Southwest Airlines has experienced significant success since its founding in 1971 through employing unique low-cost strategies. While facing initial doubts about viability, Southwest is now a major public company trading on the NYSE. Southwest prioritizes maintaining low costs through operating a simplified fleet and service while focusing on high customer service and employee satisfaction. These strategies have allowed Southwest to withstand challenges like 9/11 and economic recessions better than competitors. Southwest also differentiates itself through a rewards program and baggage policies to maintain its competitive edge.

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SWA Case Study
Professor Williams
Group 2 Bernard, Colon, Earl,
Walker
Southwest Airlines: LUV Conquers All
From the start Southwest faced difficult challenges. Three planes and three cities was a drop in
the bucket, to the competition already established n the larger metropolitan areas. Forecasters
said they would end up belly up. Today they are public company traded on the NYSE with
current shares trading at $42.82. In 2015 Southwest was named by Forbes as the best airline
for career minded people.
Since 1971 Southwest Airlines has turned heads with their unique strategies. Starting with a
mission statement of “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. For forty-four years Southwest has delivered. Truly a company that has exceeded all
expectations and become a jet setter in the Airline industry.
Southwest mission statement clearly defines the goal to” Connect people to what’s important in
their lives through friendly, reliable, low cost air travel”. The people continue to meet and
exceed them. Given the nickname and later the stock ticker of LUV, employees show the love
by offering the best in customer service, friendliness and social responsibility. Southwest.com

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states the following regarding the LUV campaign instilled in the employees. Southwest has been
in LUV with our Customers from the very beginning. Therefore, it's fitting that we began service
to San Antonio and Houston from Love Field in Dallas on June 18, 1971. As our Company and
Customers grew, our LUV grew too! With the prettiest Flight Attendants serving "Love Bites" on
our planes, and determined Employees issuing tickets from our "Love Machines," we changed
the face of the airline industry throughout the 1970s. Then in 1977, our stock was listed on the
New York Stock Exchange under the ticker symbol "LUV." Over the ensuing years, our LUV has
spread from coast to coast and border to border thanks to our hardworking Employees and their
LUV for Customer Service.
Southwest has a list of over 28 values they put into practice every day, Highlights include
“Desire to be the best, treat others with respect, Demonstrate proactive customer service,
Safety and Reliability” and maybe the most important one of all “Have Fun”. These values are a
major influence in the way Southwest conducts business and have kept them at the top of their
game.
Southwest Airlines four major strategies has helped them reach their goals and place them in a
highly competitive position. The low-cost, future minded, employee driven strategy has given
them a differentiated advantage.
Starting with a simple no frills service, flying only Boeing products and the practice of not
serving meals has kept operation cost to a minimum while still meeting the customer’s needs.
These strategies ensured that they were able to handle the aftermath of 9/11 when airline
travel decreased dramatically. Again this strategy carried them through the recession that saw

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many of their competitors struggling to survive. They did not have to make drastic decisions to
survive the heavy blows dealt from the aftermath of the attack and the financial crisis seen
around the world. Pay-cuts were the worst part of the recessions and aftermath. Again
employee loyalty came through as employees choose to work for less money rather than find
employment elsewhere. The tactics of having highly motivated employees ensure that
employees enjoy their jobs. Motivated employees make better Southwest number one in
customer service. Happy people do happy things and this shows in the great lengths they are
willing to go to make a single customer happy.
Having a differentiation strategy of a frequent flyer program and not charging for luggage
unless overweight or excessive amounts. The rewards program is unique in the option that any
flight any day can be purchased with Rapid Rewards. Recently a partnership with Chase Bank
N.A. to offer credit cards that earn points has increased business and satisfied customer’s
needs. Unlike competitors, who have complex rules for using their rewards system,
Southwest’s clear and concise simple rewards are a major source of differentiation keeping
them on top.
External Analysis
Introductions

