Southwest Airlines SWOT Analysis 2022 ❤️

Southwest Airlines Co.’s operations are one of the largest low-cost carriers worldwide and a great example of how their strategies address the external and internal strategic factors identified through the SWOT analysis. 

The SWOT analysis framework assesses an enterprise’s business strengths and weaknesses (internal and external factors), and the opportunities and threats (external and internal factors) in commercial aviation. 

Southwest Airlines Co.’s corporate vision and mission statements draw on these strengths to propel the company forward, particularly in taking advantage of all available opportunities. 

The SWOT analysis will help to align the airline company’s strategy with the identified issues. This will optimize the company’s performance and reduce the risks and weaknesses. 

southwest airlines swot analysis

Because Southwest Airlines Co. is a major player in the air travel market, its approach to solving business problems provides insight into best practices for low-cost providers within the industry and elsewhere.

The SWOT analysis shows how the company’s competitive advantages and weaknesses are partially affected by Southwest Airlines Co.’s intensive growth strategies and generic strategy. 

The company’s strategy and other decisions affect which SWOT elements are prioritized.

For example, choosing to concentrate on one threat or a single weakness while leveraging all the strengths of the airline company is one example of this. 

Leadership and administration at Southwest consider strategic changes to address the SWOT analysis’s external and internal factors.

General Overview of Southwest Airlines

Company Name Southwest Airlines
CEO Gary C. Kelly
Company Type Airlines Service
Year Founded 1967
Annual Revenue The US $21.965 billion (2018)
Founder Herb Kelleher, Rollin King
Headquarters Dallas, Texas, United States

Overview of Southwest Airlines

Southwest Airlines ranks among the top US airlines. It had the highest number of passengers enplaned in the US in 2018. 

It has operations in all 40 states as well as 15 international destinations, which it serves in 12 other countries. The airline carried 163.6 million passengers in 2018, according to its 2018 figures.

Southwest Airlines uses a point-to-point service model, unlike its competitors who use a hub-and-spoke model. 

This allows Southwest Airlines to stand out in terms of customer service and price leadership.

Rollin King and Herb Kelleher founded the company in 1971. Gary Kelly is the current CEO.

The airline’s headquarters are located in Dallas, Texas. The company employed 60,800 people and earned $2.3 billion in net income in 2019.

The company’s main focus is on its operational efficiency, which aims at reducing costs. 

The company uses only the Boeing 737 aircraft to maintain its operational costs and fuel prices. This aircraft is nearly 750 in number.

 Development Timeline of Southwest Airlines

1971 Southwest Airlines started flying
1978 Herb Kelleher was appointed interim C.E.O.
1979 New Orleans was the first city to offer service.
1982 California now offers expanded services
1993 Services on the East Coast, Florida Long Island
2001 James Parker, chairman
2004 Gary Kelly has replaced Parker
2008 Federal Aviation Administration imposed a $10.2 million civil penalty on the company.
2009 Started services in Minneapolis, with plans to expand to Boston and New York.

SWOT Analysis of Southwest Airlines

The Southwest Airlines SWOT Analysis will help you determine the best strategies to improve your company’s position and increase revenue. 

It analyzes the company’s culture and organizational structure to identify the weaknesses and effects of competition. To gain market stability, the company can focus on business diversification.

Southwest Airlines’ Strengths

Southwest Airlines’ main strengths are its low-cost business model and its point-to-point route network. Southwest Airlines has also taken aggressive steps to improve its liquidity. It has also added strong financial strengths to its arsenal.

❤️ LUV Culture: Customers should feel part of the Southwest family. This is a great way to increase customer loyalty. Southwest has perfected the art of inviting customers into its family with its warm LUV culture.

❤️ Low Cost: Southwest Airlines has a large customer base due to its low-cost flights. Passengers can book one-way flights starting at $45 using the airline’s Low Fare Calendar. For many years, the airline held the title of the best low-cost carrier.

❤️ Southwest Airlines: is consistently rated as America’s Best Employer. According to the Forbes ranking, Southwest Airlines was ranked #2 in America’s Best Employers 2019.

❤️ The World’s Most Admired Corporation: Southwest Airlines was ranked #11 in Fortune’s Most Admired Company in 2019.

❤️ Being consistently profitable: is the main reason for starting a business. It drives growth by allowing business capital to expand and R&D. Southwest Airlines reported 47 consecutive years of profit in 2019. It’s a remarkable achievement considering airlines are a competitive industry.

❤️ Brand Value: Southwest Airlines is 4 the most valuable airline brand in the world with a brand value of $6.6 billion.

❤️ One Aircraft Type (Boeing 737s): Southwest Airlines has used only Boeing 737s since its inception. It currently has 747 Boeing 737s Aircraft. Southwest Airlines has found that a single aircraft type is an efficient, low-cost strategy. This allows for easier training (pilots, ground crew, and staff), as well as scheduling and maintenance. It also facilitates effective aircraft utilization.

❤️ Effective Service Strategy: Southwest Airlines offers non-stop direct flights under its point-to-point service. This reduces time wastage.

