Southwest Airlines SWOT Analysis Southwest

Southwest Airlines SWOT Analysis

Southwest Airlines is not a new airline but it has become relatively more popular in the last few years because of its unique cost cutting methods and its ability to make profits despite being the cheapest airline in the U.S. Due to its unique operating strategies, Southwest Airlines has been able to get an edge over other airlines and has managed to stay afloat while other sank during economic slowdown. However the same strategies also present unique challenges and Southwest has to devise better plans to meet these challenges. Here we shall conduct a SWOT analysis of Southwest to find out how strong the corporation is and what opportunities and threats it can encounter in the future.

The SWOT Analysis of Southwest Airlines

Strengths:

Southwest has proved that being a low fare airline doesn't translate into lower profits. It has been doing well for decades now which, shows that this company is certainly doing something right. The company also serves as an excellent example to other low fare airlines around the globe, some of which couldn't generate much profit.

One sign of internal strength has been the company's decision to stick with Boeing 737 jet. Starting which just three, it now has an impressive fleet of aircraft dominated by this one single type. The reason being that Boeing 737 is much more fuel efficient than other modern aircrafts. [1] The aircraft offers lower maintenance costs and is easier to operate which means proper training can be provided to the aircraft crew. This also lowers the chances of unnecessary risks and accidents. The aircraft has fewer operating problems ever which means that there is low chance of encountering an operating issue and hence Southwest can deliver on its promise of on-time arrival and departures.

While not adopted for each and every flight, Southwest still has most point-to-point flights which, means there are fewer stops and connection delays. The airlines serves 62 cities in 32 states and tries to offer most point to point flights in order to cut cost, save fuel and also reduce the chances of delays. This also means there are more aircrafts to serve at each location and hence customers have more options and flexibility to fly according to their own schedule.

Southwest has also been the first airline to introduce ticketless travel. This means passengers can book their flights online, and check in without a paper document in their hands. This idea is an indication of Southwest's spirit of innovation which forms that core of its mission statement. It clearly states: "Creativity and innovation are encouraged for improving the effectiveness of Southwest Airlines."[2]

The company has shown a great financial record over the years which attests to its sounds financial health. One newspaper reported: "Simply put, Southwest is on top of the domestic aviation world. It's flush with cash and low on debt. It's shielded from record high jet fuel prices, and where it treads, other airlines quiver."[3] Southwest has better cash flow and relatively lower debt which allows it to function successfully even when oil prices are high and economy is slow. In the year 2005, it was reported that the company saved nearly $900 million because of its hedge strategy. [4]

Interestingly Southwest has also managed to save money on commission that it used to pay travel agents before 2003. Since the Ticketless program has become a huge success, the company has found that its site attracts a very high level of unique customers who are interested in online booking. The company thus doesn't need to pay commission to travel agents. [5]

Weaknesses

But strengths are not what any company is made of. There are also fair share of weaknesses which must be overcome in order to perform even better in the future and to improve where room for improvement is found. Southwest airline likewise has its weaknesses too.

Southwest does not cover some important destinations and major cities. This means that it is losing out of many potential customers simply because it doesn't have enough flights and finances to cover all major destinations. Customers then have no option but to choose another airline and Southwest has thus been losing a fair share of customers each year.

The second problem is Southwest's flight experience. Customers complain of smaller cramped seats and hence an uncomfortable flight experience. This is because Southwest wants to accommodate as many passengers as it can in one flight and its seats are thus smaller than those found in other airlines. This is especially uncomfortable for those who need extra space due to physical challenges.

The other weakness of Southwest is its customer on-plane experience. Owing to the cost concern, Southwest put as many seats as possible in the planes and only single class seat, economic. It means that the size of a seat in Southwest's airplanes is smaller than a seat in other airlines' aircrafts. Thus, there are some customers could feel uncomfortable with the smaller seats because those customers' physical issues, like the football players. Therefore, the Southwest might loses the business of those customers with special issues.

Threats:

The threats always come from external environment. And external environment includes governmental policies, economic situation and certainly the competitors. While Southwest had fewer or no competitors in low fare industry for some time but with the entrance of JetBlue, Southwest is facing fiercer competition. JetBlue has distinct advantage over Southwest in some areas and this can prove detrimental to Southwest's future. JetBlue came in 1998 and has become a major competitor. It has newer fleet of aircraft and has also adopted newer technology. It offers a more pleasant experience to customer with personal TV sets and radio system within the flight. It also has fewer seats which means customers do not feel cramped and enjoy a more comfortable flight.

JetBlue is also serving those destinations that Southwest has ignored. While Southwest chooses to serve only smaller airports due to cost concerns, JetBlue has not adopted this strategy and is offering flights from many major locations. This is a serious threat to Southwest since many of its potential customers now have the option to choose JetBlue.

The external situation is also not favorable due to the restrictions on airlines imposed after September 11 attacks. There have been more safety costs now than ever before and this is taking a toll on the financial health of most airlines. While Southwest has managed to do well, it cannot entirely escape the effect of these measures.

Opportunities: