the first airline to launch an Internet home-page, Southwest was able to generate 46% of its passengers online and at about $5-$7 less than their competitors who book flights through travel agents. They own over 355 of the latest jets and the only aircraft type Southwest works with is the Boeing 737 series. By having a single type of aircraft, Southwest is able to abridge scheduling, maintenance, flight operations, and training. The average age of their aircrafts is less than 8. 5 years.
Southwest also maintains great human resources and employee relations. In April 2001, Fortune magazine named them employer of choice among college students. One of the clever strategies they have implemented is the automatic boarding pass
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Their competitors include United, Delta, Northwest Airlines, US Airways Group, American Airlines, and Alaska air group. They rank number one in market capitalization and despite the September 11 terrorist attacks was the only airline company to withstand its impacts on the economy. Despite some decreases in net income (82. 3%), operating revenues (12%), and load factor (62. 9%), Southwest airlines have posted profit consecutively for the last twenty nine. In fact, they were the only airline to post a profit for the first quarter of 2002.
With their $1 billion in cash and cash equivalents, Southwest was able to restore service on September 14, only 3 days after the disturbing terrorist attacks. They had the strongest balance sheet and highest credit ratings among all the airline industry. There profitability allowed them to continue 100% operations and full employment with no layoffs. Southwest has the lowest cost per available mile seat flown, this company’s low-cost position is supported by low reservation and ticketing cost, type of plane flown, and low food cost.
Since Southwest runs primarily short flights which range from 60 to 90 minutes in length they can have one aircraft in their fleet. This plane is the Boeing 737. By flying only one plane, maintenance, inventory and operating costs are greatly minimized. For Southwest this means having fewer mechanics, fewer parts kept in inventory, and lower paid pilots who only have to be adept in flying one type of aircraft. The first airline to establish a home page on the internet and offer online bookings. 46% of its passenger revenue was generated by inexpensive online bookings.
It was also the first airline with a frequent flyer program to give credit for the number of trips taken, not just the number of miles flown, and also pioneered senior discounts, Fun Fares, Fun Packs, a same-day air freight delivery service, ticket-less travel, and many other unique programs. Southwest delivers consistently high level of service, on-time performance, baggage handling. And point-to-point route system provides more direct, non-stop flights so that connections delays and total trip are minimized.