Southwest Airlines industry analysis

Southwest Airlines
Miguel Pavon (MP)
Kyrsten Muentnich (KM)
Renee Reed (RR)
Monica Rudolph (MR)
November 18, 2014

MGT 590 Southwest Airlines Report Page 2
TABLE OF CONTENTS
EXECUTIVE SUMMARY (MP).............................................................................................. 5
INTRODUCTION .................................................................................................................... 6
Background / History of the Company (RR)..................................................................................6
Mission Statement (RR).................................................................................................................6
Business......................................................................................................................................6
Major Goals ................................................................................................................................7
Corporate Philosophy...................................................................................................................7
Strategic Evolution (KP)................................................................................................................7
Intended Strategies ......................................................................................................................7
Emergent Strategies.....................................................................................................................8
Stakeholders (MP).........................................................................................................................8
Internal.......................................................................................................................................9
External............................................................................................................................... 10-15
Company’s Organization and Structure (MP).............................................................................16
Purpose of the Report (MP).........................................................................................................16
EXTERNAL ANALYSIS........................................................................................................ 16
Basic Industry Information (MR)................................................................................................16
Industry Growth: ....................................................................................................................... 17
Industry Profits:......................................................................................................................... 18
Industry Segments:............................................................................................................... 19-23
External/ General Environment...................................................................................................24
General Economic Conditions (RR)..............................................2Error! Bookmark not defined.
Political, legal, and Regulatory (RR).............................................2Error! Bookmark not defined.
Technological (RR)) ....................................................................2Error! Bookmark not defined.
Sociocultural {also demographics] (RR)...................................................................................... 25
Natural environment (RR).......................................................................................................... 25
Technological (RR) ................................................................................................................... 25
Summary of Analyses and Impact (RR) ...................................................................................... 25
Industry Analysis/Porter’s Five Forces.................................................................................. 26-27
Industry Analysis/Porter’s Five Forces........................................................................................16
Potential Entrants (WC)............................................................................................................. 28
Economies of scale:................................................................................................................ 28
Cost disadvantages from other than scale................................................................................. 28
Product differentiation (strong brand preferences).................................................................... 28

Capital requirements .............................................................................................................. 28
Switching cost ....................................................................................................................... 28
Access to distribution channels ............................................................................................... 28
Government Policy ................................................................................................................ 28
Current Rivalry among Existing Firms (MP) ............................................................................... 28
Bargaining Power of Suppliers (MP)...................................................................................... 29-30
Bargaining Power of Buyers (MP).............................................................................................. 30
Substitute Products (MP)............................................................................................................ 31
Industry Attractiveness/Profitability (MP)................................................................................... 31
Summary (Results) of Five Forces (MP) ..................................................................................... 32
Strategic Group (KM)..................................................................................................................32
Competitors’ Objectives............................................................................................................. 32
Assumptions ............................................................................................................................. 32
Capabilities ............................................................................................................................... 33
Market Share............................................................................................................................. 33
Competitive Advantages:........................................................................................................... 34
Current Strategies...................................................................................................................... 34
Opportunities and Threats (MP)............................................................................................ 34-35
INTERNAL ANALYSIS......................................................................................................... 35
Value Chain Analysis (MP,RR)....................................................................................................35
Primary Activities(MP)............................................................................................................. 36
Supply Chain Management (Inbound Logistics)...............................................................36
Strengths:.............................................................................................................................. 37
Weaknesses:.......................................................................................................................... 38
Operations (Production) (MP)........................................................................................38
Strengths:................................................................................3Error! Bookmark not defined.
Weaknesses:.......................................................................................................................... 40
Distribution (Outbound Logistics) (MP).........................................................................41
Strengths:.............................................................................................................................. 41
Weaknesses:.......................................................................................................................... 42
Sales and Marketing (MP).............................................................................................42
Strengths:.............................................................................................................................. 43
Weaknesses:.......................................................................................................................... 44
Service (Customer Service) (MP)...................................................................................44
Strengths:.............................................................................................................................. 44
Weaknesses:.......................................................................................................................... 45
Support Activities...................................................................................................................... 47
Product R&D, Technology and Systems Development (RR).......................................47-48
Strengths:.............................................................................................................................. 49
Weaknesses:.......................................................................................................................... 49
Human Resources Management (RR).............................................................................50
Strengths:................................................................................. Error! Bookmark not defined.
Weaknesses:............................................................................. Error! Bookmark not defined.
General Administration (Firm Infrastructure) (RR)..........................................................51
Strengths:.............................................................................................................................. 53
Weaknesses:.......................................................................................................................... 53

Summary of Value Adding Activities..................................................................................... 53-54
Financial Ratio Analysis(MP,KM,MR).................................................................................. 54-55
Liquidity Ratios......................................................................................................................... 56
Current Ratio............................................................................................................57-58
Quick Ratio...................................................................................................................59
Leverage Ratios(MP,KM,MR)..................................................................................................60
Total Debt-to-Assets Ratio........................................................................................60-61
Debt-to-Equity Ratio.................................................................................................62-63
Activity Ratio(MP,KM,MR)................................................................................................ 63-64
Inventory Turnover...................................................................................................64-65
Days of Inventory.....................................................................................................65-66
Profitability Ratio (MP,KM,MR)............................................................................................... 66
Total Return on Assets...................................................................................................67
Return on Equity (MP,KM,MR)...............................................................................68-69
Results of Financial Analysis...................................................................................................... 70
Interpretation/Evaluation (MP)............................................................................................. 70-71
Summary of SWOT Analyses................................................................................................ 71-72
BUSINESS LEVEL STRATEGY......................................................................................72-73
Generic Business Level Strategy(MR)..........................................................................................73
Supporting Evidence for Selected Business Level Strategy........................................................... 74
Advantages and Disadvantages of Business-Level Strategy.......................................................... 75
Advantages ...................................................................................................................75
Disadvantages ...............................................................................................................75
TOWS Analysis (MP)............................................................................................................ 78-81
STRATEGY IMPLEMENTATION (RR)............................................................................... 82
Strategy Element # 1- – Write-out element # 1- :.................................................................... 82-84
STRATEGY EVALUATION (MR)........................................................................................ 84
Evaluation of Strategy Element # 1 – #13 -Write-out the element:#1- #13................................ 84-90
CORPORATE SOCIAL RESPONSIBILITYAND ETHICS (KM)........................................ 91
Corporate Social Responsibility............................................................................................. 91-94
Ethical Implication................................................................................................................ 94-95
CONCLUSION (RR).........................................................................................................95-96
APPENDICES (MR)............................................................................................................... 97
BIBLIOGRAPHY / WORK CITED(MP,KM,MR,RR)....................................................98-102
Table of Contents (MP)

Executive Summary (MP)
Southwest was founded and established by Herb Kelleher in 1976. Southwest holds the
most market share in their intense industry. Southwest's current Porter five forces shows that
Southwest has a high potential entrants, High Current Rivalry among Existing Firms, Low
Bargaining Power of Suppliers, Low Bargaining Power of Buyers, Moderate/Medium
Substitute Products. Southwest's current value chain is Value Adding Supply Chain
Management, Value Adding Operations, Neutral Distribution, Value Adding Sales and
Marketing, Value Adding Service, Neutral Product R&D, Value Adding Human Resources
General Administration. All of these value chain activities contribute to Southwest's success
and the loyalty they have from their customers. Southwest Financial analysis indentifies that
Southwest has the highest Debt to Equity Ratio than any other competitor in their industry.
Southwest works to lower their debt buy purchasing Boeing planes in bulk. Now that
Southwest acquired Airtran, they have airbus planes which will be a cost effective way to hold
on purchasing more Boeing planes for awhile. Southwest's SWOT analysis identifies their
Supply chain as a strength since that have a close business relationship with Boeing. Another
Southwest strength is their main distribution since Boeing uses the e ticket . Southwest's fourth
strength is their service since their employees are always friendly and love to be integrated into
Southwest's culture. Southwest's weakness is their financial ratio since they have the second
highest days of inventory in their industry. Southwest's distribution is a weakness because the e
ticket process creates less jobs for Southwest counter employees. Southwest's opportunities is
technology since Southwest supplier Boeing is always adding new features to the planes like
free wifi for travelers. Southwest's threat is that new airline entries have the ability to access
funds to pay for the start up of their airline company in the airline industry.

Introduction (RR)
Need to get away? Want to take a trip? Well most people do especially now when the
temperature in Chicago is getting colder. However, anywhere worth going to is farther than a
car ride away. One of the most popular sites to book a flight is Southwest Airlines. They are
notorious for emailing deals and advertisings low cost flights. “Southwest is the nation's largest
carrier in terms of originating domestic passengers boarded and operates the largest fleet of
Boeing aircraft in the world to serve 96 destinations in 41 states, the District of Columbia, the
Commonwealth of Puerto Rico, and five near-international countries via wholly owned
subsidiary, AirTran Airways,” (About Southwest). With so many choices to choose from with
low prices Southwest Airlines seems like a first stop choice for most consumers. Low prices
are extremely helpful to consumers but what really keep patrons returning is the wonderful
customer services they are known for. “
MissionStatement (RR)
The mission of Southwest Airlines is dedication to the highest quality of customer
service delivered with a sense of warmth, friendliness individual pride, and company spirit”
(About Southwest). From personal experience, I know that my experience on Southwest
Airlines is always enjoyable. I do not feel that I am being nickeled and dimed for everything.
The flight attendants are always smiling with a genuine pleasantry that makes me and other
consumers wanting to come back. This airline is based out of Dallas, Texas and employs over
45,000 employees and services over 100 million frequent flyers yearly. Southwest Airlines
does an excellent job making customers feel comfortable by offering snacks and beverages
with no additional costs. Other airlines charge for storage of bags, carry-ons, and drinks. The