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Although young in the market at 44 yrs of age, Southwest Airlines, based in Dallas Texas, has
become one of the most respected no frills air travel. Always the Odd-ball, using the bucking
the "norm" perception that has helped them stand out in the market. The end of the year 2015
will conclude the Air-Tran merger. With the exploitation of the domestic strength it holds in the
US market, they look to take on the international market. Using Houston's Hobby, its 6th largest
base based on number of seats deployed. They will offer flights to Cancun, Mexico City, Puerto
Vallarta, Los Cabos and San Jose, Costa Rica and Belize City, Belize.
Even with the recent successes Southwest Airlines still faces numerous obstacles to stay on the
top of the game. The need to maintain low cost fares while continuing the culture of LUV
continue to plague those in charge.
Strengths
1. Financial stability-
Recording its fifth consecutive quarter of record profits during the 2nd quarter of 2014,
Southwest Airlines was the first airline to be given "investment grade status". Alaska Air Group
is the only other airline to receive this grade. Maintaining profitable during the financial crisis of
2008. Maintaining a strong balance sheet, the end of 2nd quarter of 2014 they held a leverage
of 37% and cash in hand of 4 billion USD. The beginning of 2014 Southwest generated 1.6 billion
of free cash flow. In June of 2014 a reduction of debt and capital leases were at 1.5 billion.
Southwest has meet and exceed economies of scale a tough goal for this industry.

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2. Iconic Branding
Deemed the top travel brand and fifth overall brand by The Business Journals in the American
Brand Excellence Awards it is one of the most recognized brand in the US. Advertising in high
profile sporting events and social media is it consistently exploiting its heritage. A important
differentiation in a commodities industry, not going along with the crowd and forgoing revenue
is perhaps albeit and not easily accountable.
3. Strong domestic demand
The US market is in strong demand with an 8% passenger unit revenue growth for the 2nd
quarter of 2014. This is another record SWA holds the largest gain by an airline. Data from
CAPA and OAG suggests that Southwest is the second largest airline in the domestic market
when measured by seat deployment. Delta holds 22% while Southwest holds 20% .Southwest
was the largest domestic carrier by total passenger with 101.3 million passengers noted for
2009. The US DOT reported that SWA as of June 2009 was the largest air carrier in the US,
measured by the number of originating passengers boarded. This offers a comfortable
competitive advantage. With the AirTran merger and the merger of American and US Airways
Southwest was able to move forward in key markets located in Washington National and New
York LaGuardia. Resulting in a strong position in eight of the top 10 US cities in 2014.
4. Employee Moral
Employee philosophy includes eleven primary attitudes:

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 Employees are number one. The way you treat your employees is the way they will treat
your customers.
 Think small to grow big.
 Manage in the good times for the hard times.
 Irreverence is okay.
 It’s okay to be yourself.
 Have fun at work.
 Take the competition seriously, but not yourself.
 It’s difficult to change someone attitude, so hire for attitude and train for skill.
 Think of the company as a service organization that happens to be in the airline
business.
 Do whatever it takes
 Always practice the Golden Rule, internally and externally.
This philosophy and the LUV attitudes of the staff are a considerable assets in the busy world of
today. A little personal service is going a long way.
Weaknesses

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1. Lack of revenue opportunities
Rejecting the standard yet again and not "unbundling" as the competitors have done in
recent years. Ancillary revenue remains the greatest opportunity to increase medium and
long term revenue.
2. Limited flights available
Southwest has few flights offered in the morning and until 2015 offered no service to
international destinations
3. Contract obligations with Boeing
They are currently dependent on a single maker of aircraft, preventing them from
purchasing from other suppliers that may offer larger less expensive aircraft.
Opportunities
1. Population growth
The rise in the elderly and Hispanic population are potential markets that Southwest is
currently in the process of exploiting by the expansion into the international flight, beginning
with flight to Mexico and South America in 2015

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2. Increased air travel
Despite the regulations and complaints of the newly established TSA air travel is predicted
to increase rapidly in the next ten years.
4. New technology
Newly developed technology is making air-travel safer and more pleasurable by offering Wi-
Fi, streaming movies and up to date weather reports being broadcast on board. Being able to
offer these and maintain a low-cost fare will continue to make SWA number one.
Threats
1. Reduced air travel
The ever changing political and financial markets can have a huge impact on the cost of fuel
which in turn can reduce travel in any form especially air travel. A decline in leisure travel due
to terrorism and a depressed economy. The development of high speed rails can reduce the
number of short flight commutes. Along with the probability of rising airfares is likely due to the
inability to implement more cost cutting measures.
2. Increased Competition.

