Southwest Airlines Term Paper

Length: 6 pages Sources: 4 Subject: Transportation Type: Term Paper Paper: #57092356 Related Topics: Spirit Airlines, Southwest Airlines, Ukraine, American Airlines
Excerpt from Term Paper :


An Examination of Southwest Airlines

Globalization and Technology

Improving Returns

Application of the I/O Model

Application of the RBV Model

Mission and Vision Statement

Stakeholder Influences

Southwest Airlines has been one of the aviation industry's success stories; founded in 1967 the airline pioneered the low cost carrier model, and grew organically leveraging a first mover advantage (Morrison, 2001). The airline now operates approximately 3,600 flights every day, employees 45,009 staff and with the acquisition of AirTran in 2011 it became the largest domestic U.S. carrier (Southwest Airlines, 2014). The airline has grown, but in recent years the airline industry has seen significant constraints on growth due to the maturity of the industry in the U.S. along with the economic influences constraining growth (IATA, 2014). However, this does not mean there is not room for growth; to assess ways in which the firm may improve and understand the position of the company, examining the way it competes and how it is influenced by external forces will be beneficial.


Globalization and Technology

Globalization and technology have had a major impact on Southwest Airlines. The globalization effect may be argued as fairly subtle, as until recently the company operated only within the U.S. However, globalization has impacted on the global travel culture, making airline travel more popular and increasingly seen as a normal model of travel, rather than remaining an uncommon mode, which was the case 30-40 years ago (Belobaba, Odoni, & Barnhart, 2009). The globalization of the industry has also allowed for increased knowledge sharing and the development of safer technology and practices with results of air crashes being shared and the development of international aviation standards (Belobaba et al., 2009).

Technology has, and continues, to have a significant impact on the airline. As Southwest has adopted the low cost carrier strategy, one of the underlying approaches has been to ensure that operating costs are controlled and value is created in the underlying systems (Gittell, 2005). A major changed has occurred with the use of the internet, the booking system was gradually moved over to the internet, which proved to be a cost effective medium, and was able to tie in the dynamic pricing computer programs that determine seat pricing by forecasting the demand for each flight (Gittell, 2005). The automated system allowed for the passenger to be empowered and to reduce the costs associated with the call centers. The process was successful by 2000 more than 25% of all revenues were generated online; today it is more than 80% (Southwest Airlines, 2014). The internet has also increased efficiency with the online check in, reducing costs and increasing ease for passengers (Southwest Airlines, 2014; Gittell, 2005). Marketing has also benefited from technology, with the use of the 'Ding' program, a small application that potential passengers could install, so they would be notified with a pop up screen when special fares were released (Southwest, 2014). Technology also plays an important role in the operations, it has recently been reported that the cockpit software in Southwest aircraft is being upgraded, which will create smoother landings for passengers and increase fuel efficiency (McCartney, 2014). The change taken 3 years to prepare and required the retraining of pilots and (McCartney, 2014). However, technology can also be seen as a constraint, especially as the firm outgrows it or the technology becomes dated; costly upgrades may be required to facilitate the growth; this was seen with the booking system, which was unable to cope with international bookings. With the acquisition of AirTran and the decision to expand with international flights, the former Amadeus system was insufficient, and the firm has had to invest in an upgrade (Maxon, 2014; Carey, 2014). Technology has been a major enabler, and continues to be a boon, with ingoing requirements for investment.


The two approaches are the industrial organization (I/O) model and the resources-based view (RBV) (Thompson, 2007).


Application of the I/O Model

The I/O model operates under the assumption that to gain superior profits a firm needs to examine the industry influences, looking to forces outside the organization, and leverage that information to identify suitable strategic choices (Lieberman & Asaba, 2006). Applying this model to Southwest Airlines it is necessary to look at the characteristics in the industry that are external to the organization.