flight might be cheaper then Southwest Airlines but after all the additional charges one usually
ends up paying more because all this commodities is included with Southwest Airlines. With
nearly 4000 flights a day and everyday common clichés Southwest still does their best to
accommodate patrons. Just like Southwest Airlines says “You are now free to move about the
Country.  – (Southwest Airlines)
Strategic Evolution (KP)
The strategic evolution of Southwest Airlines is the product of intended strategies,
providing customers in the airline industry with low cost fairs. Southwest began over 38 years
ago as an airline dedicated to getting their passengers to their destination, on time, at the
customers desired time of arrival; while providing them low prices and a enjoyable time. To
this day, they have done so to the best of their ability. They have been able to provide
outstanding customer service and low prices by designing a simple process from flying to

boarding. However, Southwest’s faire prices may be comparable to others, yet they are still
able to provide a price advantage by not charging baggage fees for the first and second bag and
they keep their fleet simple to reduce other costs.
Stakeholders ( MP)
Southwest company has a very close relationship with their internal and external
stakeholders. Southwest's commitment to a low cost strategy rather than a low fair strategy
has brought their brand recognition to an all time high. Southwest stakeholders are interested
and invest in an American built company, HQ in Dallas, Texas, because of their loyalty to
customers, as well as, employees which differentiates themselves from their competitors. In
order for stakeholders to show interest for Southwest, there are many commonalities that both
internal and external stakeholders share. To name a few of the most important interest are
capital growth, net profit margins, company stability, and price per earnings ratio. These and
many more commonalities weigh in for a stakeholder to invest or not or to take their
investment and leave if they don't see company growth. (Southwest) (Heath Knowledge)
Internal (MP)
Southwest's internal stakeholder contributors/investors consist of 3 major categories of
investors. The first category is the executive employees of Southwest. Southwest CEO, Gary
C. Kelly, has 686,279 shares of Southwest which was reported on August 21, 2014. Ron Ricks,
Executive Vice President—Chief Legal & Regulatory Officer, has 226,066 shares of
Southwest which was reported on August 1, 2014. Jeff Lamb, Senior Vice President of

Administration & Chief People Officer, has 194,272 shares of Southwest which was reported
on August 25, 2014. Michael G. Van De Ven, Chief Operating Officer and Executive Vice
President, has 181,102 in shares which was reported on August 20, 2014. Robert E Jordan,
Executive Vicem President and Chief Commercial Officer, and President Air Tran Airways.
These top executives contribute their own money and invest it back for the company they work
so hard for. These executives are passionate about their work and not only make their
customers and internal/external stakeholders happy, but they want to make themselves happy
since they are investors.(Yahoo Finance)
Southwest has 10 financial institutions that own a great deal of shares of Southwest.
The diagrams below identify both financial institutions and mutual funds. Vanguard Group
Inc. has the most shares and owns majority of the company shares. Vanguard Group Inc. owns
50,305,640 shares which values at 1,351,209,490 which was reported on June 30, 2014.
Southwest is not limited to resources because they have many investors who buy a large
amount of shares and help Southwest invest into their R&D and other expenses to improve
Southwest so they can be more efficient and increase revenue. Southwest's Top 10 Mutual
Funds all help with their contribution to Southwest in order for Southwest to grow and have a
competitive advantage over their competitors. The top mutual fund holder for Southwest is
Vanguard/Primecap Fund with 34,559,300 in shares with a value of $928,262,798.(Yahoo
Finance)

Breakdown
% of Shares Held by All Insider and 5% Owners: 0%
% of Shares Held by Institutional & Mutual Fund Owners: 82%
% of Float Held by Institutional & Mutual Fund Owners: 82%
Number ofInstitutions Holding Shares: 500
Major Direct Holders (Forms 3 & 4)
Holder Shares Reported
KELLY GARY C 686,279 Aug 21, 2014
RICKS RON 226,066 Aug 1, 2014
LAMB JEFF 194,272 Aug 25, 2014
VAN DE VEN MICHAELG 181,102 Aug 20, 2014
JORDAN ROBERT E 167,575 Aug 21, 2014
Top Institutional Holders
Holder Shares % Out Value*
Repor
ted
Vanguard Group, Inc. (The) 50,305,640 7.34 1,351,209,490
Jun
30,
2014
State Street Corporation 26,622,943 3.89 715,092,248
Jun
30,
2014
FMR, LLC 26,220,122 3.83 704,272,476
Jun
30,
2014
Price (T. Rowe) Associates Inc 24,906,185 3.64 668,980,129
Jun
30,
2014
Black Rock Institutional TrustCompany,
N.A.
18,273,684 2.67 490,831,152
Jun
30,
2014
Bank of New York Mellon Corporation 15,143,208 2.21 406,746,566
Jun
30,
2014

Primecap ManagementCompany 78,488,794 11.46 2,108,209,006
Jun
30,
2014
Bank of Montreal/Can/ 12,485,781 1.82 335,368,077
Jun
30,
2014
Acadian AssetManagement 11,118,294 1.62 298,637,376
Jun
30,
2014
Black Rock Fund Advisors 9,797,465 1.43 263,159,909
Jun
30,
2014
Top Mutual Fund Holders
Holder Shares % Out Value* Reported
Vanguard/Primecap Fund 34,559,300 5.04
928,262,
798
Jun 30,
2014
Vanguard Mid-Cap Index Fund 11,499,188 1.68
308,868,
189
Jun 30,
2014
Price (T. Rowe) Mid-Cap Value Fund 11,492,700 1.68
271,342,
647
Mar 31,
2014
Vanguard Horizon Fund-Capital Opportunity Portfolio 10,935,100 1.60
293,716,
786
Jun 30,
2014
Vanguard Total Stock Market Index Fund 10,824,173 1.58
255,558,
724
Mar 31,
2014
Vanguard Fenway Fds-Primecap Core Fund 8,926,525 1.30
239,766,
461
Jun 30,
2014
Fidelity Growth CompanyFund 7,645,515 1.12
205,358,
532
Jun 30,
2014
Vanguard 500 Index Fund 7,117,746 1.04
191,182,
657
Jun 30,
2014
Vanguard Institutional Index Fund-Institutional Index
Fund
6,949,897 1.01
186,674,
233
Jun 30,
2014
SPDR S&P 500 ETF Trust 6,563,893 0.96
173,614,
969
May 31,
2014

External (MP)
Southwest has external stakeholders as well. One of their key stakeholders is their
union employees. According to Southwest's Annual Report 2013, it states that on December
31, 2013, "The Company had 44,831 active fulltime equivalent employees, consisting of
19,003 flight crew, 2,689 maintenance, 15,464 ground, customer, and fleet service, and 7,675
management, finance, marketing and clerical personnel (associated with non-operational
departments). Approximately 83 percent of these employees were represented by labor
unions." This quote is informative on the breakdown of 44,831 employees at Southwest. The
most important statistic to gain from this quote is that 83 percent of Southwest employees are
represented by labor unions. Southwest has 11 Unions they work with. These unions work
together with Southwest to ensure that their employees are receiving all their benefits and are
being paid cordially. (Southwest Annual Report 2013)
Aircraft Mechanics
FraternalAssociation
(AMFA)
Appearance Technicians 2/16/2009-2/16/2017
2
Aircraft Mechanics Fraternal Association
(AMFA)
Facilities Maintenance Technicians (New) In negotiations
3
Aircraft Mechanics FraternalAssociation
(AMFA)
Mechanics, Inspectors, Controllers (New),
Training Instructors (New)
8/16/2008-
8/16/2012
In negotiations
4
InternationalAssociation of Machinists
and Aerospace Workers, AFL-CIO (IAM)
– District 142
Customer Service Agents, Ground Operations
And Customer Representatives, Customer
Support and Services
11/1/2008-
10/31/2012
In negotiations

5
InternationalBrotherhood of Teamsters
(IBT) - Local 19
Material Specialists
8/16/2008 –
8/16/2013
In negotiations
6
InternationalBrotherhood of Teamsters
Airline Division (IBT)
Flight Simulator Technicians
11/1/2013-
10/31/2015
7
Southwest Airlines Pilots Association
(SWAPA)
Pilots
9/1/2006 –
8/31/2012
In negotiations
8
Transport Workers Union (TWU) - Local
550
Dispatchers
6/15/2012-
11/30/2015
9
Transport Workers Union (TWU) -
Local 555
Ramp, Operations, Provisioning and Freight
Agents
7/1/2008-
6/30/2011
In mediation
10
Transport Workers Union (TWU) -
Local 556
Flight Attendants
6/1/2008-
5/31/2013
In negotiations
11
Transport Workers Union (TWU) - Local
557
Flight Instructors
4/1/1999 –
12/31/2015
There are 18 top suppliers of Southwest. Southwest's top 18 suppliers are listed in the
diagram below. All of these suppliers have contributed to Southwest's success in so many
different ways. Southwest's major customers are passengers that travel using Southwest in
cities like Chicago, Las Vegas, Baltimore, Denver, Houston, Phoenix, Atlanta, Dallas, Orlando
and Los Angeles. Throughout these cities, major customers contribute to the $45,232 daily
reservations which on a weekly basis is $313,497. On a monthly basis it is 1.4 million. If that is
not surprising enough, a year of reservations from customers is 16.5 million. This show how
loyal Southwest customers are, and how many when they want to travel choose Southwest.