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Competing on the basis of customer service, low cost, frequency and convenience of booking
travel along with frequent flyer benefits is a tough gig. Competitors are taking notice and
strategically positioning themselves to maintain their current standings. With many competitors
having assets such as large fleets and branding this can be a difficult hurdle for Southwest in the
coming years
3. Shortcoming on Shareholder expectations
Failing to meet expectations will decrease the value of the company’s stock causing the
company difficulty to raise capital needed in both short term endeavors as well as long term
financing such as the purchase or expansion of the number of aircraft.
Conclusion
Overall, Southwest has strengths in its firm operating strategy, strong fleet operation and
dominant market position in North America. Their brand image was well noted by the domestic
market, and now by the acquisition of AirTran Holdings, Southwest has a good opportunity to
expend its market internationally, which has seen to be one of its main weakness in the past. Its
conservation growth strategy can be seen as the double side edge, which has delayed its
globalization, but meanwhile prevent it’s involvement with the unfamiliar competitive market.
Mixture of both conservative and fast growth strategies could be the best way of its future
development.

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Southwest Airlines Internal Analysis
As we take a look at the foundation of Southwest Airlines, we will assess their internal
resources, capabilities and core competencies, discerning their strengths and weaknesses.
Southwest has a continuous mission and vision dedicated to their employees, community, our
planet and stakeholders, with the intent of achieving high quality customer service involving
warmth, friendliness, individual pride and company spirit. Southwest has continued to maintain
an annual profit for 42 consecutive years, highlighting 2014 as an exceptional year of
achievements. Moreover, as Southwest continues to be the best in its industry, dissecting what
is good and deficient can provide a forecast of future success.
ORGANIZATIONAL RESOURCES
STRENGTHS
 Financial, physical and intangible assets for Southwest remain strong for liquidity with
an increase of 4% fiscal year 2014 to LY. According to Southwest Airlines’ Balance Sheet
and Cash Flow Reports, “As of January. 21, 2015, the company had approximately $3.1
billion in cash and short-term investments, and a fully available unsecured revolving
credit line of $1billion.”

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As for human resources, it is considered this to be one of Southwest’ greatest strengths. They
consider “the people” to be one of their greatest assets. Southwest has branded themselves
with a reputation for creating innovative programs to generate an increase in productivity and

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create ideas to cut cost for a continual affordable airfare for the customer. They have also
formulated a collaboration of experience, knowledge, judgment and skills into their legendary
“Southwest Way”, which teaches the art of the “warrior spirit”, “the servant’s heart”, and a
“fun-LUVing attitude”. The Implementation of these fundamental behaviors can be considered
a competitive advantage. Southwest’ dedication to their employees also consist of:
Benefits for part-time and full-time employees such as:
1. 401K retirement savings plan
2. Profit sharing plans
3. Medical and prescription
4. Vision
5. Dental
6. Adoption assistance
7. Pre-tax benefits
8. Mental Health Employee assistance Program
9. Life insurance
10. Accidental death and dismemberment
11. Long-term disability
12. Dependent life insurance
13. Healthcare Spending account
Having these benefits available to all employees is definitely an advantage for a great retention
rate within their company.