There are numerous industry wide pressures; the economic recovery is seeing an increase join the demand for airline travel, but the rate is constrained; the rate of increase for the entire industry in August 2014 compared to the previous year was 5.9%, but this was not equally spread across all markets, the U.S. domestic market only grew by 4.5% revenue per kilometer travelled (RPK) compared to international flights where the growth was 6.7% RPK (IATA, 2014). Latin America has the fastest growth rate of 8.2% RPK, followed by Africa with 7.5% RPK and Europe with a growth rate was 6.8% RPK (IATA, 2014).

The current concerns regarding Ebola appear likely to have an impact on the aviation industry, with a potential decrease in demand for flights into and out of Africa, as well as increased associated costs and security in order to undertake relevant measures to prevent the spread of the contagion. However, this is not expected to impact other flight destinations. The political uncertainty in Eastern Europe, and the Middle East, is also heading a potential impact on demand, as well as operations. Fewer passengers are likely to travel to areas where there is political unrest, and airlines are increasingly diverting their aircraft away from aviation routes which fly over conflict areas, an issue which has come to the fore following the downing of the Malaysia airlines flight over the Ukraine in July 2014 (Walker, Salem, & Luhn, 2014).

Extrapolating from these environmental factors, maybe argued that the potential strategy for increasing revenues and creating superior profits will be to increase international flights, due to the constrained growth which is taking place within the domestic market. Strategy may be to look towards expanding the existing international strategy to incorporate Latin America, this avoids problematic areas of the world where there are political unrest and health concerns, and also target scenario where there is currently the highest level of growth per passenger kilometer. Notably, this is also an area where there is expected to be long-term increase in demand, especially as many Latin American countries develop economically (IATA, 2014).


Application of the RBV Model

The resource-based approach towards strategy assumes that superior returns may be gained by examining the firm, and leveraging characteristics that are internal to the organization, rather than the external assumption with the I/O model (Thompson, 2007). The RBV model examines the organization in the holistic sense, with the firm seen as more than only its final output. The RBV may be considered by looking at the tangible and the intangible assets belonging to the firm.

Southwest Airlines has a significant amount of tangible assets; the largest asset group is the aircraft, with the firm owning and operating a fleet of 680 Boeing aircraft. Prior to the acquisition of AirTran the entire fleet was made up of Boeing 737's, giving the firms a high level of flexibility in terms of substitution if an aircraft was delayed or developed a fault, as well as the economies of scope and scale with maintenance, and also reduces the amount of money tied up a spare parts different types of aircraft (Gittell, 2005). Today there are also 66 Boeing 717's and more & 37's are on order. Although some of the aircraft are older, they are being modernized and retrofitted to keep them up-to-date. The aircraft are maintained in-house, which also reduces the potential reliance on a third-party maintenance contract, an issue which many other airlines face (Southwest Airlines, 2014; Gittell, 2005).

The technological assets are also major part of Southwest Airlines, and help to support its value strategy, retaining a leadership position within the low-cost carrier market. However, this is not particularly unique; many other airlines utilize a similar strategy. A significant point of differentiation within the airline is the relationship with the employees, and the corporate culture (Gittell, 2005). The organization has a very positive relationship with employees, which has resulted in a highly cooperative culture, which is even resulted in pilots helping flight attendants and luggage handlers when there has been a shortage of staff (Gittell, 2005). This is highly unusual within the aviation industry, may be argued as a source of competitive advantage in terms of differentiation, as well as supporting cost-effective support operations (Belobaba et al., 2009; Gittell, 2005). The value of employees is also seen within the way that the organization tries to ensure that price not only functional bill, but also enjoyable supported with the way flight attendants interact with the passengers (Southwest Airlines, 2014).…

Sources Used in Documents:


Belobaba, Peter; Odoni, Amedeo; Barnhart, Cynthia, (2009), The Global Airline Industry, John Wiley & Sons