According to swamedia.com Southwest has served 1.5 billion Customer since their first flight
in America for customers. Southwest local communities along with Southwest stakeholders
contribute to being named number one for Fortune 500 Green Power Partners by
Environmental Protection Agency. Southwest is all about staying green and take part in keep
Earth cleaner and greener. According to Southwest One Report, Southwest works closely with
communities to offer volunteer work at their airports. (Spiderbook.com)
Top Southwest Airlines Suppliers
Nintendo
Nintendo's Partnership With Southwest Airlines Takes Off ... 18 documents
Boeing
Southwest Airlines upgrades 20 Boeing orders 11 documents
SeaWorld
... performances at the marine park and its sister parks and advocates
have pressured SeaWorld
7 documents
Volaris
4:47 pm Southwest offering flights to Mexico zoom Southwest Airlines
is partnering with Mexican
7 documents
Goodrich
Aviation Today :: Southwest Airlines Chooses Goodrich ... 6 documents
Clarity
Technologi
es
April 26th, 2007 No Comments Southwest Airlines has selected Clarity
6 software as a single
5 documents

Eaton
Eaton wins service contract from Southwest Airlines by MBJ Staff
Tags: air travel , airlines ,
5 documents
Dish
Network
DISH has partnered with Southwest Airlines to make your TV and
traveling options even sweeter.
4 documents
Wunderma
n
Southwest to work with Wunderman for its FFP Feb 6, 2009 Southwest
Airlines has chosen Wunderman as
4 documents
Swissport
Swissport Fueling Services to Supply Southwest Airlines at ... 3 documents
BAE
BAE Systems Selected by Southwest Airlines for Repair ... 3 documents
Spigit
Southwest Airlines Selects Spigit to Drive Innovation ... 3 documents
InterConti
nental
Hotels
InterContinental Hotels Group Partners with Southwest Airlines 2 documents
nuTravel
Technology
nuTravel Signs Content Agreement with Southwest Airlines Southwest
Airlines Partnership Improves
2 documents
Siemens
Southwest Airlines has contracted with Siemens for a turnkey baggage
handling system at McCarran
2 documents
ATA
Airlines
ATA's code-share dealwith Southwest aids both By Ted Evanoff, The
Indianapolis Star ATA Airlines'
2 documents
MasterCar
d
MasterCard Teams with Southwest Airlines and Starwood ... 2 documents

Chase
Chase Partners with Southwest Airlines to Enhance Ultimate ...
Company's Organization and Structure (MR)
(SWA Media)
Purpose of the Report (MR)
The purpose of this report is to show that our group has learned to analyze a real
company and the industry it is in from an executive management perspective. The report is
broken up into five modules. The first module will address the history of Southwest and
includes information about the mission, company objectives, and the company’s present
situation. It will also include an organizational chart.

External Analysis (MR)
In module 2 our group will analyze the general environment and industry environment
in which our company is based. It will include an analysis will of the opportunities and threats
of the airline industry. An evaluation of the airline industry using Porter’s five forces model
will also be included. We will also discuss if we find evidence of changes taking place or
reasonably anticipated in the macro environment.
Industry Growth/Industry Profits/ Industry Segments (MR)
The travel industry is at risk with everything which is going on in the world. The
slowly improving economy has stressed the industry. The Ebola scare, the war in the Middle
East and the conflict in the Ukraine causes more issues for the travel agencies. Particular the
airline industry will mostly be affected. The rise in gas prices directly affects the rise in prices
for the ticket prices. With everything which is occurring to raise prices for travelers the airline
industry is in the forefront of the challenges which are being presented.
The international airline industry is improving has been improving for the last few
years. For instance, “IATA this week raised its net post-tax profit for the global airline
industry in 2011 to USD 6.9 billion, after downgrading the prediction from USD 8.6 to USD
$4 billion in June 2011.” (CAPA, 2011) Nevertheless, the global industry is still going to have
difficulties with the continued economic issues which exist today. For instances, “The U.S.
airline industry is expected to remain profitable over the next two decades given the improving

worldwide trends in air travel. However, growth may be held back until 2015 due to the
increase in fuel costs and ongoing economic turmoil in the U.S. and Europe.” (Zacks Equity
Research, 2012) Among these issues are the many continues internal cost which the airlines.
One of the major concerns within the airlines is with the workforce they have to employ to
maintain their operation. “Most of the employees are unionized and depend on various U.S.
labor organizations. The relation between airlines and labor unions are governed by the
Railway Labor Act, which states that a collective bargaining agreement between an airline and
a labor union does not expire – instead it becomes amendable as of a stated date. Failure to
amend terms and conditions suitably may lead to work stoppages or strikes, and thereby
hamper operations.” (Zacks Equity Research, 2012) Despite the risk involved with the global
airline industry there is strategies to increase profitably in the coming future. For example,
“International traffic is expected to grow 4.2% per year, in contrast to domestic travel that will
grow at a more modest clit of 2.7% annually through 2032…the 20-year airline growth is
expected to stem from the implementation of a NextGen, the satellite-based navigation system
that aims to make air travel more efficient.” (Zacks Equity Research, 2012) Another method to
increasing the appeal of airline travel is offering a better experience while traveling. For
instance, “..A top notch carrier, is expected to incur a spending of more than $350 million for
the installation of superior in-flight entertainment and communications system.” (Zacks Equity
Research, 2012) The airline industry has been improving and various strategies are being
implemented to assist with the demand internally. However, the external concerns are what
may inhibit the growth of the industry.

The air travel SIC code is 4512. The travel industry faces many obstacles in keeping
and gaining profits; due to the sloe global economic recovery, and increased possibilities of
war between nations. In particular the global health scares, the war in the Middle East and the
conflicts in the Europe, causes great stress for the airline industry as a whole.. The rise in gas
prices directly affects the rise in prices for the ticket prices. With everything that is occurring
to raise prices for travelers, the airline industry is in the forefront of the challenges that are
being presented.
The international airline industry is improving has been improving for the last few
years. For instance, “IATA this week raised its net post-tax profit for the global airline
industry in 2011 to USD 6.9 billion, after downgrading the prediction from USD 8.6 to USD
$4 billion in June 2011.” (CAPA, 2011) Nevertheless, the global industry is still going to have
difficulties with the continued economic issues which exist today. For instances, “The U.S.
airline industry is expected to remain profitable over the next two decades given the improving
worldwide trends in air travel. However, growth may be held back until 2015 due to the
increase in fuel costs and ongoing economic turmoil in the U.S. and Europe.” (Zachs Equity
Research, 2012) Among these issues are the many continues internal cost which the airlines.
One of the major concerns within the airlines is with the workforce they have to employ to
maintain their operation. “Most of the employees are unionized and depend on various U.S.
labor organizations. The relation between airlines and labor unions are governed by the
Railway Labor Act, which states that a collective bargaining agreement between an airline and
a labor union does not expire – instead it becomes amendable as of a stated date. Failure to
amend terms and conditions suitably may lead to work stoppages or strikes, and thereby
hamper operations.” (Zacks Equity Research, 2012) Despite the risk involved with the global

airline industry there is strategies to increase profitably in the coming future. For example,
“International traffic is expected to grow 4.2% per year, in contrast to domestic travel that will
grow at a more modest clit of 2.7% annually through 2032…the 20-year airline growth is
expected to stem from the implementation of a NextGen, the satellite-based navigation system
that aims to make air travel more efficient.” (Zacks Equity Research, 2012) Another method to
increasing the appeal of airline travel is offering a better experience while traveling. For
instance, “..A top notch carrier, is expected to incur a spending of more than $350 million for
the installation of superior in-flight entertainment and communications system.” (Zacks Equity
Research, 2012) The airline industry has been improving and various strategies are being
implemented to assist with the demand internally. However, the external concerns are what
may inhibit the growth of the industry.
Over the last 17 years, aviation has been the first contributor to international tourist
arrival growth with a 5.5% yearly average growth of tourists arriving by air (compared with
4.1% for road transport, 2.3% for sea transport and 1.5% for rail transport) (Airbus, 2014).
According to “Tourism 2020 Vision”, the World Tourism Organization’s long term forecast,
the number of tourists is expected to grow from 1.1 billion tourists currently up to 1.6 billion
by 2020 (Airbus, 2014). This corresponds to an impressive 5.7% compound annual growth rate
over the next 7 years (Airbus, 2014).
The financial crisis in 2008-2009 greatly effected passenger traffic, but the recovery
over the period 2009-2013 has proven its resilience (Airbus, 2014). Airbus latest traffic
forecast suggests that World RPKs will again double over the next 15 years (Airbus, 2014).
This represents a 4.7% yearly average growth over the next twenty years, 5.2% over 2013-
2023 and 4.2% over 2023-2033 (Airbus, 2014).

Source: file:///Users/monica/Downloads/Airbus_GMF_book_2014-2033.pdf
U.S. scheduled passenger airlines reported a net profit of $3.6 billion in the
second quarter of 2014, up from $507 million in the first quarter of 2014 and $2.2
billion in the second quarter of 2013, the U.S. Department of Transportation’s Bureau
of Transportation Statistics (BTS) reported today (Table 1) (U.S. Department of
Transportation, 2014).

The 27 U.S. scheduled service airlines reported an after-tax net profit as a
group for the fifth consecutive quarter. The scheduled service passenger airlines
reported a $5.5 billion pre-tax operating profit in the second quarter of 2014, up from
$1.7 billion in the first quarter of 2014 and up from $3.7 billion in the second quarter of
2013. The airlines reported a pre-tax operating profit - as a group - for the 14th
consecutive quarter (U.S. Department of Transportation, 2014).

