Southwest Airlines has achieved success through a low-cost strategy focused on short-haul flights using only Boeing 737 aircraft. Key aspects of Southwest's strategy include no baggage fees, no change fees, no meal service, and no assigned seating. This keeps costs low and allows for quick turnarounds. Southwest also emphasizes excellent customer service and a friendly culture for both customers and employees. This strategy has helped Southwest gain significant market share through high customer satisfaction and loyalty.

1. Southwest History and Growth
Corporate Level Strategy
Mission and Goal
Southwest has its mission statement since January 1988 as
following: “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”.
The company uses a welcoming approach to deal with customers
and employees, utilizing great customer service to deliver the
best the industry can have. Therefore, to differentiate itself
from other airlines, Southwest places a large dedication to its
employees, giving them authority to make the necessary
decisions to better assist customers with all the comfort needed.
This strategy is key for Southwest to provide respect and
loyalty for customers.
By following a simple goal: “A primarily short-haul airline that
flies directly from city to city, with just one type of plane - the
Boeing 737 - and the lowest costs”, Southwest has its horizon
set, making sure to deliver a good service that excise
“luxurious” rivals to gather market share, increasing
profitability customer value.
Short/Medium-Haul
Southwest Airlines has their strategy focused on short/medium
flights across the U.S. They participate in an extremely
competitive market, where airlines are constantly hunting for
competitor’s market share. Southwest uses different approaches
to differentiate itself from the market. By providing good
customer service, quick airplane turnovers, no baggage fees,

2. low tickets price, efficient operations, and a great work
environment, the company is able to maintain airplanes capacity
in desired levels.
Connecting airports with a point-to-point strategy has allowed
Southwest to provide service at lower costs. The choice of only
using Boeing 737s, and training all the personnel to turnover the
airplane in a fast and efficient manner, brings efficiency and
pleasure to customers that enjoy a wider range of flight times.
Customer Service
Southwest’s hiring process is one of the strongest points that
the company has been focusing to deliver superior satisfaction
to customers. Employees are not only assessed on their
qualifications and experience, but also on the attitudes they
bring to their positions (Campbell, 2010). The process
concentrates on prospective employees that fit the service
culture of the company. This procedure ensures Southwest that
when their newly trained personnel is out to perform, they will
create constructive relations to customer requests based on their
excellent abilities and passion to work. Southwest believes that
training is important and crucial to deal with demands on
ground, but abilities and high-class social skills are top-not on
the company’s preferences.
By providing an example of what means to be “customer
oriented”, Southwest delivers a sense of a friendship that can be
perceived by their workforce. The company takes different
approaches to support that mentality. Clients receive birthday
cards and event invitations; and games and activities are
provided during flight delays to diverge the feeling of
impatience and disturbance to a relaxed atmosphere, stimulating
team effort to deliver success.
Building this friendship mentality and focusing to hire the right
personnel, gives Southwest the ability to permit employees to
make reasonable choices for greater customer satisfaction. The
spectrum of different requests by customers is wide, and
examples such as a man that was going to propose to his

3. girlfriend, asked the flight attendant if he could do it during the
flight (Morell, 2012). The flight attendant promptly went to
grab a champagne bottle at no cost to ensure that the moment
will become unforgettable for the couple and all passengers.
These decisions help the company to build customer loyalty are
heavily appreciated in Southwest. It is extremely good in the
long run for the company, and it also bring happiness in the
work environment once employees are recognized as powerful
participants.
No Assigned Seats
Southwest no-assigned-seat policy has helped the company to
quickly overcome unpleasant situations. When flights are
delayed or the flight network is compromised due to weather
issues, or even planes that could not take off because of
maintenance, passengers can easily board swapped planes
without having to issue new boarding passes. This also favors
the ability to use planes with different seat configurations if
necessary (Stevenson, 2012). The velocity in which this policy
helps to please customers in moments of frustration has big
impact in the overall customer service. Passengers usually
assimilate weather problems easier than other issues, but in any
case they fell unpleased with the outcome of waiting at the gate.
Therefore, speeding the turnover of airplanes and having the
capacity to quickly overcome it, has brought Southwest distinct
differentiation in the industry.
Boeing 737
Southwest has a love story with the Boeing 737. The
standardization in the airline’s fleet is a crucial success to the
company. Southwest has a big advantage in the industry, other
companies fly a diverse range of airplanes, and by focusing on
just one model, Southwest can maximize skills on their ground
personnel, flight attendant and mechanics. Flight attendants can
be substituted easily and have their schedule switched because
their performance in any route will not be affected. Ground