Buchanan, D; Huczynski, A, (2010) Organisational Behaviour, Harlow, FT/Prentice Hall

Carey, (2014, Oct 14), Steep Learning Curve for Southwest Airlines as It Flies Overseas, Wall Street Journal, accessed at

Cook Sarah, (2008), The Essential Guide to Employee Engagement: Better Business Performance Through Staff Satisfaction, Kogan Page Publishers
IATA, (2014, Oct 2), Demand for Air Travel Picks-up in August [press release] accessed at
IATA, (2014), Economic Performance of the Airline Industry, accessed at
Maxon, T, (2014, May 5), Southwest Airlines to replace its reservations system, Dallas News, accessed at
McCartney, S, (2014, April 1), A Radical Cockpit Upgrade Southwest Fliers Will Feel, Wall Street Journal, accessed at

Cite this Document:

"Southwest Airlines" (2014, October 16) Retrieved January 20, 2022, from

"Southwest Airlines" 16 October 2014. Web.20 January. 2022. <>

"Southwest Airlines", 16 October 2014, Accessed.20 January. 2022,

Related Documents
Southwest Airlines
Words: 1071 Length: 3 Pages Topic: Transportation Paper #: 72998436

Southwest Airlines: The corporate culture of the LUV airline Southwest Airlines is known for a unique corporate culture that is particularly distinctive, in contrast to its competitors. Southwest Airlines has "a raucous corporate culture that is the exception in the grim airline industry" (Bailey 2008). From the Airline's inception, its founder and chairman, Herbert D. Kelleher ensured that there was "a startling amount of office hugging and kissing in lieu of

Southwest Airlines
Words: 1223 Length: 4 Pages Topic: Transportation Paper #: 99964912

Southwest Airlines Effectiveness of Southwest Leadership Southwest management has defined a clear and simple business purpose. The management has also chosen the right business model that supports the business purpose. The management consistently demonstrates the core values and behaviors derived from the key business purpose (Emerald, 2005). The quality of the airline customer service is synonymous with warmth, friendliness, individual pride, and company spirit. This has kept the staff morale high. The

Southwest Airlines
Words: 1009 Length: 3 Pages Topic: Transportation Paper #: 67596028

Southwest Airlines originally began operation in 1967, but as Air Southwest Co. In 1971 its name was changed to Southwest Air Co. The purpose behind its foundation was to provide passengers with a cheap means of air travel within Texas. Today they have a fleet of 550 Boeing 737s and 37000 employees. Although it's a relatively small, domestic airline, taking passengers to 73 American cities, but it provides remarkable customer

Southwest Airlines
Words: 1053 Length: 3 Pages Topic: Transportation Paper #: 94579745

Southwest Airlines The deregulation of the United States domestic civil aviation industry in 1978 saw airlines begin to compete freely. However, the capital-intensive nature of the business, along with undifferentiated products and services, has led to 120 airline bankruptcies since then. In the light of this context, Southwest's ability to compete is particularly interesting as it has not only continued to expand, but has been the only one to earn a

Southwest Airlines
Words: 2322 Length: 8 Pages Topic: Business Paper #: 1434238

Southwest Airlines Case Analysis Southwest Airlines is a company that has grown from a small regional carrier in Texas and surrounding states to the largest U.S.-based airline. The primary strategy of the company is to be the low-cost, no frills option for people wanting to travel within the United States. Recently, Southwest acquired another carrier so they will soon begin international flights to the Caribbean and Mexico. This paper discusses the

Southwest Airlines
Words: 1140 Length: 3 Pages Topic: Transportation Paper #: 90556961

Southwest Airlines Value chain and resource-based view of the firm Southwest Airlines has a famously unique business model for an airline, one which has enabled it to sustain a profit even during times when the rest of the airline industry's fortunes were flagging. Southwest is a budget airline that offers relatively limited flights to a fixed number of destinations, in comparison to its competitors. However, it strives to offer superior service, thanks