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 Training is essential to ensure the greatest experience from a customer perspective and
it gives employees the confidence to perform their job to the highest ability. According
to Southwest overview they provide their employees with “internal training programs
but also encourage employees to attend external training programs to further specialize
in their respective fields.”
 Engagement and recognition are an essential part of appreciating the “beLUVed”
employees of Southwest. This program consist of:
14. 40th Anniversary Celebration
15. Employee Survey
16. Employee Recognition Programs
17. Volunteers of LUV
18. President’s Award
19. Winning Spirit Award
20. Operation Kick Tail
21. Star of the Month
22. Heroes of the Heart
23. Hockey Day
All of these programs are implemented on a monthly and annual consistent basis to show how
important the “people” of Southwest are.
WEAKNESSES

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 In human relations in regards to customer service:
24. Southwest currently has limited space to carry freight and cargo.
25. They do not offer international flights.
26. Their longer trip destinations do not offer better rewards than their short ones.
27. They currently do not provide segmented seat options.
 In human relations in regards to their employees:
28. They currently have a reduction in line supervisors which can lead to employees that do
not practice company principles.
ORGANIZATIONAL CAPABILITIES
STRENGTHS
 Organizational Processes and routines for Southwest has intelligent strategy that allows
them to provide their customers with non-stop flight and minimizes connections, delays,
and total trip time (Mary Coulter 250).
 Their planes have identical designs, making them easy to operate and maintain.
 Southwest has provided planes with fuel savings, performance-enhancing engines.
 Customers are not assigned seats, instead, they are assigned by boarding groups.
 Southwest chooses to schedule flights out of local or downtown airports, making it
convenient to travel close to home.
 Southwest has utilized the use of technology to efficiently process customers, allowing
them to bypass waiting in lines at ticket and gate counters.

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 The decision for Southwest to upgrade to new devices used to navigate ground crews,
adding another level of safety.
WEAKNESSES
 Southwest planes can only carry small amounts of cargo and freight.
 Booking flights are only available through Southwest airlines.
CORE COMPETENCIES
STRENGTHS
 Distinctive Capabilities for Southwest includes:
 Advance purchases of fuel buyout options to smooth out fluctuations in fuel costs.
 Commitment to delivering low airfare to their customers through cost leadership.
 Southwest employees has a reputation for being the friendliest.
 Strict policy on customer satisfaction. They have a motto which states, “Do whatever
you can to keep the plane flying”, motivating employees to go above and beyond.
 Quick turn-around trip of 25 minutes vs 40-60 the competitions average.
 Southwest airlines’ “culture”, being committed to the health and well-being of their
employees

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Strategic Analysis
Strengths
1. Financial resources
2. Focused on short routes
3. Bags fly free
Weaknesses
1. Heavy dependence on passenger revenues
2. Growth strategy (also considered a strength)
3. Online and Phone reservations only
4. Lack of Business/First Class services
5. Limited cargo space
Southwest Airlines 2014 income was approximately $1.4 billion. In the 4th quarter, Southwest
reported earnings of $404 million, which equaled to 59 cents a share. AirTran Airways boosted
Southwest’s earnings by $500 million due to the company flying its last flight in December
Opportunities
1. Wright Amendment repeal

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During Oct-2014, Southwest Airlines began offering direct flights to some of its strongest
markets without connecting flights.
Southwest operating service include Baltimore, Denver, Las Vegas, Orlando and Chicago
Midway. Other new service includes flights to Atlanta, Fort Lauderdale, Los Angeles, Nashville,
LaGuardia, San Diego, Orange County, Tampa and Washington National.
Given its position in all of these markets the new direct flights from Love Field should reel up
quickly and make a positive revenue contribution.
2. New international operations
Southwest introduced its own-branded international service during 2014. AirTran acquisition
and updating their reservations system, have helped Southwest to offer service to Aruba,
Cancun, Los Cabos, Nassau, Montego Bay and San Juan.
In addition to the international service, Southwest has pierced most of the domestic US (85
domestic destinations as of 21-Sep-2014). Its ability to offer its large passenger base access to
near international leisure destinations is considered to be progress.
3. Potential partnerships with foreign international airlines
Southwest Airlines commonly operate only domestic services.
787 and A350 airline operators will open up new Europe-US routes - despite some resistance
Threats

