Southwest Airline Strategic Audit

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Ecole supérieure libre des sciences commerciales appliquées (ESLSCA)

Strategic Management Paper

Southwest Airline Strategic Audit

Prepared By:Hesham Gamal El Din El Desouky
Mohamed Dandash
Wael Youssef

Professor:Dr. Saneya El Galaly

Table Of Contents

I.Executive Summary5

II.SouthWest Airlines History6

III.Current Situation8

III.1.Current Performance8
III.2.Strategic Posture13
III.2.1.Mission & Vision13

IV.Corporate governance19

IV.1.Board of Directors19
IV.2.Top Management21
IV.3.Corporate Governance Guidelines22
IV.4.Ownership Profile26

V.External Environment (SWOT)27

V.1.External Societal Environment27
V.1.3.Political & Legal29
V.1.4.Socioculutral & Environment31
V.2.Task Environment32
V.2.1.Threat of new Entrants32
V.2.2.Bargaining power of buyers33
V.2.3.Threat of Substitute products or services33
V.2.4.Bargaining power of suppliers34
V.2.5.Rivalry among competition35
V.2.6.Relative power of unions37
V.3.Summary of External Factors (EFAS)38

VI.Internal Environment (SWOT)39

VI.1.Corporate Structure39
VI.2.Corporate Culture41
VI.3.Corporate Resources42
VI.3.3.Human Resources Management43
VI.3.4.Information Systems44
VI.4.Summary of Internal Factors (IFAS)46

VII.Analysis of Strategic Factors (SWOT)47

VII.1.Situational Analysis47
VII.2.Review of Mission and Vision48

VIII.Strategic Alternatives & Recommended Strategy49

VIII.1.Strategic Alternatives (TOWS)49
VIII.2.Recommended Strategy50
VIII.2.1.Corporate / Business Strategies50
VIII.2.2.Functional Strategies51
VIII.2.2.3.Human Resources52
VIII.2.2.4.Information Technology53


X.Evaluation and Control57

XI.Annex-1 (SouthWest Financial Statements)59

XII.Annex-2 (SouthWest Activity System)62

List of Tables

Table 1 - SouthWest Liquidity Ratios10
Table 2 - SouthWest Activity Ratios11
Table 3 - SouthWest Profitability Ratios11
Table 4 - SouthWest Leverage Ratios11
Table 5 - SouthWest Others Ratios12
Table 6 - Investment / Financial Structure of SouthWest Airlines12 Table 7 - Passenger Revenues (In millions) and Distribution Method12 Table 8 - Cost Figures Comparison43
Table 9 - SouthWest Income Statement59
Table 10 - SouthWest Balance Sheet60
Table 11 - Statement of Cash Flow61

List of Figures

Figure 1 - Southwest Airlines Average Cost of Fuel27
Figure 2 - US Taxes Level Increase29
Figure 3 - Strategy Canvas of Short-Haul Industry34
Figure 4 - % of Fuel Hedged by Company35
Figure 5 - Southwest Organization Structure40

Executive Summary

More than 36 years ago, Rollin W. King scribbled three lines on a cocktail napkin, leaned across the table, and muttered to his longtime friend: “Herb, let’s start our own airline”. Herbert D. Kelleher loosened his tie and knitted his brow before replying: “Rollin, you’re crazy.” He then paused, grinned, and added, “Let’s do it!”

They founded Air Southwest Company in 1967. The company incorporated as Southwest Airlines in Texas, and commenced customer service on June 18, 1971. They began with three Boeing 737 aircraft serving three Texas cities – Dallas, Houston, and San Antonio.

Today, Southwest is America’s low fare, high customer satisfaction airline. Southwest has literally written the book on low fares. The airline has never pretended to be anything more than a bus service. No matter how long the flight is Southwest offers only a single class, open seating, and no meals. Southwest Airlines also maintains high frequency of flights and quick ground turnaround, yielding approximately 10 minutes ground time between flights. By maintaining this consistency, they...
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