Southwest Airlines - Clear Strategy and Successful Execution

SWOT Analysis

Strengths

Clear Strategy and Successful Execution

Southwest Airlines is the largest low-cost carrier in the United States; it is headquartered in Dallas, Texas. Southwest Airlines was incorporated in 1967; for the first three years, Southwest Airlines was able to fight against the threats from its competitors, and kept a steady growth rate since its inception. This growth rate still persisted after September 11, 2001 when all of its competitors were steadily losing business. Its management team leads the company with a positive spirit and integrity. As of June 5, 2011 it is the largest airline in the United States based upon domestic passengers carried (Bureau of Transportation Statistics). It is the largest operator of the Boeing 737 worldwide with over 572 in service, with an average of six flights each per day. In May of 2011 Southwest Airlines bought AirTran Airways, an Orlando-based company with the full integration of their carriers coming by 2015. On March 1, 2012, Southwest and AirTran technically became one airline. The acquisition of AirTran will extend service to a variety of new locations, including flights to the Caribbean and Central America with some of those flights being international. Southwest Airlines has over 46,000 employees and they operate over 3,400 flights every day. Southwest Airlines has been number three among America's Top Ten most admired corporations, done by FORTUNE magazine. By 2015 Southwest will be flying internationally to Mexican and South American destinations from Hobby Airport in Houston, Texas.

Strong Culture

Southwest has been employing humor in its advertising with slogans like "Love Is Still Our Field", "Just Plane Smart", "The Somebody Else Up There Who Loves You", "THE Low Fare Airline", and "Grab your bag, It's On!". They have been using a wide variety of slogans, and their current slogan is "A Symbol of Freedom". The key elements of Southwest's culture are on-floor leadership style, low level of debt, and employees come first. At Southwest, employees are treated as major assets; one of Kelly's beliefs is to hire great people, and treat them like family. As one of the objectives that Kelly established for the company was to be one of the best places to work in the country. Its low cost fares and short turnaround time advantages are mainly a result of employees' happiness at work, which translates to productivity. When the employees are happy and cheerful at work, they offer the best customer service. At Southwest, managers are expected to spend at least one-third of their time in the facilities interacting with their employees. This does not only include observing and listening to their employees, but also includes helping them to complete their work; for example, on "Black Wednesday", the CEO will help the employees load and unload passengers. Two big core values at Southwest are LUV and Fun. LUV means demonstrating a caring, loving attitude towards employees and customers. Employees are encouraged to entertain customers and bring laughter into the workplace. Everyone who works at Southwest are treated as family members. In order to sustain the company's culture, new employees will watch footage from events during training; the employee newsletter always keeps the employees up-to-date with all the company's events and changes.

Excellent Customer Service

Southwest has a series of processes to ensure the implementation of its high quality service. During the hiring process, the Leadership Development Department looks for people with a "Warrior Spirit," lead with a "Servant's Heart," and have a "Fun-LUVing" attitude. The qualified candidates live the "Southwest Way" and the company prefers to hire someone with the right attitude with little or no experience over highly skilled people with the wrong attitude. During the training process, besides the FAA-mandated training courses, the new employees are offered training activities in Southwest's University for People and a one-year long sponsorship program. Learning is a never-ending process in Southwest. As a result, Southwest's employees are always preforming their best service to customers and always practice the Southwest culture. On-time performance is another important component in customer service. Compared with other major airlines, Southwest Airlines has the second lowest percentage of cancelled flight (see Exhibit A).

Weaknesses

Single Supplier

At Southwest, the sole aircraft supplier is Boeing. The company does not have a back-up plan if relations with Boeing are sullied. This increases Boeing's bargaining power in negotiations; at the same time, Southwest may not be getting the best deals to reduce their costs. Southwest has had some problems in recent years in regard to their aging fleet of Boeing aircraft, there have been delays and cancellations due to the aging aircraft and their growing maintenance issues. As a result they have placed an order with Boeing for 150 new Boeing 737 MAX aircraft which is a new type of aircraft. If Southwest Airlines did not solely rely on Boeing for their aircraft they be able to get a more competitive price, especially if Boeing knew that the company was considering a deal with Airbus, the other major aircraft manufacturer in the world.

Opportunity

Large and Diverse Chinese Consumer Base

The total population in China is 1.3 billion, and the majority of the population is living and working in Eastern China along the coast. Among this huge population, Southwest Airlines has three target consumer groups: migrant laborers, college students, and young professionals.

1. Migrant Laborers

Migrant laborers refer to the people who used to be farmers but are now working in non-agricultural jobs in urban areas. They move from the less developed areas to the eastern part of the country, which are the more developed areas with more work opportunities. The total population of the migrant laborers is more than 250 million (People, 2012). They are not highly educated and usually do not hold a college degree. They usually work in construction sites, factories and service-orientated jobs that require less education and skill. Due to the high cost of living, the migrant laborers do not take their children or families with them. They work all year long, and save all of their income; at the end of the year they will go home for the Spring