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1. ULCCs
Southwest is no longer the low fare leader as Spirit Airlines, Frontier Airlines and Allegiant Air
began offering low fares to stimulate air travel. Southwest should maintain certain fare levels to
control costs.
The airline is no longer really low-fare or low-cost, they do not offer any of the amenities of the
full service airlines. Southwest need to innovate their strategy in order to compete with the
other airlines.
2. Costs are rising and likely to rise further
Southwest labor negotiations are making it tough to predict its unit cost increases in the
medium to long term. For the moment its unit costs are in line with major airlines, rising 2% in
1H2014 as passenger unit revenues grew a healthy 6% during that time.
Salaries, wages and benefits represented 31% of the airline’s total top-line expenses.
In early 2014 the union representing ramp workers sued Southwest after the airline requested
that employees at Chicago Midway prove they were ill during Jan-2014 after inadequate
staffing and a winter storm caused disruptions at the airport.
Strategic Issues and Recommendations
Southwest strategic issues can be summarized into two categories. Southwest maintain its low
cost advantages in the airline industry. Second, Southwest will need to be able to maintain its
growth through its current operational strategy.
Maintaining Cost

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Most of the discount airlines have attempted to challenge Southwest’s position for low cost. As
CASM increases, Southwest has become vulnerable and at time, appears to be losing its market
advantage. Southwest needs improvement with non-fuel cost management. Many of the other
operational costs will be harder to control with its current market position, Southwest can take
steps to guarantee that it can maintain its low cost advantage.
Strategic Alternatives
The goal of Southwest Airlines is to make air travel available to people who could not afford it.
Their profit-making strategy includes keeping prices at rock bottom prices. The company is
more interested in minimizing prices, instead of capitalizing on profits. Their ultimate goal is
supported by the following lists of strategic objective, followed with alternative capable of
accomplishing the respective objectives.
Strategic Objectives and Alternatives:
Corporate Culture – define and enforce the company’s personality.
Fun-loving
Fight to survive
Strategic Planning – grow with discipline
Plan for future scenarios
Cost Control – lower costs result in lower prices.
Maintain employee needs satisfaction

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Practice all cost saving ideas, procedures, and equipment
Quality Control – do one thing better than anyone else.
Service short-haul, regional routes…for peanuts
Customer Service – Motivated employees will produce satisfied customers.
Accommodate the special needs of customers
Hiring – hire for attitude, train for skill.
Recruit fun-loving employees, then provide them with skills
Training – Encourage employees to think like they own the place, because they do!
Employee ownership encourages hard, cost-effective work
Employee morale – celebrate your mistakes.
Plane pulling contests
Work at a place where wearing pants is optional
Marketing and Advertising – break the rules
Leadership – always think like an entrepreneur.
Learn from the past to foresee the future
The success of Southwest Airlines is determined by hosting the strongest balance sheet and
highest credit rating in the industry. Southwest’s pricing strategy involves the application of
price resistance to perfect a system-wide peak and off-peak pricing system. Their strategy

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involves dividing the short-haul market into executives and pleasure travelers. This results in
cheaper flights in the evening. In the event of full aircraft, the fare-determination strategy does
not call for an increase in the fare. Instead, they increase the number of flights. Their hiring
strategy involves a panel interview, complete with a presentation by the prospective employee.
Diversification is the best way to ensure a steady revenue stream, although Southwest is not
known for servicing, shipping or reservations. The best way for Southwest to diversify is simply
by expanding their market. Saving and investing a portion of retained earnings could also
smooth the peaks and valleys of travel fluctuations. A shakeout strategy must be developed to
overcome intense pricing competition and cyclical effects of the industry. Investors selected to
work for Southwest Airlines must have a proven track record. Professional financiers only quote
the textbook and seldom have any common sense or profit to back their knowledge.
Financial analysis
Southwest Airlines Strengths
Southwest Airlines 2014 income was approximately $1.4 billion. In the 4th quarter, Southwest
reported earnings of $404 million, which equaled to 59 cents a share. AirTran Airways boosted
Southwest’s earnings by $500 million due to the company flying its last flight in December
Southwest Airlines Opportunities
During Oct-2014, Southwest Airlines began offering direct flights to some of its strongest
markets without connecting flights.
Southwest operating service include Baltimore, Denver, Las Vegas, Orlando and Chicago
Midway. Other new service includes flights to Atlanta, Fort Lauderdale, Los Angeles, Nashville,

