SouthWest Airline Company: SWOT Analysis
Southwest Airlines SWOT
- Largest Airline Company: It is the 5th largest airline company in America. It operates more than 2700 flights/day. Yearly to 58 different cities, it carries around 64 million passengers all over the United States.
- Good Financials: Since 11 September 2001 the Southwest Airline is the only major carrier that is being profitable in each quarter. Though the airline industry was continuously going down and most of the airlines in the industry went bankrupt yet Southwest Airline is still generating profits in this alarming situation and will continue to generate in the next couple of years.
- Good employee relationship: This airline which is one of the major strength that other companies don’t have it is that they never do downsizing. They take employees as important and never fire them. Thus they have good relationship with employees. The airline makes them feel good about whatever daily work they do. And these employees are the one who helps the airline to move towards greater success.
- Best Customer Service: “We try to be the absolute best in terms of customer service delivery.” (www.mccombs.utexas.edu,2008), according to the President. The airline believes that in order to bring loyal customers who could come back to our airline again and again; we must provide them with the best service from all from our heart.
- Southwest Airline provides people oriented environment: The Airline’s low fares for short distances enable people to meet their closed ones more often. According to Barret who is the President of SouthWest Airline: “We are literally helping people fulfill their dreams each year,” she said. “It’s very personal—it’s not just a business anymore.” (www.mccombs.utexas.edu,2008)
- Good Customer Relationship: Southwest Airline takes customers as they are always right. Even if they are wrong the airline never abuses it’s customers but always tries to solve their issues and listen to their concerns.
- High Market Share: It has a high market share in the domestic US Airline industry.
- Unique Structure: It has a unique organizational structure i.e. top management is at the bottom and it supports the front line employees. This is one of the major reasons of its success from the start.
- No Diversity in services: The Southwest Airline doesn’t provide mixture of services i.e. their services are not diverse. Example tickets cannot be transferred to other airlines.
- Serves only domestically: Serving internationally gives companies more room to get success and attain higher profits than just to serve locally. It only serves 29 states and is not capable enough to compete against large companies.
- Labor Cost issue: Other airlines are paying high to its employees. Therefore there is a negotiation being taken place between pilots and Southwest Airline. If both agree to the higher pay rates it will further affect the growth potential and profitability of this airline.
- No use of Hub system: The hub system is not being utilized by this airline which could allow the airline to reach bigger competitors.
- Limited to one type of airline: The airline only gives preference to Boeing 737s. It makes the airline less flexible whenever any critical flaw is being discovered or such a model receives a bad reputation. This would result in bad publicity and costly venture for the airline whenever such situation arises. But according to the recent news, it has thought to go beyond that single carrier.
- Could increase market share: It has the opportunity to increase its share in the market when larger carries are bankrupt i.e. United and U.S. Airways.
- Expansion Opportunity: Since the airline is operating fine since September 11 attack where the other airlines in the industry are suffering, there is a good opportunity for Southwest Airline to expand itself.
- Could increase productivity: Since the airline used to serve employees and always give them first preference, it can increase their productivity as they are already satisfied.
- Consolidation: It is planning to acquire another airline and it says according to some news that if we would acquire a carrier that doesn’t have 737s even then we had plans how to deal with it. We will go for it. (www.dallasnews.com,2008).
- Intense Competition: Competition has been increased dramatically in this industry. Competitors include JetBlue and AirTran Holdings. JetBlue is the one providing lots of amenities thus creating threat for the SouthWest Airline to do something about this issue immediately.
- Constant Increase in fuel Prices: It is one of the major threats for Southwest Airline because it is the low cost airline where price is more important factor on which decision has been made. If the competitor would make an increase in price to a small extent it would not get noticed but the same price if increased by SouthWest Airline it will immediately come to notice.
- Bigger companies might copy SouthWest Strategy: Since the strategy of this airline has proven so effective, there is a big chance that the big companies will imitate it and would introduce low cost models to the wider market thus could overstep Southwest Airlines itself.
- Saturation of discount websites: The airline could lose its customers if it doesn’t take an immediate step and today more and more websites are offering special discounts and competitive rates. It’s the way to advertise so the airline has to make sure that its voice is being heard through this medium effectively.
Strategies for the coming years:
- Further lower down the price if competitors are close to bankruptcy:This will increase the price gap which would further hurt the competitors and would take the weakest competitor out from the airline industry. Since it will lower down the profits of Southwest Airline itself so the airline has to make sure that their competitors are near to bankrupt as this strategy would be effective only in that case.
- Upgrading:Few changes like seat and hardware upgrading would open this airline to the larger market. Though it’s costly at first place, market penetration would help the airline to gain more market share and achieve higher profitability.
- Listed in price comparison websites:Earlier information was not easily available. But now there are many sites that compare items and packages based on different factors like price and so on. The strategy is that the airline should make sure that it is taking full advantage of this medium to advertise its packages.
- Implementation of cost saving technology:With the advent of internet companies, companies are becoming more cost effective. So southwest Airline should make the use of it and in this way operating cost will be reduced which will result in better customer deals.
The airline should do the cost benefit analysis before lowering the cost. What would be the consequences of it, it should find out and measure all that. Then it should decide on how much price should be lowered in order to maintain profitability in the long run. Also the analysis should be done on how much price reduction would result in take the weakest competitor out from the industry. Once it did it then price should be fixed. How much this price would increase profits in long term and market share? The numerical value should be taken out so that company could continuously strive hard to attain that target.
Secondly it should see the market preferences and then upgrade the resources. It means airline should conduct market research in order to know customer major preferences. It would also help the airline know the trend of the industry.
Thirdly it should see the new ways of promotion. Today trend has been changed. People are more relying on websites to find out the information about different kinds of deals and packages for different products. It should make the effective use of it. Detailed investigation should be done in order to know which medium would be worthy for it’s airline and then work it out according to it.
Since technology has become very effective, it should make the most effective use of it. Appropriate technology related to the industry should be used. The company should use the technology in all aspects of its work to make it cost effective. It will also increase the productivity. Innovation always gives fruitful result thus will benefit the airline as the whole.
Actual results should be compared with the plan results by regularly getting feedback through meetings. Along with this regular meetings; top management should observe and keep check of every work all the time and should record it on a daily basis. Surveys, focus groups, one to one interviews and similar tools could be used to evaluate the implementation results. First, it would see what happened? At what stage is the action? Does it work or not? If it’s not working immediate steps should be taken and the action should be stopped. What did you learn for the future? Subjective comments could be taken from the key stakeholders to evaluate the action plan results. (www.eowa.gov.au, 2008)
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