External/General Environment (RR)
For over 30 years the airlines industry has had to deal with restriction of flights out of
one of the busiest cities in the United States…Dallas, Texas. In the 1960’s the Federal Aviation
Administration (FAA) decided that Love Field in Dallas and the Greater Southwest
International Airport in Fort Worth would not be able to maintain future air traffic. As a result
the FAA decided that they would continue to federally fund the airports until the situation was
resolved. It was decided that both airports would combine and relocate to create the
Dallas/Fort Worth International Airport. However, in order for DFW to be successful the other
former airports had to agree that they would move their carriers into the new airport. Southwest
Airlines was not created until after the agreement was signed and had their flights entering and
leaving Love Field. The Supreme Court ruled that since Southwest Airlines came after the
agreement was signed and was operating in an airport that was still open that they could fly out
of Love Field. At the time Southwest Airlines was only doing flights within the state. When all
the other airlines left to DFW Southwest Airlines stated at Love Field. When Southwest
decided to expand their destinations that is when the city of Fort Worth became upset because
it was interfering with DFW and the purpose it was built. In February of 1980, former
President Jimmy Carter enacted the Wright Amendment, which restricted the number of flights
out of Dallas. The reasoning behind this law was to promote the Dallas/Fort Worth
International airport (DFW). The law stated, “ That passenger airlines could not fly airplanes of
more than 56 seats out of Love Field beyond a certain point to protect Dallas/Fort Worth
International Airport from unlimited competition from Love Field,” (The Points Guy, 2014).
This law has restricted many Airlines and keeping flights at a constant price in Texas.

On Monday Oct. 13, 2014 the Wright Amendment will be repealed and airlines will be
able to return back to Love Field to increase their flights. How is this going to impact the
airline industry? With more flights now airlines go back into competition with each other,
which allows for the consumers to shop around for the best prices. It is anticipated that flights
leaving and entering Dallas will drop significantly because one airline will be in competition
with each other. Major cities like Chicago, New York, Los Angeles, Orlando, and Las Vegas
will definitely see an increase in their flights departing and arriving. Rick Seaney, CEO and
Founder of Fare Compare states,” You should be ready to shop. You should be manning your
computer, especially on Monday when they launch," said Seaney with a big smile. "There's
going to be something,"(Dewberry, 2014). Seaney analyzed airfare over the last decade and
concluded that lack of competition causes prices to stay stagnant. According to Seaney in 2004
Delta withdrew from DFW Airport and prices went up. However in 2014, when Virgin
America came to DFW prices dropped for most airlines within DFW that flew the same routes.
Seaney explains the reasoning behind this is because Virgin America charges half compared to
other airlines and now other airlines need to adjust their prices to be able to compete. So come
Monday October 13, 2014 there should be significant price reduction for most Airlines
traveling in and out of Texas. The question at hand will be will these low fares sustain or will
they vanish soon and all will be forgotten only time will tell.

Industry Analysis/Porter’s Five Forces (MP)
Currently the Airline Industry is growing at a fast rate each year. Airline Industry,
according to Investopedia and Google's Airline Industry Analysis comprises of four
categories. The four categories are International, National, Regional and Cargo. The
macro environment plays a huge factor on any airline company’s strategic action. Porter
Five forces are used in companies to view the airline industry to see where they stand and
how they can improve. The threat of new entrants in the airline industry can be high
depending on the how the economy is doing. The Airlines industry is analyzed by the
potential entrants and what barriers coincide with entry. The current rivalry among existing
firms determines how airline companies may pay more to have a competitive advantage.

Bargaining power of supplies and how airlines companies who have a more recognizable
brand and loyal customers have power over suppliers. Bargaining power of buyers allows
customers to pick and choose the most inexpensive or convenient airline company which
affects the airline companies drastically loosing loyal customers. Substitute Product in the
airline industry is high since not only can customers take another airline but take another
means of transportation like Amtrak to get to a destination.(Investopedia) (Google Airline
Industry Analysis)

Potential Entrants/Current Rivalry among Existing Firms (MP)
Currently the airline industry is medium. Even though many people may disagree that it
is medium you have to look at all aspects that affect the entry barriers and the threat of new
entrants. The airlines industry market share is controlled by the airline company with the
brand loyalty. New entrants may or may not get in the airline industry, but will struggle
financially to gain more and more of the current market share. The airlines industry’s
economies of scale varies. According the Stocks 100 article, airline economy is never
steady because it fluctuates depending on how the economy is and what customers are
willing to pay. Even the most loyal customer may switch airline companies if they are
trying to save money. This is why the airline companies try to have the best deals to attract
customers as much as possible. Cost disadvantages for new airline companies and current
airline companies in the industry is that more money is needed to be able to give certain
incentives to customers and increase customer experience. Product differentiation in the
airline industry is viewed as all airline companies offering programs and first seating
privileges to differentiate themselves. The airline industry capital requirements for new
entry can be high but is accessible with startup companies borrowing money. The airline
industry and the access to distribution allows all airline companies to follow their own
distribution channel or feed off of one another. Government policy depending on where
the airline companies are, affects the industry since all airline companies have to make sure
they follow all rules and regulations different governments have. The entry of barriers is

medium because new entries can borrow money to provide the foundation to start up in the
airline industry. The threat of new entrants is also medium because if new entrants
successfully come into the industry, they now have to deal with all their competitors who
have a huge chunk of the market. This causes new entries to spend more and borrow more
in order to keep their company in business. (Stocks 100)
Current Rivalry among Existing Firms (MP)
According to a report by Google and Investopedia on the airlines industry, Current
Rivalry among Existing Firms, the stage of the business cycle is in the mature stage. I
agree with this because the airline industry is very intense because the competitors don’t
come and go that are involved in the industry for the long run. All the current rivalry
among existing firms is high because they are in long contract agreements just so they can
stay in business. In addition, current rivalry is high because every competitor has high
complex products in their company which increase competitiveness in the industry. Since
the industry is now growing rapidly, the rivalry is higher. Rivalry in the industry isn’t so
strong for airline companies that have more loyalty and more effective and efficiency
business strategies.(Investopedia) (Google Airline Industry Analysis)

Bargaining Power of Suppliers (MP)
And article by Investopedia and Google Airline Industry Analysis stated the airline
industry bargaining power of suppliers are both Boeing and Airbus that manufacture to all
airline companies in the industry. Since the airline industry companies really don’t differentiate
their planes, it is the incentives and amenities that offer customers to go to them and become
loyal to the company. Since plane manufacture industry is high there needs to be a lot of
capital available for there to be more suppliers. According to the Google article on the airline
industry, to make one plane it cost 200 million dollars. This is why airline companies don’t
have much of a say on the prices of the planes except for the airline companies who have the
most market share in the industry. Because of all these reasons, bargaining power of suppliers
has a lower threat. (Investopedia) (Airline Industry Analysis)
Bargaining Power of Buyers (MP)
According to the article by Google on the airline industry, there are two groups of
buyers. Airline industries have concluded that one group is an individual buyer, who is
traveling for personal or business related reasons, which contributes to the airline industry
overall growth profit. The second group is more diverse since travel agents and online portals
offer customers to purchase bundle packs where plane transportation, hotel, rental car, and
food expenses are taken care of in an all-inclusive deal. This gives customers the advantage to
choose either way they want to travel. Buyers choose airlines based on safety, amenities like
food, if it’s a direct or non-direct flight. Bargaining power of buyer are low because
customers/travelers have such more room to choose on how they want to fly. (Google Airline
Industry Analysis)

Substitute Products (MP)
According to Investopedia Airline Industry Analysis the airline industry, substitutes are
moderate and depend on whether the customers or travelers are looking for a regional
airline or an international carrier. This is because regional airlines will stay in the same
country. For this reason, customers have the option to take Amtrak that will take them
from one destination to another. Travelers can also substitute airline companies for a road
trip by driving to their destination in the country. For international customers/travelers the
only substitute is airlines unless they take a cruise ship. Most travelers go with airlines
because of all the cruise ship problems and malfunctions. The airlines industry substitutes
are moderate. (Investopedia)
Industry Attractiveness/Profitability (AR)
According to an article by Investopedia Airline Industry Analysis, the airline industry is
an attractive industry the firm is in, as well as, all other airline companies only if they have
enough resourcing and capital to pay off their suppliers and keep their market share. If
airlines companies cannot meet this expectation from their customers, then their customer
will leave and become loyal to another airline. Any new entries that want to become a part
of this industry need to have lots of resources and funds to start up the company and gain
awareness especially when the market share is so tight with major competitors and
competition that customers are too loyal to switch to another airline. (Investopedia)
(Airline Industry Analysis)

Summary (Results) of Five Forces (MP)
Force Intensity of Force (high, moderate or low)
Threat of Potential Entrants Moderate
Current Rivalry among Existing Firms High
Bargaining Power of Suppliers High
Bargaining Power of Buyers Low
Substitute Products Moderate
Industry Strategic Groups (KM)
The airline industry is a made up strategic groups of low cost carriers and high cost
carriers. Low cost carriers provide the cheapest flights possible by keeping things simple.
While high cost carriers are more expensive but offer different amenities such as first class,
meals, more legroom, and other luxuries. In the discount airline group, Southwest has recently
been beat by Spirit Airlines and Allegiant Travel, as the lowest cost providers. However,
JetBlue Airlines is the closest major competitor in the discount airline business
(Southwest.com). JetBlue began their venture of brining humanity back to the sky in 2000.
They felt that airlines were missing kindness in the sky, so they strove to bring back the
missing passion and kindheartedness to both the ground and the sky. Not only does this
company strive to impact customers lives while traveling, they do their best to influence the
lives of those in need. Whether it is raising awareness for a cause or volunteering with an
organization. Corporate and social responsibility makes up JetBlue, and is their business
model. Their website states:

“It's the nonstop dedication to align our efforts to reflect the diverse interests and core
values of our company. It’s constantly striving to enrich the lives of others every day.
It's sustaining our environment for future generations. And it's inspiring our customers
and crewmembers to do the same.”(Southwest.com)
Southwest and JetBlue are both dedicated to providing the best customer service and
travel experience to their customers and a stable work environment for their employees. Jet
Blue has created a ‘Customer Bill of Rights’ which states their commitment to their employees
and expectations of staff to carry out their customer commitment. However, the bill of rights
also acknowledges that the unexpected happens and customers may become occasionally
inconvenienced however, JetBlue will always strive to provide a safe and convenient
experience. JetBlue is not only committed to satisfying individual passengers and families,
they offer corporate fares and amenities to corporations of all sizes. They too, collaborate with
over 30 airlines internationally. (Southwest.com)
The company’s dedication to sustainability, they have created a strategy to better the
environment. Their sustainability strategy states: “We depend on our natural resources and a
healthy environment to keep business running smoothly. Natural resources are essential for us
to fly, and tourism relies on having beautiful, natural, and preserved destinations for our
customers to visit.” JetBlue has worked successfully created strategies to try to reduce
emissions in daily operations, recycle, and run efficiently to help the environment. They are
proud to share their efforts throughout their website. (Southwest.com)
JetBlue’s market share for August 2013- July 2014 is 5.1%, based on revenue
passenger mileage of $29.5 billion. Southwest’s market share of 16.3% for the same period

based on revenue passenger mileage of $95.67 billion. The recent overall increases of the
airline industry have helped JetBlue, increasing value by 40%. Increased airline travel during
the summer and lower fuel costs have benefited company profits. Based on industry
projections the airline should continue to increase profits through year-end. (Southwest.com)
JetBlue may have strong customer service, and low cost fares yet they are having
troubles maximizing profits, resulting in leadership changes. Therefore, come 2015, to
continue increasing profits the company has plans for success come 2015, along with plans to
bring in a new CEO. The focus on maintaining past strategies and values has resulted in a loss
for the airline. New strategies have been developed and implemented in 2015. The new
strategies are said to include baggage and wifi fees along with squeezing more seats into
planes. The strategy is projected to increase earnings per share by as much as 50 cents. These
changes may bring the revenues the airline is looking for but may have a negative impact on
their image. Similar to when Southwest decided to compete with fares of other airlines, they
lost the title of low cost carrier. The new CEO must go about implementing these changes
carefully to be sure they airline will still be maintaining its visions and values.
(Southwest.com)
Opportunities and Threats (MP)
Opportunities Threats
Technological – Technology increases
airline industry’s innovation and help airline
industries and suppliers work closely to
provide more fuel efficient planes and safer
rides for passengers.
Economic – When the economy is
struggling there will be less travelers and
more loyalty to airlines that have the best
low cost strategy for their travelers

Demographics – Airline companies are
worldwide so they meet all demographic
necessities
Political/Legal – Government may or may
not bail an airline company that is going into
bankruptcy.
Economic – when the economy is booming
the airline companies can raise prices and
expect customers to pay more.
Low Entry Barriers - Start up airline
companies can borrower money to get into
the firm
Socio-cultural – Airlines Industry is diverse
and encourage all ages and ethnicity and
sex.
High Bargaining Power of Buyers-
Customers can choose if they want to take
an airline or drive, or take a train
Low Bargaining Power of Suppliers
Airlines have a choice to use Boeing or
Airbus and their suppliers. They are also
limited to them too and may not have so
much say on decisions.
Intense Internal Rivalry- Rivalries use low
cost strategies and amenities to have a
competitive advantage and market share
INTERNAL ANALYSIS (MP)
When looking at the internal analysis of a company, essentially it is the internal
working of the day to day basis of the company. Companies understand that analysis of their
company will separate their strengths form their weakness in which they can have a better
understand on what they can improve on. In order for a company to become successful and
have a competitive advantage, company executive managers will do an internal analysis which
in return gives them an competitive advantage when the weaknesses are diminished and
shareholders are pleased. In this case, the internal analysis is able to identify what Southwest
is capable of doing and what they can improve on. Utilizing Southwest Airlines Value Chain
and Financial Ratio Analysis aids to identify and the current strengths and weakness within the
company. The value chain analysis will detail the Supply Chain Management (Inbound
Logistics), Operations, Human Resources Management, and General Administration (Southwest
Infrastructure). Part one of this, will evaluate the company’s value added activities. This
analysis of the Value Chain will enable our group to determine Southwest’s strengths and

weaknesses. The value chain analysis will detail the Supply Chain Management (Inbound
Logistics), Operations, Human Resources Management, and General Administration (Southwest
Infrastructure). Part two will analyze, give meaning, and relevance for the Southwest’s financial
metrics. Specifically detailing what the leverage ratios, what the activity ratios, and what the
profitability ratios tell us about Southwest airlines.
The Value Chain Analysis (MP)
The value chain analysis conducted on Southwest Airlines consist of the Primary
Activity which includes: Supply Chain Management (Inbound Logistics), Operations
(Production), Distribution (Outbound Logistics), Sales and Marketing, Service (Customer
Service). The value chain analysis also consists of the support activities that are, Product R&D,
Technology and Systems Development, Human Resources Management, General
Administration (Firm Infrastructure). Both Primary and supportive activities help companies
like Southwest Airlines to identify what activities create value and what activities don’t create
value. For the activity that doesn’t create value companies like Southwest will do what they
can to limit the risk to better improve their activities both primary and supportive.
Supply Chain Management (MP)
Southwest inbound logistics are activities that Southwest uses like warehousing,
materials, inventory control. According to a Seattle Times article by Dominic Gates Southwest

purchases materials/products from Boeing while they warehouse their planes at airports.
Southwest manages their inventory. Southwest Supply Chain management consists of
purchasing Boeing planes and training their pilots to fly them. Since Southwest doesn’t
produce the planes but purchases only one brand, pilots of southwest can fill in for one another
when it comes to covering shifts. Southwest distributes their planes to all airports in America
they’re currently based. Southwest keeps in touch with Boeing for new and updated technology
to have more fuel efficient planes and also purchases jet bio fuel so that planes can have a
higher turnover and get more passengers on and off planes to keep revenue flowing. (Seattle
Times)
Strengths
 Southwest works close to stay green and does that with purchasing 3 million gallons of
jet bio fuel from forest residue

 Southwest has a close relationship with Boeing unlike other competitors
 Southwest pilots can operate any plane that is in air because they are all Boeing planes.
Weakness
 Since Southwest only buys Boeing planes which gives the Boeing the ability to raise
the prices of the planes they sell you Southwest
 Southwest can’t fill more passengers on their planes if Boeing only offers planes that fit
170 passengers and Airbus fits 300 passengers
 Southwest buys Boeing planes that end up having battery defects and cost a loss on
Southwest
Operations (MP)
Southwest operation activities take all inbound logistics and are able to get their planes up
and running and travelers flying form one destinations to another. Southwest daily operations
are never fixed and stable. Southwest deals with unexpected delays in weather along with
what the current demand the travels want like free Wi-Fi, movies to watch, a blanket and
pillow. Companies like Southwest in the airline industry have to deal with delays when it
comes to meeting travelers expectations. According to an article, Inc. Turnaround Strategy:
What You Can Learn from Southwest Airlines, by ILan Mochari, Southwest Airlines tries
their best to meet customer’s needs. According to an article by Boeing called southwest
airlines launches the 737max Southwest is aware that seating 175 seats on a 737-800 takes
longer than seating 143 seats on a 737. Since Southwest and other airlines have to wait when

there is a winter storm, this is a disadvantage that affects delay of airlines and why only two-
thirds of Southwest flights land on time. (INC.) (Boeing)
Strengths
 everyone equally can sit where they please
 Southwest uses Boeing 737 planes because it’s a quick turnout and low cost compared
to competitors
 10 minute turnaround
 Train pilots to fly one plane Boeing 737
 no charge for carry on because it cost

Weakness
 no first class seating
 Southwest is losing money by not charging for carry on
 Southwest can purchase bigger planes that Airbus offers because their own plane
supplier is Airbus
 Having first class seat gives a meaning for customers that want to spend more feel more
important and get more amenities than an average customer.
 Score card of where Southwest stands with operations
2013 AirlineScorecard
Rankings of major carriers in key operational areas, best to worst.
Airline
On-
Time
Arrivals
Rank
Delays
> 45
minutes
Canceled
Flights
Mishandled
Bags
Passenger
Bumping
Passenger
Complaints
2-Hour Tarmac
Delays
Total
Score
Alaska 1 1 4 6 3 2 1 18
Delta 2 2 1 3 6 3 6 23
Virgin
America
3 6 3 1 2 5 4 24
Southwest 7 4 5 9 8 1 2 36
JetBlue 8 9 6 2 1 4 7 37
US Airways 4 3 7 5 5 6 9 39
Frontier 9 8 2 4 7 9 3 42
American 6 7 9 7 4 7 8 48
United 5 5 8 8 9 8 5 48

Distribution (MP)
Southwest distribution process consists of their customers and suppliers. Southwest use
to distribute tickets in person and at the ticket counter. Now the e tickets allows customers to
print out tickets at home and go on their way to their destitution. Southwest donates money
and distributes it throughout different charities. Southwest has no marketing distribution for
flights to other countries internationally. Southwest distributes there planes to their airports so
they have enough plans to meet how many customers are flying. Improper repairs that
Southwest does on their planes with no help and guidance from Boeing doesn’t always go right
and Southwest is sued for improper repairs. (Southwest.com)
Strengths
 purchases 737 planes from Boeing and sends them to all airports that Southwest flies to
 free vouchers to customers willing to give up their seat

 gives back to charities
 works alongside with stakeholders to prove a greener earth
 Ticketless tickets which gives customers the convenience to print tickets at home
Weakness
 FAA lawsuit against Southwest improper aircraft repairs article by Terry Maxon
 Southwest doesn’t distribute tickets or flight to international destination
 E Tickets decreases the amount of southwest ticket employees to have jobs
Sales and Marketing (MP)
Sales and Marketing from Southwest is advertising and making sure they have a great
distribution channels. Southwest Airlines has a lot of different sales and marketing strategies
that their competitors lack to accomplish. According to Southwest website they ads that stated
low fares which Southwest competitors could not do because they didn’t have low fares.
(Southwest) Now this is the opposite since southwest knows that they have loyal customers
and higher their prices knowing people will still purchase tickets. Southwest marketing
strategy to save money was to give customers peanuts which saved the company lots of money
compared to Southwest competitors that spend $5 on each meal per customer. Southwest raised
their sales by having flight turnover and getting more passengers on and of the planes to make
sure their supply meet the demands of the customers. Competitor’s planes wait an hour or more
and not having their passengers get on until they want to have them get from A to B.
Southwest has gained more customers with their rewards card marketing strategy which has

customers earning flight miles so they can go on a flight for free even if they never flew
before. (Southwest.com)
Strengths
 Marketing ad states The only low fare
 Peanuts to customers when their competitors purchase meals for their customers
 Cost of meal for passengers on competitor airlines $5- Southwest spends only 20 cents
on each of their customers.
 Southwest planes are turned fast so their can be more flights in the air. Other airlines
planes just sit and wait
 Airfares go down and tourist traffic increase when southwest enters a certain market.
 frequent flyer rewards cards for avid customers- Other airlines don’t have rewards like
Southwest
Weakness
 Southwest airlines raised their prices now matching with Delta and American airlines