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LaGuardia, San Diego, Orange County, Tampa and Washington National.
Given its position in all of these markets the new direct flights from Love Field should reel up
quickly and make a positive revenue contribution.
New international operations
Southwest introduced its own-branded international service during 2014. AirTran acquisition
and updating their reservations system, have helped Southwest to offer service
to Aruba, Cancun, Los Cabos, Nassau, Montego Bay and San Juan.
In addition to the international service, Southwest has pierced most of the domestic US (85
domestic destinations as of 21-Sep-2014). Its ability to offer its large passenger base access to
near international leisure destinations is considered to be progress.
3. Potential partnerships with foreign international airlines
Southwest Airlines commonly operate only domestic services.
787 and A350 airline operators will open up new Europe-US routes - despite some resistance
Southwest Airlines Threats
Southwest is no longer the low fare leader as Spirit Airlines, Frontier Airlines and Allegiant
Air began offering low fares to stimulate air travel. Southwest should maintain certain fare levels

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to control costs.
The airline is no longer really low-fare or low-cost, they do not offer any of the amenities of the
full service airlines. Southwest need to innovate their strategy in order to compete with the
other airlines.
Costs are rising and likely to rise further
Southwest labor negotiations are making it tough to predict its unit cost increases in the
medium to long term. For the moment its unit costs are in line with major airlines, rising 2% in
1H2014 as passenger unit revenues grew a healthy 6% during that time.
Salaries, wages and benefits represented 31% of the airline’s total top-line expenses.
In early 2014 the union representing ramp workers sued Southwest after the airline requested
that employees at Chicago Midway prove they were ill during Jan-2014 after inadequate staffing
and a winter storm caused disruptions at the airport.
Strategic Issues and Recommendations
Southwest strategic issues can be summarized into two categories. Southwest maintain its low
cost advantages in the airline industry. Second, Southwest will need to be able to maintain its
growth through its current operational strategy.

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Maintaining Cost
Most of the discount airlines have attempted to challenge Southwest’s position for low cost. As
CASM increases, Southwest has become vulnerable and at time, appears to be losing its market
advantage. Southwest needs improvement with non-fuel cost management. Many of the other
operational costs will be harder to control with its current market position, Southwest can take
steps to guarantee that it can maintain its low cost advantage.
Strategic Alternatives
The goal of Southwest Airlines is to make air travel available to people who could not afford it.
Their profit-making strategy includes keeping prices at rock bottom prices. The company is more
interested in minimizing prices, instead of capitalizing on profits.
The success of Southwest Airlines is determined by hosting the strongest balance sheet and
highest credit rating in the industry. Southwest’s pricing strategy involves the application of
price resistance to perfect a system-wide peak and off-peak pricing system. Their strategy
involves dividing the short-haul market into executives and pleasure travelers. This results in
cheaper flights in the evening. In the event of full aircraft, the fare-determination strategy does
not call for an increase in the fare. Instead, they increase the number of flights. Their hiring
strategy involves a panel interview, complete with a presentation by the prospective employee.
Diversification is the best way to ensure a steady revenue stream, although Southwest is not
known for servicing, shipping or reservations. The best way for Southwest to diversify is simply
by expanding their market. Saving and investing a portion of retained earnings could also