4. personnel will be more effective and secure when boarding,
loading bags and amenities, and turning airplanes around for the
next flight. Also, mechanics will be better prepared to fix
problems that the fleet might have. They are specifically trained
to perform precise tasks on the Boeing 737, boosting abilities
and effectiveness.
Furthermore, the Boeing 737 helps the company to maintain its
total low-cost model, enjoying cost efficiency per seat that is
inferior to the current industry overall status. The initiative to
preserve the standard method for maintaining and training
personnel has been kept in effect for the recent AirTran
acquisition. AirTran’s fleet had 88 Boeing 717s that Southwest
is now transitioning to Delta, on a rate of nearly three airplanes
per month, according to the Trefis Team.
Baggage Fees
A recent survey by Airfarewatchdog found that the most hated
airline fees are baggage costs. Passengers hate the fact that they
need to pay fees for their belongings on top of their fare. Using
this principle, Southwest is one of the last US airlines (besides
JetBlue) that do not charge for baggage on domestic flights.
Southwest allows passengers to check two bags (50lbs and 62
inches) for free, and using this method as a great marketing
strategy: “bags fly free”, “Southwest's planes have gotten about
10 percentage points fuller, reaching nearly 81% of
capacity”(Nicas and Carey, 2013).
No Meals. No First Class
Since Southwest is focused on short hauls, the company
emphasizes some policies that not all passengers in the market
are happy with. Meals are not served in any flight. However, in
selected flights, some snacks are served. Regular beverage
services are provided, but beer, wine, and energy drinks have to
be paid using credit card, cash is not accepted onboard.
Southwest also does not provide first-class seats on their routes,
instead, its economic cabin seats takes over the whole airplane

5. inner length. Even though these policies might drive some
costumers to different airlines, they are key aspects that help
the company to gain in other sides, such as the low fares.
Selling Tickets Online
In 1996, when airlines were still heavily dependent on travel
agencies, Southwest was one of the first airlines to create its
own website to sell tickets online. This huge step started to
change the industry, and nowadays the majority of tickets are
purchased online, and customers also use it to search for the
best fares available (Southwest Media).
Porter’s Forces
Southwest Airline Industry
Airlines provide services that go beyond any other industry
in terms of timeliness and convenience. The industry is able to
achieve its purpose by providing outstanding service to its
clients; it offers transport to people in a timely fashion quality
that can only be provided by modern airplanes. Southwest
Airlines is one of the best companies in the United States,
deriving its strengths from the profits it makes. Therefore,
despite the challenges in the industry, Southwest is able to make
viable decisions and adjust its policies more efficient than other
greatly hampered airlines. Essentially, the services offered by
Southwest are majorly limited to short-haul trips (Boguslaski,
et. al, 2004).
The company focuses on offering city-to-city services and
has devised methods of cutting its operational costs. Some of
the measures adopted by the airline to slash on cost include;
cutting on training and maintenance cost by using the 737
Boeing airplane, riddance of luxurious seats, and eliminating
meals on board while ensuring a high degree of customer
satisfaction. Therefore, the Porter’s five forces is a good tool to
enhance understanding of an institution’s position within an
industry while analyzing its strengths and weaknesses
(Morrison, 2001).