 Customer's baggage are being lost because of allowing late bags from customers which
other airlines don’t have such a big problem like this
 Customers prefer a meal on a plane rather than peanuts on Southwest
 Southwest rewards cards are limited to customer who have to chose Chase.
 Southwest current marketing ads don't state low fares anymore
Service (MP)
Southwest has a different way of servicing to their customers. Southwest treats their
customers and employees the same way. Southwest cargo service has a process that the
diagram below goes into detail the procedure customer cargo is processed and handled. They
pick the best and most happiest employees ever to move the cargo and the service the
customer service hotline. This keeps customer's moral high. Southwest's great service increases
customers to return because they love the service. According to Southwest website a service
incentive is Southwest doesn’t charge for carryon's like Delta airlines does. Customers enjoy
the service of first come first serve seating basis. This allows customers to feel equally
important and not one passenger in higher class is being pampered more than the rest.
Southwest does train their employees but their competitors are doing the same which is the
service competitiveness between rivalry companies. Southwest customer service is a
phenomenon and is why when Americans thinks of Airlines they think of Southwest before
they consider a competitors name. (Southwest.com)

Strengths
 Southwest allows customers to pick their seats on a first come first serve basis unlike
Delta where there is assigned seats
 Southwest doesn't charge for carry on like Delta does
 Southwest has their corporate office send personal letters to customers apologizing for
delays?
 Southwest has a great cargo service process that meets and exceeds customers
expectations

Weakness
 Southwest luggage’s were lost or delayed more than United Airlines and Delta Airlines
 United Airlines had 43,000 front line employees take new customer service training
which Southwest didn't do in 2013.
 Southwest is too kind to their customers with late baggage which affects mishandling
of bags. Delta and American Airlines are more strict with their customers and don’t
have this problem
 Not allowing customers to extend their vouchers like Lauren from TN when she found
out she had cancer.

Support Activities (RR)
Southwest Airlines is a very successful airline because it takes its customers into consideration.
It also knows that without the support of their employees that it would be very hard to follow
through on their vision. However, there are other components that help make Southwest
Airlines successful that are called supporting activities. Supporting Activities is everything on
the side that helps run a business but actually is not related to your product.
 Winglets- save on fuel consumption
 RNP- Required Navigational Performance allows for safer, quicker, and less fuel
consumption of aircrafts.
 Location- Dallas is a metropolitan area where there is a lot of business so it benefits
having that as the headquarters for SWA.
 Advertising-The color schemes and slogans make SWA very identifiable.
Strengths
 Advertising
 RNP
 Fuel
Weakness
 Location- there is another international airport also located in Dallas. .

Product R&D, Technology and Systems Development (RR)
Southwest Airlines is always trying to stay one step ahead of its competition. In this
day in age technology is an integral part of the success of a company. In 2013 Southwest
Airlines hired Craig Maccubbin as the Chief Technologies Officer (CTO) and Vice President
of Technology Operations. Maccubbin has years of experience working for Fortune 500
companies in their technology department. One of technological developments that Southwest
Airlines is incorporating is the use of big data to help improve on their customer service. For
example, “Front-line personnel will receive real-time KPI dashboards related to operational
and strategic goals. They will use speech analytics to extract deep and meaningful information
out of live-recorded interactions between customers and personnel. This will deliver Southwest
Airlines more information in what the customers are looking for and how their experience with
Southwest Airlines is. Different metrics will guide the personnel in their objective to deliver
high-quality service,”( McCartney, 2010). The analysis of big data is crucial to the airline as a
whole. They use social media outlets to better understand their customers and to find out how
they can improve flights. Southwest has also buddied up with NASA on a text data-mining
project. What it entails is the collection of sensor data from pilots and anyone else that deals
with air traffic. What is being collected is used to improve airline safety. Another technological
advance is the change in cockpit software to its fleet. The new software means that pilots will
need to be accustomed to different instruments and displays. “Using more-precise approaches
to airports called Required Navigation Performance (RNP) routes, airplanes can shorten their
flights. The paths laid out in the sky that planes use into and out of airports will be much
narrower, removing overlap between different airports in congested cities,”(McCartney, 2010).
Lastly with the deterioration of our ecosystem most companies are going “Green.” Southwest

has also decided that they should also by introducing plans for the “Green Plane.” They will
take the old Boeing 737-700 and transform it into an eco-friendly plane where the cabin
materials will be “…recyclable and lighter weight, saving up to five pounds per seat”
(Airlinetrends.com, 2014). The lighter flight should allow for prices to decrease on flights,
which would benefit the consumer.

Strengths
 The CTO has a lot of experience in this field
 Data is being brought in by every possible source (e.g. Social media, texts, sensors)
 Innovations are to help our ecosystem and to improve safety.
Weaknesses
 Analysis takes time and some of the projects have taken 3-4 years to accomplish
 Data Analysis can be expensive
Human Resources Management (RR)
Southwest Airlines always ranks high on the Fortunes magazine’s “100 best places to
work.” The way they view their employees and the other companies with such high regard is
why they are such a popular and successful airline. For example, Julie Weber is the Vice
President of Human Resources but that is not her title. Instead she is known as Vice President
of People because that is whom she is dealing with…People. They focus on respect and
building relationships with one another rather than isolating themselves within their
department. According to MIT. “Southwest has excelled by focusing management attention on
building relationships with front-line employees, among front-line employees, and with
external parties including suppliers and labor unions.” Not only does Southwest have mission
statement to their customers but they also do to their employees that states, “We are committed
to provide our Employees a stable work environment with equal opportunity for learning and
personal growth. Creativity and innovation are encouraged for improving the effectiveness of
Southwest Airlines. Above all, Employees will be provided the same concern, respect, and

caring attitude within the organization that they are expected to share externally with every
Southwest Customer.”
Strengths
 There is a good work environment
 There is a strong sense of support from within the company for every employee
 Higher managerial staff lead by example
Weakness
 Leadership infrastructure can be unclear.
 Thinking freely is wanted
 Those higher in command appreciate their employees
General Administration (RR)
Southwest Airlines does not focus their success solely on profit margin but even though
every year they stay out of the red and have productive and profitable years. Since the
beginning, their co-founder Herb Kelleher, has wanted this company to think outside of the
box. Most companies are run where those at the top are the ones that make the decisions and
those that are below are just to follow and obey. However, Southwest Airlines does not operate
like that, “The organization of Southwest Airlines is best described as an upside-down pyramid

– an organization very much in line with the way they want to do business. The upper
management is at the bottom and supports the front line employees, who are the experts. Front
line employees play a major role in the yearly business planning and operational budgeting
which for a great part is done bottom-up rather than top-down,” (The Rise of Southwest
Airlines, 2009). As a company they do not put much emphasis on titles and chain of command.
They encourage their employees to think freely and independently without worry. The
President and Chief Executive Officer, Gary Kelly has held his position for 10 years. He has
worked for Southwest Airlines for 28 years and began as an air traffic controller and has
moved his way up. He has received many awards while working for Southwest Airlines. Most
notably he received the award of CEO of the year twice while holding his current position
(Kelly, 2014)
Strengths
 Being different is applauded
 Thinking freely is wanted
 Those higher in command appreciate their employees
Weaknesses
 Chain of command can be skewed

Summary of Value Adding Activities (MP)
Value Chain Analysis Findings
Value Chain Activity Value Adding, Neutral or Negative Impact on
Value1
Supply Chain Management Value Adding: Southwest purchases Boeing planes
in Bulks and only flies Boeing. This allows
Southwest pilots to be able to fly all planes at any
airport.
Operations Value Adding: Southwest has high turnaround
unlike their competitors and get more travels to their
destination faster while competitors have their
planes staling at the airport gates.
Distribution Neutral: Southwest had an added value for E
Tickets until their competitors followed and many
airline Companies use E Tickets .
Sales and Marketing Value Adding: Southwest uses low cost strategy
while competitors throughout they are using a low
fare strategy
Service Value Adding Southwest competitors strive to
compete with happy customers with creates the
customers happy experience. However customers
tend to be a repeat customer and stay loyal to
Southwest due to their fire experience.
Product R&D, etc. Neutral: Southwest uses Big data analytics to see
what the customers’ needs and wants are but
competitors are also seeing what their customers
want or why customer choose southwest and not
Delta Airlines for example
Human Resources
Management
Value Adding: Southwest hires the best employees
and the results are noticed with positive customer
service that still say competitors still have meet up
to part if Southwest
General Administration
(infrastructure)
Value Adding: Southwest has a horizontal
decentralized organization structure that allows
employees to think outside the box and have say on
what southwest can implement to become more effective

and efficient. Competitors don’t allows employees to have
much say at all on the company current and future
strategy.
Financial Ratio Analysis (MP,KM,MR)
The financial ratio analysis consists of four parts. The four parts is Liquidity Ratios;
which is Ratios that consists of Current Ratios and Quick Ratio. Both of these ratios help
define what the debt is for assets of the company and what the debt is for the equity the
company ended with Lever ratio, Activity ratio, and Probability ratio. In these sections there is
a total of eight financial ratios from 2010-2013 that is evaluated, compared, and analyzed. In
the section below, it goes into great detail who was ranked one for each ratio, and their ratios
for that section from all 4 years had any similarity or where not constant and had great or bad
changes. Southwest Airlines, Delta, American Airlines, and United are the top competitors in
the industry and the next section go into detail the ratios even if they have great brand loyalty
and in the public eye is the best airline company to fly.