❤️ High Capacity: Airline capacity is measured in terms ASMs or Available Seat Miles. A higher ASM equals more seats and longer mileage, which is good for the bottom line. Southwest Airlines’ ASMs increased from 120.58 to 157.25 billion between 2011 and 2019, making it one national airline with a ridiculously high capacity.

❤️ Effective Management: From financial management down to HRM, effective management increases stability and speeds up growth. Southwest Airlines’ management has been praised as being one of the most effective in the industry. This is the airline’s greatest strength.

❤️ Market Share Dominance: Being the dominant player in a market is especially beneficial for industries like airlines that are heavily influenced by lobbying. The most powerful players can use their resources, connections, and superiority to lobby for legislation that advances their agenda.

Southwest Airlines ranks 3 rd from February 2019 to Jan 2020. It has a 16.8% U.S. domestic market share, followed by American (17.6%), and Delta (17.5%).

❤️ Many Flights: A larger number of flights means more revenue for an airline. Southwest Airlines operates more than 4,000 flights per day during the peak travel season. Southwest Airlines is a major player in the airline industry with its large fleet of flights.

Southwest Airlines’ Weaknesses

Southwest Airlines’ biggest flaw is its inability to stay competitive when other airlines adopt cost-cutting measures due to the pandemic. Additionally, Southwest’s passenger amenities and destinations are not as good as those offered by its competitors.

❤️ Inadequacy of diversification: A company that is too dependent on one revenue source can suffer catastrophic losses in the event of economic uncertainty or turmoil in its sector.

Southwest Airlines reported total revenues of $22.4 billion in FY2019. This included $20.7 billion of passenger revenue, which made up 93% of total revenue, and $172 million in freight revenue, which was less than 1%.

  • Passenger (airticket) revenue: $20.77 billion (93% of total revenue).
  • Other (loyalty point) revenue: $1.48 billion (6% of total revenue).
  • Freight (cargo, mail) revenue $172 Million (11% of total revenue).

Southwest Airlines needs to diversify its revenue sources. The airline can suffer from severe consequences if it is unable to attract tourists or travelers in uncertain times.

❤️ Dependent on US Market: Southwest Airlines doesn’t offer international flights and is completely dependent on the US market (with the exception of a few tropical vacation islands in Mexico and Central America).

I think of the phrase “Don’t put all your eggs into one basket”. In the event that the US market suddenly dries up, Southwest could lose its profitability and sustainability.

❤️ Overdependence on Boeing 737s: Southwest Airlines was founded solely on Boeing737s.

After two fatal accidents, the Federal Aviation Administration (FAA), issued an emergency order on March 13, 2019, to ground all MAX aircraft. Southwest Airlines has 31 Boeing 737Max Max planes in its 747 fleets.

The grounding of Boeing 737 MAX caused a loss in revenue because there were fewer planes. This shows the problem of relying on one model of aircraft.

Southwest Airlines’ Opportunities

Southwest Airlines has many opportunities, including the expansion of its routes and modernizing its fleet. Southwest Airlines can also change its cost structure to offer more amenities and compete against ultra-low-cost carriers.

❤️ Expand Globally: Southwest Airlines has recently increased its local flights to Hawaii. It can also expand to meet the growing demand for air travel in emerging countries, which is a result of globalization and better financial conditions.

South America is a great place to start and it can also be an untapped market that can serve as a perfect starting point for Southwest’s global growth.

❤️ Enhance the booking process: Southwest has added PayPal and Apple Pay pages to its website, mobile application, and in-flight WiFi purchase webpage. This is a fantastic opportunity for Southwest to offer more e-payment options to its customers.

❤️ Freight Business Expanded: Southwest Airlines can expand its freight business in order to tap into the growing global logistics market. The market is expected to reach $6 Trillion by 2019.

❤️ Exploit New Technologies: Southwest Airlines has the opportunity to promote its services to a broad audience because of the increasing number of internet-related use cases. To speed up security, the airline can also adopt emerging technologies like biometric boarding kiosks.

❤️ Offer long-distance flights: As more millennials get into the workforce and are willing to live and work further away than their parents, the market for longer flights is growing rapidly. Southwest Airlines can offer long and short-haul flights to meet growing demand.

Southwest Airlines’ Threats

The biggest threats to Southwest airlines have been fluctuating fuel prices and heavy regulation. These threats are not the only ones Southwest airlines face. There are new threats as well, such as COVID-19 restrictions or remote work.

❤️ Global Recession: Uncertain times are causing economic chaos across the globe, from South East Asia to Europe to America to Africa to Australia. Southwest’s operations could be at risk due to the high unemployment rate in the US, and the threat of recession.

❤️ Boeing 737 Max Issues: The Max aircraft of Boeing are essential for Southwest Airlines’ growth strategies and modernization efforts. Southwest’s operations were greatly affected by the grounded Boeing 737 Max. Southwest’s fleet consists primarily of this aircraft model.

The airline could be in serious trouble if the situation persists.