6. Threat of New Entrants
Due to the fact that Southwest is very successful in its
functions, it is likely to face high risks in the form of rivalry
from both the existing, and the new competitors that intend to
enter the industry. For instance, the existing companies are
likely to imitate Southwest’s stratagems of cost efficiency, and
also lowering their ticket prices in order to challenge
Southwest. The end effect of this threat is that Southwest may
not be able to enjoy the control of offering its low fare.
Another threat to the company is that if a well-developed firm
with more advanced technologies and facilities enter the airline
market, there is a high possibility that Southwest Airline’s
services will be interfered. On the other hand, there are key
factors that limit the entry of new companies into the industry
such as: cost disadvantage, government policies and large entry
capital requirements. For those reasons, threat of entry can be
categorized as medium, since southwest airlines have readily
available resources in terms revenue to equally compete the
emerging and existing firms (Caves & Porter, 1977).
Government policies regulate how and when the
corporations can enter and leave the market. At times, the
policies may require product and service differentiation to
ensure fair competition in the industry. Consequently, the risk
of Southwest losing business to its competitors is reduced due
to the existence of these government policies. Additionally, the
government employs measures such as licenses and permits to
guarantee passengers safety, environmental protection and
quality services. On occasion, the regime requirements may be
very costly, thus discouraging new businesses from entering the
market. Moreover, the period that it takes for a firm to get its
operating license can be excessively long. Thus, the amount of
money and time that the new firms will have to spend before
joining the airline market is a factor that hinders many
businesses from entering the industry (Jordan, 2002).

7. Threat of substitutes
The airline industry has a medium substitute risk level. A
source of substitutes to the airline industry arises when the
clients choose other forms of travelling such as train, ship, and
bus as a mean of transport. However, these other forms of
transport may be costly in terms of time, convenience, and
effectiveness as compared to airplanes, thus, rendering the risk
level in industry as medium. Airplanes offer the fastest mean of
transport over short and long distances. However,
telecommunication business is the greatest sector that
challenges the airline industry. Many people opt to use online
services such as the Email or online conferences to resolve
problems and prevent the cost of tickets. Conversely, in cases
where the parcels must be delivered in person, the service of
airlines are still benefic, thus, making the airline sector safe
from substitution threats (Porter, 2008).
The new developments in the railway sector have also
formed substitute threat to the airline industry. The well-
equipped electronic trains are also able to offer fast and
convenient services. In addition, the cost of train tickets tends
to be lower as compared to the plane tickets. However, Porter
notes that such developments are healthy since they encourage
the skills of innovativeness and efficiency, thus improving the
level of customers’ satisfaction. Nevertheless, Southwest is not
hindered from such advancements (Caves & Porter, 1977).
In conclusion, Southwest Airlines delights itself in their
ability to offer timely services to their clients. The airline
achieves this by reducing checking points and hiring highly
competent staffs that perform their duties diligently. Therefore,
the airline has managed to attain high customer satisfaction and
loyalty, which makes them one of the best within the industry.
Given that, Southwest Airlines is well known for its low ticket
costs and good customer care, customers will repeatedly choose
them over other airlines and other means of transport
(Boguslaski et. al, 2004).

8. Bargaining Power of Southwest Airlines Customers
In an industry where consumer loyalty is at an all-time
goal, companies such as Southwest struggle to differentiate
themselves from one another in order to maintain growth in
their business. Due to the nature of the services provided by
airlines, there is little to no differentiation between them, which
drives companies to either lower their airfares, offer routes that
other airlines do not fly in, or have something other companies
do not have. Southwest has a few points that set them apart
from other companies; one of the biggest differences between
them and their competitors is their “No Change Fees and Bags
Fly Free” policy. As the name suggests, there are no fees
incurred when changing your ticket and no fees for passenger’s
luggage. This is a major selling point for the airline because the
cheaper ticket combined with no extra fees is a massive
attractor to customers. Southwest Airlines also has an
innovative system with respect to seat assignment; there is no
seat assignment. The impact of this policy to the airline has
been invaluable to their success because it increased the rate of
aircraft turnover at airports. By having a “first-come, first-
serve” based boarding system, this reduces yet another fee that
would increase ticket price, but most importantly it reduces
boarding time allowing planes to depart faster and stick to the
schedule. For the average businessperson flying, time is the
essence and knowing a flight is more likely to stick to the time
on the boarding pass is a huge selling point. The approach taken
by Southwest Airlines is very unconventional for an airline
company, however these small differences are what set them
apart from others and allow them to gain a substantial share of
the airline market in the areas they are present.
Bargaining Power of Southwest Airlines Suppliers
The airline industry is heavily dependent on two aircraft
companies to build up their fleet: Boeing and Airbus. This poses
an issue to the industry because of the dependence created on
those two companies; in Southwest’s case that company is