Southwest Airlines Co. (LUV)
-NYSE Watchlist
39.07 0.12(0.31%) Nov 17, 4:01PM EST
After Hours : 39.10 0.03 (0.08%) Nov 17, 7:59PM EST
Prev Close: 38.95Day's Range: 38.90 - 39.53
Open: 38.9352wk Range: 17.73 - 40.06
Bid: 39.07 x 200Volume: 6,282,670
Ask: 39.32 x 200Avg Vol (3m): 8,773,890
1y Target Est: 43.28Market Cap: 26.52B
Beta: 0.59P/E (ttm): 23.56
Next Earnings Date: 22-Jan-15 EPS (ttm): 1.66
Div & Yield: 0.24 (0.60%)
Ratios Southwest Delta American Airlines United
2013 2012 2011 2010 2013 2012 2011 2010 2013 2012 2011 2010 2013 2012 2011 2010
Liquidity
Ratios
Current
Ratio 0.79 0.91 0.96 1.29 0.68 0.62 0.61 0.64 1.04 0.76 0.78 0.78 0.72 0.78 0.97 0.95
Quick Ratio 0.63 0.71 0.76 1.13 0.38 0.38 0.41 0.45 0.78 0.54 0.57 0.6 0.55 0.61 0.8 0.81
Leverage
Ratios
Total Debt
to Assets
Ratio 38.44 14.57 35.64 32.66 16.06 19.71 25.1 2.83 10.12 20.08 22.49 27.49 17.13 19.2 11.91 22.07
Debt to
Equity Ratio 0.34 0.47 0.45 0.46 0.84 -8.49 -5.2 14.69 -5.62 -0.84 -0.94 -2.22 3.66 23.35 6.33 7.22
Activity
Ratios
Inventory
Turnover 14.62 16.67 20.49 18.84 18.55 28.85 61.04 43.85 11.43 16.9 15.83 14.28 24.35 26.52 30.57 29.0
Days of
Inventory 24.96 21.89 17.81 19.37 19.68 12.65 5.98 8.32 31.93 21.59 23.05 25.56 14.99 13.77 11.94 12.59
Profitability
Ratios
Total
Return on
Assets (%) 3.97 2.3 1.06 3.09 21.78 2.29 1.97 1.37 -5.58 -7.92 -8.09 -1.86 1.53 -1.91 2.17 0.87
Return on
Equity (%) 10.52 6.07 2.71 7.84 103.85
-
47.35
-
61.17 221.64 67.15 23.49 27.83 11.94 32.96
-
63.23 47.55 49.45

Liquidity Ratios (MP,KM,MR)
Liquidity Ratios consist of Current Ratios and Quick Ratio. Both of these ratios help
define what the debt is for assets of the company and what the debt is for the equity the
company ended with. Current ratio which is discuss in the section below, if calculated, with the
function current assets and current liabilities.
All assets to the company in one way or another is a reason for the success of the
company wealth and profit is a set and all liabilities, such as, what the company owe or is
leasing a liability. Quick ratio which is also discussed in the section below goes into detail out
the Airlines industry and how each company are ranked and where they stand throughout the 4
years from 2010-2013. Quick ratios, is the ability to meet its short term obligations with its
most liquid assets. (Investopedia)
Quick ratio = (current assets – inventories) / current liabilities, or = (cash and
equivalents + marketable securities + accounts receivable) / current liabilities.

Current Ratio (MP,KM,MR)
Southwest is very competitive to the public eye and has a low cost strategy approach.
When looking at the financial analysis 2010 was their peak at 1.29 and they steadily decrease
to 0.96 in 2011 to 0.91 in 2012 then to 0.79 in 2013. Southwest has man liabilities which their
assets couldn’t cover but took this biggest drop from 2012 to 2013 with a 12% difference.
Southwest airlines would not be able to pay off their short term debt with these kind of
financial results. While looking at the big picture Delta airlines in 2010 had a 0.64 current ratio
it wasn’t as good as southwest but was able to get their current ratio to 0.68 despite the drop in
20111 at 0.61. American airlines in 2010 current ratio was steady in 2010 and 2011 at .078 and
dropped in 2010 to 0.76 but recovered in 2013 to 1.04. United Airlines current ratio wasn’t up
to par with Delta and American Airlines however it was on the same track as southwest.
United Airline’s had a 0.95 in 2010 and raised in 2011 to 0.97 it then dropped in 2012 19% to
0.78 and in 2013 dropped to 0.72. Analyzing the current ratio Southwest couldn’t compete
with their competitors on the current ratio since Delta, American, and United Airlines
recovered from their loss or had a point where they did better than the year prior. Southwest
did not improve one year it was a down slope which is something that southwest hopefully
change for the 2014 current ratio. (Investopedia)
Southwest United American Delta
2010 1.29 0.95 0.78 0.64
2011 0.96 0.97 0.78 0.61
2012 0.91 0.78 0.76 0.62
2013 0.79 0.72 1.04 0.68

Quick Ratio (MP,KM,MR)
Southwest airlines to a major downturn just like their current ratios. Southwest quick
ratio is the current assets of southwest minus inventory/current liabilities. This equation give
the dollar amount of liquid assets for each dollar of liabilities. In 2010 southwest quick ratio
was 1.13 and plummeted downward at 0.76 in 2011 and 0.71 in 2012 and 0.63 in 2013.
Southwest competitors Delta airlines 2010 quick ratio is 0.45 and in 2011 it was 0.41. Delta
however in 2012 and 2013 went down but staid constant at 0.38. American airline did fairly
well and did the best out of the industry despite their slow start at 0.6 in 2010 to an increase to
0.57 in 2011 and a decrease in 2012 at 0.54. They finished strong with a quick ratio at 0.78.
United Airlines quick ratio started out strong at 0.81 but plummeted downward to 0.8 and
improve in 2012 at 0.61 but wasn’t able to maintain the 0.61 and ended with a 0.55 in 2013.
The industry struggles to have their liquid assets that are available to cover each $1 of
liabilities. In 2010 and 2011, competitor rates were roughly 0.2 percent apart across the board
0
0.2
0.4
0.6
0.8
1
1.2
1.4
2010 2011 2012 2013
AxisTitle
Current Ratio
Southwest
United
American
Delta

decreasing in 2012 and 2013. Southwest’s dollar amount has decreased dramatically over the
four years. (Investopedia)
2010 1.13 0.81 0.6 0.45
2011 0.76 0.8 0.57 0.41
2012 0.71 0.61 0.54 0.38
2013 0.63 0.55 0.78 0.38
Leverage Ratios: (MP,KM,MR)
Leverage ratios look at debt, equity, assets and interest expenses. Leverage ratios
comprise of total debt to asset ratio and debt to equity ratio. Total debt to asset ratio means
that the higher degree of ratio the higher degree of leverage. Debt to equity ratio is a
measurement of how much suppliers, lenders, creditors and obligors have committed to the
company versus what the shareholders have committed. (Investopedia). Total debt to asset
ratio and Debt to equity ratio are both analyzed and evaluated in detail below and how
Southwest, Delta, American, United Airlines did form 2010-2013. (Investopedia)
0
0.2
0.4
0.6
0.8
1
1.2
2010 2011 2012 2013
Parcentage
Quick Ratio
Southwest
United
American
Delta

Total Debt-to-Assets Ratio (MP,KM,MR)
Southwest total debt to asset ratio is founded by using the short term debt plus long
term debt and then dividing it by total assets. Southwest total debt to assets ratio in 2010 was
32.66 which increased to 35.64 in 2011. In 2012 southwest total Debt to asset ratio was 14.57
which not only are they back in the 30's but end of with the most debt to equity ratio from all 4
years. 38.44. Southwest best year was in 2012 but more than double their debt to equity ratio
and the end of year 4.Southwest competitors delta in 2010 had a great start at 2.83 and
increased dramatically in 2011 to 25.1. In 2012 delta was able to lower their debt to asset ratio
form the year prior with 19.71 which carried over in 2013 to 16.06. Deltas best year was in 201
at 2.83 but had no significant similarities in the next 3 years. American Airlines total debt to
asset ratio did very well since in 2012 their highs was 27.49 and was able to lower their debt
to 22.49 in 2011 then to 20.08 in 2012 and finally 10.12 in 2013. American Airlines best year
was in 2013 and had the best results throughout the 4 years. United Airlines debt to equity
ratio did fairly well since in 2010 they had a 22.07 which was their peak and went down to
11.91 in 2011 and in 2013 went back up to 19.2 but in 2013 was able to bring their total debt to
equity to 17.13. United Airlines best year was in 2011 but wasn't able to match that in 2013 or
have a lower number. (Investopedia)
2010 32.66 22.07 27.49 2.83
2011 35.64 11.91 22.49 25.1
2012 14.57 19.2 20.08 19.71
2013 38.44 17.13 10.12 16.06

2010
Total Assets $ 15,460,000,000.00
Total Debt $ 505,000,000.00
Debt to Assets Ratio 0.032664942 3.27
2011
Total Assets $ 18,070,000,000.00
Total Debt $ 644,000,000.00
2012
Total Assets $ 18,600,000,000.00
Total Debt $ 271,000,000.00
0
5
10
15
20
25
30
35
40
45
2010 2011 2012 2013
Percentage
TotalDebt to Assets Ratio
Southwest
United
American
Delta

