1. EXECUTIVE SUMMARY
Southwest Airlines provides short haul, high frequency, point-to-point, low-fare services to
and from 58 cities across the United States. The company is known for its low-cost fares and
superior customer service in the airline industry. The company was started in 1971 with a
motto still lived by today, "If you get your passengers to their destinations when they want to
get there, on time, at the lowest possible fares, and make darn sure they have a good time
doing it, people will fly your airline." This motto has been effective for the company because
they recently reported their 58th straight quarterly profit.while other airline companies are in
debt. The information was majority gathered and analyzed from the internet; sources such
as "News Week," and "Wall Street Journal." According to the acquired knowledge of
Southwest, the company maintains steady sales. The major success to their continued
success is due to their low-cost model and competitors are aware that they cannot match
Southwest Airlines low prices therefore, by dropping the price even lower; Southwest Airlines
can force a company to go bankrupt.
SWOT Analysis
The SWOT analysis describes the internal strengths and weaknesses, opportunities and
threats of a company. The strengths of Southwest include its market leadership, its low-cost
business model, and its strong financial performance. Weaknesses are the poor short-term
liquidity situation, having only one established alliance, and the declining passenger revenue
yields. Opportunities for the company include its new services, the new code-sharing
agreement with ATA Airlines, and the overall positive outlook for the airline industry. Threats
to Southwest include the increasing jet fuel costs, uncertainty in demand, and an increase in
competition.
ORGANIZATIONAL ANALYSIS
It is evident that the greatest strength that Southwest Airlines has is its financial stability. As
known in the US airline industry, Southwest is one of those airlines who are consistently
earning profits despite the problems the industry is facing. With such stability, the
corporation is able to make decisions and adjust policies, which other heavily burdened
airlines may not be able to imitate.
Having a low amount of cost in their operations is one of the contributing factors in
Southwest Airlines’ financial success. Such low cost model of the corporation is brought
about by an effective strategy. Southwest uses only one type of aircraft – the fuel-efficient
Boeing 737. This tactic keeps training and maintenance costs down. Moreover, the no-frills
approach to customer service contributed to the low cost of operations for Southwest. The
airline does not serve meals on board, and there are no luxurious or first class seats offered.
Services like these have been seen by the airline as unnecessary for an airline that provides
a short-haul trip from city to city. By these, Southwest were able to offer low price tickets to
customers, which was good for the company because most people would prefer to fly
without those services mentioned if it meant for cheaper ticket price.

2. Even though Southwest offers no-frills, there is still a high degree of customer satisfaction
that continuously builds customer loyalty for the company. As mentioned, Southwest offers
low prices on their airplane tickets. Also, Southwest is renowned in the airline industry for its
short turnaround time on arrivals and departures. And since people's biggest concern
nowadays is money and time, having low price airline tickets to cater their traveling needs in
a shorter period of time will surely satisfy them. Moreover, aside from the low prices offered,
what attracts to customers is Southwest’s way in dealing with them.
Q1.What makes Southwest so successful?
One of the main reasons for the great success is their corporate culture. Rollin Kig and Herb
Kelleher started the company with a simple notion: “If you get your passengers to their
destinations when they want to get there, on time, at the lowest possible fares, and make
darn sure they have a good time doing it, people will fly your airline” (We Weren’t Just
Airborne Yesterday, 2010). As stated in the interview with CEO Garry Kelly, Southwest
follows four basic rules keep cost down, fly all the same planes so parts and maintenance is
fairly simple.
Q2.
Southwest was set up for success from the beginning because of its unique upside-down
organizational structure. Upper management is at the bottom and supports the front line
employees, who are the real experts. Kelleher’s unorthodox leadership style, in which
everyone in the company makes management decisions, is largely unheard of these days.
The company doesn’t place much emphasis on structure; rather employees are encouraged
to think freely without constraints such as titles. This, in addition to a profit-sharing program
(first in the airline industry), higher salaries than any others.
In an industry where most of the airlines have been forced to either cut back or cease
operations, Southwest has sustained its profitability in the face of severe obstacles.
By offering low priced, short, frequent and convenient services, Southwest has carved a
niche for itself in the market and has gained an edge over its competitors. However, the
company faces the threat of rival airlines trying to emulate its strategy and enter the low fare
market. This could potentially reduce Southwest's market share and profitability, and risk the
sustainability of its competitive advantage.
The airline industry is very competitive and Michael Porter's five-force model can be used to
explain why the potential for returns is so low in this industry. Firstly, the threat of new
companies entering the industry is high and the entry barriers are low since banks, debt and
equity markets provide access to funds and capital. Secondly, the bargaining power of
customers is high since they are price sensitive and search for the best deals. The third
force, bargaining position of suppliers, is strong since they are concentrated and this limits
the control airlines have over suppliers to reduce prices and earn higher profits. The
availability and threat of substitutes is another factor that can affect a company's competitive
position. However, the degree of this threat depends on various factors such as time,
money, convenience and personal preferences of travellers. The final force in Porter's model

3. is competitive rivalry between the companies within an industry. Cut-throat competition
exists among the airlines.