9. Boeing. There is little a commercial airline can do to have any
bargaining power on their supplier because of the high-cost,
high-skilled, and time consuming process that is building an
airplane to carry thousands of people over the course of its use.
This leaves companies at mercy of their aircraft supplier.
Degree of Competitive Rivalry
There is a high level of contemporary business competition in
the airline industry. That is why it is important for each airline
to realize its strengths and opportunities so that it can harness
them achieve greater competitive advantage among other
airlines (Barney, 2002). To thrive in the industry’s atmosphere
of stiff competition, Southwest Airlines continues to build its
brand among its current and potential customers. In this case, it
faces very strong competitive rivalry from other existing firms
in the industry. It has about 12 rival airlines. Out of the five
Porter’s forces, competitive rivalry appears to be the strongest
because it determines the profitability of the industry in the
long term (Pereira, 2013). It can be destructive eventually
because competitors engage in price wars and reduce profit
margins (Barney, 2002). The rivalry in the airline industry is
intense because it appears to be very stagnant, as the number of
competitors remains the same.
Innovation enables a company such as Southwest Airlines
to create sustainable competitive advantage because it forms a
premise of uniqueness that strengthens the company’s brand
(Barney, 2002). Existing airlines also capitalize on their own
innovation strategies and the industry develops variety for the
customers. To be different from other airlines, Southwest
Airlines developed the Point-to-Point system where the
customers’ check-in times determines the times which they are
assigned to a boarding group (Lea, 2014). Since an airline’s
competitive advantage may last a short while, it is important to
develop sustainable competitive advantage. Other airlines will
always try to equalize Southwest Airlines’ competitive
advantage to create a plain field in the industry in terms of

10. competitive rivalry. Both process and product innovation are
more likely to identify Southwest Airlines among customers
regardless of the other airlines’ efforts (Pereira, 2013). They
include, low fare sales, new nonstop services, new destinations,
cultural leadership, new vacation packages, technological
innovation (DING) and excellent customer service among
others.
The Internet facilitates competition in industries due to the
rise of e-commerce. In this regard, offline companies are
constantly competing with online companies to enhance
business performance (Pereira, 2013). Web-based businesses
continue to grow because of the online purchasing environment
attributable to the growth of information technology. Southwest
Airlines is known as the largest airline e-commerce site and one
of its online innovations is a free online tool known as SWABIZ
(Lindsay, 2010). Using the latter, business travellers can
purchase ticketless travel after planning and booking. The
airline does not rely on travel agents for flight bookings. In its
advertising campaigns, Southwest Airlines intrigues, entertains
and persuades (Lea, 2014).
Competitive rivalry forces airlines to invest so much in
advertising campaigns so that each remains relevant among
flight travellers. Other than building its brand on quality service
and low fare costs, Southwest Airlines continues to maintain the
image through various adverts and promotions. Its level of
advert expenses is quite high as seen in the $159.5 million that
it spent on the TV advert, “Bags Fly Free” (Lindsay, 2010).
Competitive rivalry exerts too much pressure on airlines in such
a way that they have to spend a lot to garner considerable
profits in the stagnant industry. The airline industry has a low
concentration ratio, given the intensity of competitive rivalry.
Southwest Airlines has larger grasp of market share because of
its low fare cost strategy and other innovations. Still,
competitors such as JetBlue Airways continue to increase the
degree of competitive rivalry.

11. Recommendations
Make Recommendations. The final part of your case study
analysis should include your recommendations for the company.
Every recommendation you make should be based on and
supported by the context of your case study analysis.
Keep good customer service keeping the price strategy
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13. advantage/>.
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