Southwest Airlines Internal and SWOT Analysis

Introduction to Southwest's Competitive Strategy

Southwest Airlines has been a major inspiration to other low-cost carriers, and its business model has been replicated many times worldwide. The competitive strategy it employs combines high levels of employee and aircraft productivity with low unit costs by reducing aircraft turnaround time, predominantly at the gate (Bamber, Gittell, Kochan, & von Nordenflytch, 2009). When conducting an internal analysis and SWOT analysis, it is important to examine a company's tangible and intangible resources.

Tangible Resources: Financial, Physical, and Human Assets

Southwest Airlines possesses tangible resources in the form of financial resources, physical resources, and human resources. In 2009, Southwest Airlines had revenues exceeding ten billion dollars. The airline is the largest in the world by number of originating passengers boarded, and holds the third-largest passenger fleet among all of the world's commercial airlines. According to the U.S. Department of Transportation's Bureau of Transportation Statistics, Southwest has carried more passengers than any other U.S. airline for domestic and international travel combined since August 2006. The company also achieved 37 consecutive years of profitability (Fact Sheet, 2010).

Southwest's physical resources center on its aircraft. Southwest Airlines flies only Boeing 737 jets, making it the largest operator of the 737 worldwide. The airline has been a launch customer on three 737 models and is the world's largest operator of two of those models. Southwest chose to fly exclusively the 737 because of the cost benefits it offers. As of the time of writing, Southwest's fleet included 544 aircraft, with firm orders for more than one hundred additional 737s, as well as over one hundred options and purchasing rights for future aircraft. As of July 1, 2009, Southwest's fleet had an average age of approximately ten years. The 737 is flown exclusively because of maintenance and training cost savings; in addition, the aircraft is versatile enough to be profitable on a variety of long-haul and short-haul routes. The 737's rapid preparation and turnaround time allows Southwest to utilize its aircraft for more hours per day (Beyman, 2011).

Southwest Airlines considers its employees to be its single greatest strength and most enduring long-term competitive advantage. The airline employs workers across a wide range of roles — customer service agents, cabin crew, pilots, and maintenance technicians — all of whom are vital to daily operations. At Southwest, employees have the freedom to be creative, dress casually, and enjoy their work. They also receive free travel privileges and strong benefits, including profit sharing, a matching 401(k) plan, and medical and dental insurance (Southwest Airline Careers, 2010).

Intangible Resources: Technology and High-Performance Relationships

Southwest Airlines' intangible resources include technical resources, intellectual resources, and goodwill. The company has done a great deal over the years to enhance its technology while keeping costs low. One of its earliest technology milestones was transitioning to a ticketless model in the mid-1990s; today, the airline operates at nearly ninety to ninety-five percent ticketless. Customers who use credit cards are able to complete online transactions, and Southwest.com bookings now account for approximately sixty-five percent of total revenue. In the late 1980s, the company implemented a reservations and ticketing system, replacing cash registers that had previously been used (Steinert-Threlkeld, 2010).

As Southwest integrated its ticketing and reservation processes, the boarding pass remained manual for some time. Until 2003, customers would gather in the gate area to exchange their boarding passes. The airline then began issuing boarding passes from multiple points within airports, and later added boarding-pass generation through Southwest.com. Self-service kiosks were subsequently introduced, with additional functionality being added incrementally (Steinert-Threlkeld, 2010).

In an industry that frequently loses billions of dollars, Southwest Airlines has maintained an unbroken string of thirty-one consecutive years of profitability. The Southwest Airlines way is to develop high-performance relationships grounded in shared goals, shared knowledge, and mutual respect among all levels of management, employees, and suppliers. The company relies heavily on these high-performance relationships to generate a substantial competitive advantage in motivation, teamwork, and coordination. Southwest fosters strong cooperative relationships among its employees through ten key practices, as described by Hoffer Gittell (2003):

References

Bamber, G. J., Gittell, J. H., Kochan, T. A., & von Nordenflytch, A. (2009). Up in the air: How airlines can improve performance by engaging their employees. Cornell University Press.

Beyman, M. J. (2011). What kind of planes does Southwest Airlines fly? Retrieved from

Fact Sheet. (2010). Retrieved from

Hoffer Gittell, J. (2003). The Southwest Airlines way: Using the power of relationships to achieve high performance. McGraw-Hill.

Southwest Airline Careers. (2010). Retrieved from http://www.southwest.com/html/about-southwest/careers/index.html

Southwest Citizenship. (2010). Retrieved from http://www.southwest.com/html/southwest-difference/southwest-citizenship/index.html

Steinert-Threlkeld, T. (2010). Southwest Airlines: High tech, low costs. Retrieved from

What's reputation worth? Just ask Southwest Airlines. (2011). Retrieved from

World's most admired companies. (2011). Retrieved from http://money.cnn.com/magazines/fortune/mostadmired/2010/snapshots/2068.html