Southwest Airlines

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Southwest Airlines in 2008 - 2009:
Analysis and Recommendations

Analysis Performed
By:
American Consulting Group, LLC
CEO: Michael A. Evans

Table of Contents

Letter of Appreciation to Gary Kelly, CEO……………………………...3

Executive Summary……………………………………………..........4

Appendix 1……………………………………………………………….10
Appendix 2……………………………………………………………….11

Appendix 3……………………………………………………………….12

Appendix 4……………………………………………………………….13

Appendix 5……………………………………………………………….15

Appendix 6……………………………………………………………….16

Appendix 7……………………………………………………………….18

Appendix 8……………………………………………………………….20

Appendix 9……………………………………………………………….24

Bibliography………………………………………………………...28

Southwest Airlines Co.
Gary Kelly, CEO
P.O. Box 36611

2702 Love Field Drive

Dallas, TX 75235

Dear Mr. Gary Kelly,

Enclosed you will find our analysis of Southwest Airlines Co. We have included

analysis on the current market trends, Southwest’s market share, SWOT analysis and more to

identify the current structure of Southwest Airlines.

American Consulting Group, LLC would like to take this time to thank you for

choosing our firm to perform analysis on Southwest Airlines Co. It is our hope that we

have exceeded your company’s expectations with our analysis, opinions, and

recommendations.

Sincerely,

Michael A. Evans, CEO
American Consulting Group, LLC

Executive Summary

Since Southwest Airlines does not handle international travel like the other major

airlines, it focuses on controlling costs within its domestic market. In Appendix 1, you

can see how Southwest compares with Delta, American Airlines, and United Airlines as far as

passengers served versus revenue earned. According to the information in Appendix 1, it is

noticeable that Southwest serves as many passengers as its competitors, but has substantially

lower revenue. In Appendix 2, you can see that Southwest Airlines had much lower average

prices per ticket than its competitors.

Southwest Airlines is able to offer the lowest fares in the industry because they have

directed their focus to managing costs. When Southwest Airlines was formed, it was done so

with a certain business model. The company’s history can stand as a testament to their continued

care for the business professionals (See Appendix 4). Southwest has earned a profit every year

for the past two decades. Appendix 3 shows how Southwest compares to the previously

mentioned major airlines in terms of net income. As you can see from the graph, only Southwest

Airlines and Delta Airlines had a positive net income. American Airlines and United Airlines

both had significant losses. If they continue these substantial losses in the future, continuing

business would prove difficult.

Southwest Airlines has figured out several ways to provide low-fare flights while

making high profits. One of their successes has been their decision to fly one model of

airplane, the Boeing 737. Therefore, pilots and mechanics only need to know one type of

airplane. Mechanics will also have spare parts to work with and become knowledgeable

on how the plane functions. The question still remains, why choose the 737? First and

foremost, cost. Low-fare airlines are very cost conscience, and must be able to provide low-

fares. The 737 provides the lowest operating cost of any airline in its class. In fact, the

Boeing 737 is nearly 4 percent less costly then its closest competitor. It also weighs less

then its closest competitor, which requires less engine thrust. The 737 is also much easier

to maintain. It has a simple design and low stance...
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