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smooth the peaks and valleys of travel fluctuations. A shakeout strategy must be developed to
overcome intense pricing competition and cyclical effects of the industry. Investors selected to
work for Southwest Airlines must have a proven track record. Professional financiers only quote
the textbook and seldom have any common sense or profit to back their knowledge.
In observation to the history of Southwest Airlines, they have accomplished over 39 years of
profitability. Some of the core attributes contributing to their accomplishment consist of:
legendary customer service, functional strategies and low cost advantage for (operations,
maintenance and training). Highlighting a few of their strategic strengths, Southwest Airlines
strategically focuses primarily on point-to-point travel for more direct trip flights, shortening the
passenger trip length. Also, the decision to use a specific type of aircraft “Boeing 737” for simple
scheduling, operations, maintenance and training. Southwest also benefited from fuel hedging
in which they pay up front for the right to buy fuel at certain, lower prices (Strategic
Management in Action 250).
As of 2014, Southwest hit 42 years of profitability. According to the shareholders 2014 annual
report their net income of $1.1 billion easily surpassed the previous annual record in 2013.
Excluding special items, Southwest’s record earnings surged over 73 percent, compared with
2013. Other strategic initiatives launched since 2010 also helped propel our earnings
performance, including the Rapid Rewards, frequent flyer program, the addition of the Boeing
737-800 model, and the fleet modernization program. To commemorate the historic year,
record results, and transformation, Southwest Airlines unveiled a bold new look for their aircraft
and branding. They believe the completion of their strategy to transform, along with the record
results, positions Southwest exceptionally well for the future (2014 annual report to

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shareholders 1). In review of the financial ratios for Southwest, we can observe liquidity,
leverage, activity and profitability.
Southwest Airlines Annual Balance Sheet Financial Ratios
Fiscal year is Jan - Dec. 2014 2013 2012 2011 2010
Cash 1.28B 1.36B 1.11B 829M 1.26B
Marketable Securities 1.71B 1.8B 1.86B 2.32B 2.28B
Receivables 365M 419M 332M 299M 195M
Inventory 342M 467M 469M 401M 243M
Raw Materials - - - - -
Work In Progress - - - - -
Finished Goods - - - - -
Notes Receivable - - - - -
Other Current Assets 709M 418M 702M 764M 517M
Southwest Airlines Total Current Assets 4.4B 4.46B 4.23B 4.35B 4.28B
Property Plant & Equipment 22.51B 20.82B 19.5B 18.42B 16.34B
Accumulated Depreciation 8.22B 7.43B 6.73B 6.29B 5.77B
Southwest Airlines Net Property Plant & Equipment14.29B 13.39B 12.77B 12.13B 10.58B
Investment & Advances - - - - -
Other Non-Current Assets - - - - -
Deferred Charges - - - - -
Intangibles 970M 970M 970M 970M -
Deposits & Other Assets 534M 530M 633M 626M 606M
Southwest Airlines Total Assets 20.2B 19.35B 18.6B 18.07B 15.46B
Notes Payable - - - - -
Accounts Payable 1.2B 1.25B 1.11B 1.06B 739M
Current Portion Long-Term Debt 258M 629M 271M 644M 505M
Current Portion Capital Leases - - - - -
Accrued Expenses 1.57B 1.23B 1.1B 996M 863M
Income Taxes Payable - - - - -
Other Current Liabilities 2.9B 2.57B 2.17B 1.84B 1.2B
Southwest Airlines Total Current Liabilities 5.92B 5.68B 4.65B 4.53B 3.31B
Mortgages - - - - -
Deferred Taxes/Income 3.26B 2.93B 2.95B 2.64B 2.58B
Convertible Debt - - - - -