Debt to Equity Ratio (MP)
Southwest Debt to Equity Ratio is total assets divided by shareholder equity this is how
the debt to equity ratio is determined. Southwest Debt to Equity Ratio in 2010 was 0.46 which
decreased in 2011 to 0.45. Southwest had an all time high Debt to Equity Ratio in 2012 at 0.47.
In 2013, Southwest had the lowest ratio in the 4th year at 0.34. Delta Airlines' Debt to Equity
Ratio in 2010 was 14.68 and in 2011 it was the second lowest at -5.2. In 2012, Delta had the
lowest Debt to Equity Ratio at -8.49 which increased in 2013 to finish their last year at 0.84 but
still wasn't close to their 2010 Debt to Equity at 14.68. American Airlines' Debt to Equity in
2010 was -2.22. American Airlines were able to improve the Debt to Equity in 2011 to-.094
and in 2012 it went down to -0.84. In 2013, American Airlines ended with the most
unsuccessful year at a Debt to Equity at -5.62. United Airlines was the most successful in the
industry. In 2014, United Airlines' Debt to Equity was 7.22 which decreased in 2012 to 6.33. In
2012, United had an all time high at 23.35 but ended with their lowest debt to equity at 3.66
which was still higher than anyone else in the industry.
2010 0.46 22.07 -2.22 14.69
2011 0.45 11.91 -0.94 -5.2
2012 0.47 19.2 -0.84 -8.49
2013 0.34 17.13 -5.62 0.84

Activity Ratios (MP,KM,MR)
Activity ratio are used to measure the efficiency of a firm. Activity ratio is broken into to
part which is inventory turnover and days Inventory. Inventory turnover is how many time a
company’s inventory is sold and replaced over a period. The picture below is the formula for
inventory turnover. The days of inventory is the amount of days the item is held as inventory
before it is sold. (Investopedia). The formula of days of inventory is below. (Investopedia).
Two ratios, inventory turnover ratio and total asset turnover ratio reevaluated and analyzed for
the airline industry which included Southwest, Delta, American, and United Airlines.
(Investopedia)
.
-15
-10
-5
0
5
10
15
20
25
2010 2011 2012 2013
Percentage
Debt to Equity Ratio
Southwest
United
American
Delta

Inventory Turnover (MP,KM,MR)
The industry all did very well with their inventory turnover. United Airlines inventory
turnover was 24.35 and came in 1st in for overall industry. . Delta came in 2nd with an 18.55
inventory turnover in 2013. Southwest came in third in the industry with a 14.62 inventory
turnover in 2013. . American airlines had the worst ending 4th years result with a 11.43
inventory turnover in 2013 Southwest in 2010 had a 18.84 inventory turnover and in 2011 had
the highest inventory turnover of their 4 years at 20.49. In 2012 southwest invests was 16.67
and decreases to 14.82 in 2013. Southwest is unable to lower their turnover and our group
would like to see the changes improve for southwest in 2014. Delta came in 2nd out of the
whole industry even though in 2010 their inventory turnover was 43.85 and in 2011 their
inventory turnover is 61.04. From there on in 2012 their inventory turnover was 28.85 and
went down to 18.55 in 2013 but still had the second highs 2013 4 years results from their
industry. American airlines came in last this is because for all 3 out of the 4 years their
inventory turnover was decreasing. In 2010 they had a 14.28 inventory turnover in 2011 they
had a 15.83 inventory turnover and highs peak was in 2012 at 16.9 and ended with 11.43 in
2013. United Airlines did the best in the industry. In 2010 united had an inventory turnover of
29.0 and their best peak year was 2011 at 30.57. In 2012their inventory turnover was 26.52.
United may have not meet their peak at 30.57 in 2011 but they still had the highest inventory in
2013 with 24.35. (Investopedia)
2010 18.84 24.35 14.28 43.85
2011 20.49 26.52 15.83 61.04
2012 16.67 30.57 16.9 28.28
2013 14.62 29 11.43 18.55

Days of Inventory (MP,KM,MR)
Analyzing the whole industry United Airlines day of inventory were the lowest and
came in first at 14.99. Delta came in second ending their fourth year at 19.68. Southwest
came in third at 24.96. American Airlines came in fourth with an inventory turnover of 31.93.
Southwest day of inventory had an improvement when it went from 19.37 in 2010 to 12.81 in
2011. However they increased their days of inventory from 21.89 in 2012 to 24.86 in 2013
which results in Southwest ranking 3rd in their industry. Delta had a really good start in 2010
at 8.32 and had the best lowest results at 5.988 but in 2012 raised it to 12.65 and in 2013 had
their highest peak at 19.68. American airlines came in last since in 2010 had a 25.56 days of
inventory and in 2011 had a 23.05 days of inventory which was an improvement which lead to
their 21.59 days of inventory in 2012. In 2013 they had the highest days of inventory at 31.93.
United airlines kept days of inventory somewhat consistent. In 2010 their days inventory was
12.59 and was able to decrease it 10 11.94 they took a hit in 2012 with 13.77 and to a smaller
hit at 14.99 but they kept the lowest days of inventory at 14.99. (Investopedia)
0
10
20
30
40
50
60
70
2010 2011 2012 2013
Percentage
InventoryTurnover
Southwest
United
American
Delta

2010 19.37 12.59 25.56 8.32
2011 17.81 11.94 23.05 5.98
2012 21.89 13.77 21.59 12.65
2013 24.96 14.99 31.93 19.68
Profitability Ratios (MP,KM,MR)
According to Education Portal profitability ratios is a ratio that allows a company or
competitors to measure a company’s performance. The two ways two do this is Total
Return on Assets and Return on Equity. Total Return on Assets is shows how effective a
company is using their assets to generate earning before contractual obligations must be
paid. (Investopedia). Formula for ROA is below. Return on Equity is the amount of net
income returned as a percentage of shareholders equity. ROE formula is below.
(Educational Portal) (Investopedia) (Morningstar)
0
10
20
30
40
2010 2011 2012 2013
AxisTitle
Daysof Inventory
Southwest
United
American
Delta

Total Return on Assets (MP,KM,MR)
Analyzing the industry in total return on assets Delta came in first with the highest
ROA at 21.78 and southwest came in second with a ROA of 3.97. United came in third at 1.53
while American airlines ROA came in last at -5.58. Southwest came in second because that
had a high ROA in 2010 at 3.09 which decreased to 1.06 in 2011 and in 2012 rose to 2.3 and
their 4 years end result in 2013 was 3.97. With the ups and downs Southwest did very well in
their industry and own their own. Delta came in first with extremely well ROA financial
results. In 2010 Deltas ROA was 1.37 and was higher in 2011 at 1.97 and in 2012 was 2.29.
The biggest success which no other competitors in their industry was that they had a 21.78
ROA which was highest in the industry and Delta was very proud of that. American Airlines
ROA were all negative. Not only were they negative but in 201 there ROA was -1.86 and in
2011 their ROA was -8.09 and in 2012 their ROA was -7.92 and in 2013 their ROA was -5.58.
United airlines came in third and hand some improvements like their 2010 ROA was a 0.87
and they increased it to 2.17 but failed to maintain that 2.17 and had a -1.91 in 2012. In 2013
they were able to have a positive 1.53. (Investopedia)
2010 3.09 1.53 -1.86 1.37
2011 1.06 -1.91 -8.09 1.97
2012 2.3 2.17 -7.92 2.29
2013 3.97 0.87 -5.58 21.78

Return on Equity (MP,KM,MR)
After analyzing the industry all 4 companies in the industry did very well some better
than other but were able to finish strong with better number in 2013. Deltas ROE came in first
with an astonishing ROE 103.85. American Airlines came in second with a strong 67.15 ROE
in 2013. United came in third with a 32.96 ROE and Southwest Airlines came in last with a
10.52 ROE in 2013. Southwest ROE in 2010 was 7.84 a decreased to 2.71 but Southwest was
able to kickback and raise their roe to 6.07 and in 2013 10.52. Delta did phenomena they had
such a high ROE in 2010 at 221.64 but in 2011 dropped to -61.2 and in 2012 went worse for
them since there was 47.4. Delta had a recovery that took them 4 years and ended with an ROE
of 103.85 which doesn’t compare to their 201 221.64 ROE but at least finished strong.
American Airlines did very well they had an 11.94 ROE and in 2011 had a 27.83 ROE. In
2012 they took a dip at their ROE was 23.49 but were able to recover and ended with a trip
percentage at 67.15 United Airlines didn’t do so well they had their peak ROE in 2010 at
49.45 and went down little in 2011 to 47.55 and drastically declined in 2012 to -63.23.
-10
-5
0
5
10
15
20
25
2010 2011 2012 2013
AxisTitle TotalReturn on Assets
Southwest
United
American
Delta

However despite the horrible let down United was able to finish with a 32.96 ROE which
didn’t meet or exceeded their original 49.45 in 2010 3 years ago but hand a higher ROE than
southwest. (Investopedia)
2010 7.84 32.96 11.94 221.64
2011 2.71 -63.23 27.83 -61.17
2012 6.07 47.55 23.49 -47.35
2013 10.52 49.45 67.15 103.85
Results of Financial Analysis (MP,KM,MR)
After analyzing the airlines industry financially ratios Southwest Airlines didn’t have the
best financial results for equity ratios, Leverage Ratios, Activity ratios, and probability ratios.
For liquidity ratio American Airlines had both the highest Current and Quick Ratios. For the
-100
-50
0
50
100
150
200
250
2010 2011 2012 2013
AxisTitle
Return on Equity
Southwest
United
American
Delta

Southwest Airlines industry analysis

Southwest Airlines industry analysis

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