  • lost revenue due to cancellations
  • b) Negative effects on customers’ airline choices

❤️ Negative Publicity: The US government released a report that revealed that the airline had been flying jets with no maintenance records for more than two years. This exposed over 17,000,000 passengers to safety hazards.

Intense competition: Southwest Airlines is up against intense competition from the other US airlines, including Jet Blue, Delta, American Spirit, United, and Alaska.

Southwest Airlines also considers the airline industry, as well as buses and automobiles, as potential competitors.

Customers can cut back on discretionary spending and opt for less costly ground transport options during an economic downturn.

❤️ Fuel prices rise: Fuel prices are a major factor in the profitability and sustainability of airlines. Southwest’s sustainability and profitability could be affected by an increase in fuel prices.

❤️ Terrorism incidents: With the drop in leisure travel following the terrorist attack on September 11, 2001, the airline industry was hard hit. A terrorist attack on Southwest Airlines in the future could have devastating consequences for the industry and economy.

❤️ Stringent Regulations: The strict regulations within the airline industry can threaten Southwest Airlines’ operations, from FAA inspections to government compliance. One, the government announced recently that it will take action against the airlines’ decision not to fly 49 used aircraft purchased from foreign carriers without proper inspection.

❤️ Uncertain Times (Economic Shock): These uncertain times have exposed the vulnerability of the airline industry. There have been many plane crashes, and the demand for air travel is at an all-time low. This has led to losses in excess of a billion dollars.

Southwest warned investors in March 2019 that the company’s first-quarter revenue was expected to fall between $200 million and $300 million. Southwest’s sustainability and profitability could be further affected if the situation continues.

Limitations of SWOT Analysis for Southwest Airlines

The SWOT analysis is a popular tool for strategic planning, but it does have some limitations.

  • Some capabilities or factors can be both a strength or a weakness of an organization. This is one of the main limitations of SWOT analysis. Changes in environmental regulations can pose a threat to a company, but can also present an opportunity for the company. If the company is able to develop products faster than its competitors, it could be a competitive advantage.
  • SWOT is not a way to gain a competitive advantage. It should not be a goal in and of itself.
  • This matrix is only intended to be a starting point for discussion about how strategies might be implemented. It was intended to be used as a starting point for a discussion about how strategies could be implemented. However, it did not provide an implementation plan that was based on Southwest Airlines’ strategic competitiveness.
  • SWOT is a static analysis – an analysis of the status quo that includes a few potential changes. The dynamics of a competitive landscape may change as circumstances, capabilities, threats, and strategies change.
  • The SWOT analysis could lead a firm to focus too much on one external or internal factor when formulating its strategies. SWOT analysis may not show the interdependencies between key internal and externe factors. This could be a problem when devising strategies.

Weighted SWOT Analysis of Southwest Airlines

Due to the limitations of the SWOT matrix/SWOT analysis, corporate managers decided that each firm’s internal strengths and weaknesses should be given weightage. 

Organizations assess the impact of future events on company performance and the likelihood that they will occur.

This is a Weighted SWOT analysis. This is better than a simple SWOT analysis. Southwest Airlines managers can concentrate on the most important factors and ignore the rest. 

This solves the problem of organizations making too many lists, but not enough critical factors.

References

FAQs

❤️ Southwest Airlines can I change my flight?

You can make a change to your flight time up to 14 days after the date of travel if you are affected by an involuntary change. Southwest Airlines may occasionally change its flight schedule. If your flight is affected by such changes, they will email you or call with a revised itinerary. You can cancel the trip or modify it if it does not work out for you.

If you need to change your flight, there is no fee. If the fare on the new flight is higher than the one you have booked, you will need to pay the difference. Southwest will also refund any difference in flight cost or keep the difference as a travel fund for future trips.

❤️ What is Southwest Airlines’ cancellation policy?

Southwest offers two cancellation policies. You have the option to decide whether you wish to keep the ticket’s value or convert it to a travel fund that you can use to purchase a future flight. You can also choose to be refunded in a different way.

❤️ How big should my carry-on be?

The dimensions of a carry-on bag should not exceed 10x16x24 inches. You should not take any bags larger than these dimensions. You will need to take it to baggage claim if it exceeds these dimensions. You can only carry one bag with you, one large bag and one personal item. Personal items must fit under the seat at 18.5×8.5×13.5 inches

❤️ What is travel funding?

Travel funds can be used as a credit for future flights. The six-digit confirmation number of the flight that was canceled is tied to the funds. The original ticket expires and the travel fund expires.

Southwest Airlines SWOT Conclusion 2022

Although the pandemic in the world has had a financial impact on the airline industry, all airlines have tried to adapt to the short-term and plan for the long-term. 

Southwest Airlines has maintained its commitment to providing low-cost fares as well as an excellent customer experience despite the difficult situation. Their revenue rose after the pandemic, more than one year later.

This was due to their collaboration. They intend to speed up fleet modernization and replace their 700-737 aircraft with the Max.

Their goal is to become carbon neutral by 2050. They expect to increase their revenue and improve their competitive edge by adding new routes. 

Although the pandemic brought uncertainty, Southwest Airlines took the necessary steps to prepare for the future.

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