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Economics of Southwest Airlines
A Brief Economic Analysis of Southwest Airlines Today
Southwest Airlines was incorporated in 1967 and has its headquarters in Dallas. It is a U.S. airline that offers domestic point-to-point service; as of December 31, 2004, the company operated 417 Boeing 737 aircraft, with service to 60 airports in 59 cities in 31 states (Southwest 2); the company also has at least another 261 Boeing 737-700s on order (Comerford 1). Today, Southwest has six reservations centers (one each in Albuquerque, Chicago, Houston, Oklahoma City, Phoenix, and San Antonio); in addition, the company sells credits to its business partners (these include credit card companies, hotels, telecommunications companies, and car rental agencies) (Southwest 3).
Economic Performance and Discussion
While much of the aviation industry was devastated by the terrorist attacks of September 11, 2001, Southwest has managed to maintain an even keel due in large part to the progressive management style of its chairman, Herb Kelleher. In fact, Kaplan-Leiserson (2003) reports that Southwest is the only major airline to report profits in every quarter since September 11 and it is one of the few airlines that has not been forced to lay off employees. "A CIO magazine article says that Southwest attributes much of its success to its service emphasis" (Kaplan-Leiserson 14).
Figure 1. Southwest Airlines vs. Major Competitors as of September 24, 2005.
Source: Yahoo! Finance 2.
Key:
AMR:
American Airlines
LUV:
Southwest Airlines
DAL:
Delta Airlines
JBLU:
JetBlue Airways
The "bottom-line" for Southwest's Operating Income for the past 3 years is shown in Figure 2 below.
Figure 2. Southwest Airlines: Total Revenue, Gross Profit, Operating Income (Loss) and Net Income -- December 31, 2002 -- December 31, 2004.
Source: Based on Data in Southwest Airlines' Income Statement 2005 (Yahoo! Finance).
Works Cited
Comerford, Mike. (2003, July 25). "Low-Fare Airlines at O'Hare? Discount Carriers Such as
ATA Are Outgrowing Midway and Might Look Elsewhere to Expand." Daily Herald 1.
Kaplan-Leiserson, Eva. (2003, November). "Strategic Service." T& D. 57(11):14.
Southwest Airlines [LUV] (2005). Yahoo! Finance. [Online]. Available: http://finance.yahoo.
com/q/pr?s=LUV.
Works Cited
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