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Long-Term Debt 2.99B 2.63B 2.88B 3.11B 2.88B
Non-Current Capital Leases - - - - -
Other Long-Term Liabilities 1.26B 771M 1.12B 910M 465M
Southwest Airlines Total Liabilities 13.43B 12.01B 11.6B 11.19B 9.23B
Minority Interest - - - - -
Preferred Stock - - - - -
Common Stock Net 808M 808M 808M 808M 808M
Capital Surplus 1.32B 1.23B 1.21B 1.22B 1.18B
Retained Earnings 7.42B 6.43B 5.77B 5.4B 5.4B
Treasury Stock 2.03B 1.13B 675M 324M 891M
Other Liabilities -738M -3M -119M -224M -262M
Southwest Airlines Shareholders Equity 6.78B 7.34B 6.99B 6.88B 6.24B
Southwest Airlines Total Liabilities & Shareholders’
Equity
20.2B 19.35B 18.6B 18.07B 15.46B
Financial Ratios & Measures
LIQUIDITY 2014
Current assets 4.4 Billion = .743
Current Liabilities 5.92 Billion
Current ratio indicates that Southwest struggles to meet its’ short term obligations.
Current assets minus inventories 4.39 Billion =.75
Current Liabilities 5.92 Billion
Acid ratio indicate that Southwest cannot pay their current inventories and should be looked at
with extreme caution.
LEVERAGE 2014
Total debt 13.43 Billion= .66
Total assets 20.2 Billion
Debt ratio indicates that 66 percent of Southwest assets are financed by debt. This percentage
of debt can be a challenge to manage. Even though Southwest has more assets than debt it can
be considered a high risk level company.
Total Debt 13.43 Billion= 2
Total Equity 6.78Billion
Considering that in 2014 Southwest has a high debt/equity ratio it indicates that they have been
aggressively financing their growth debt, which can result in volatile earnings as a result of the
additional interest expense.
Profits before interest and taxes 355 Million= 2.6

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Total interest charges 139 Million
Southwest’ (times interest earned) is 2 ½ times higher than its interest expense for the year
which indicates that creditors can trust that they are able to pay their interest payments when
they come due.
ACTIVITY
Sales 13.111 Million= .38
Inventory 342 Million
Inventory turnover for Southwest is .38 which means they sold over a third of their inventory.
Southwest Airlines Co. annual net profit (loss): 2008 to 2013

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Source: CAPA - Centre for Aviation and airline reports

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Growth of Southwest Airlines Co. annual net profit (loss): 2009 to 2013
Source: CAPA - Centre for Aviation and airline reports

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United States of America capacity by airline (% of seats): 15-Sep-2014 to 21-Sep-2014
Source: CAPA - Centre for Aviation and OAG

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United States of America top 10 domestic cities by arrivals: 15-Sep-2014 to 21-Sep-
2014
Source: CAPA - Centre for Aviation and OAG

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Southwest Airlines global top 10 hubs/bases/stations by seats: 15-Sep-2014 to 21-
Sep-2014

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Growth in Southwest Airlines Co. annual operating revenue: 2009 to 2013

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Source: CAPA - Centre for Aviation and airline reports
WORKS CITED
Organizational Research: Southwest Airlines, Brandin Lea June. 3, 2014
https://www.linkedin.com/pulse/3-traits-high-potential-people-lou-adler
Southwest Airlines SWOT Analysis, McWick, INC 2007-2014
www.businesstune-ups.com/Southwest-Airlines-SWOT-Analysis.html
Southwest Airlines CO 2013
https://www.southwest.com/html/about-southwest/index.html?clk=GFOOTER-ABOUT-ABOUT

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http://customwritingtips.com/component/k2/item/13594-external-analysis-of-southwest-
airlines.html?tmpl=component&print=1
http://centreforaviation.com/analysis/southwest-airlines-swot-financial-strength-is-mainstay-
but-cost- and-culture-challenges-loom-large-187714
https://airbornesurfer.wordpress.com/2012/01/25/southwest-airlines-bringing-the-luv-a-
strategic-recommendation-proposal/
http://economics-files.pomona.edu/jlikens/SeniorSeminars/pandora/reports/southwest.pdf
http://www.123helpme.com/southwest-airlines-view.asp?id=167345
http://www.mcafee.cc/Classes/BEM106/Papers/UTexas/351/Southwest.pdf
http://www.arichall.com/academic/papers/mgmt485-southwest-strategy.pdf
www.rapid-business-intelligence-success.com/southwest-airlines-swot-analysis