Southwest Airlines Analysis

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The U.S. airline industry has proven to be one of the least profitable in the entire world. It has been plagued by fierce competition and destructive price wars, extraordinary fixed costs, and heated labor relations. Despite these numerous challenges, Southwest Airlines has been able to stand out from the competition and has established itself as one of the only consistently profitable airlines, with a record of twenty-one straight profitable years and stock earnings that have only been rivaled by Wal-Mart. Southwest’s success can be attributed to a combination of a number of factors, including a strategy that lowers costs for itself and its customers, a liberal and fun focused culture, an extremely motivated and loyal workforce, and a highly coordinated and team oriented system that spans across the company. These four components, and their related elements, fit into the organizational behavior diamond framework to reinforce each other and form the basis of Southwest’s competitive advantage over its rivals.

Southwest’s primary strategy is to minimize its own operating costs so that it can then offer the lowest possible fares to its customers. It is able to accomplish this by scheduling frequent, short point-to-point flights out of underutilized airports without a central hub. Its service is very straightforward, without pre-assigned seating or meal service, and one simple pricing structure. Southwest only uses fuel efficient 737s, which also allows them to save on maintenance and training costs. All these efforts have proven successful, as Southwest has managed to achieve the lowest operating cost structure in the industry.

Southwest has also created a truly unique culture in the airline industry that starts at the top with CEO Herb Kelleher, who is known as a visible, hands on, and party promoting leader. He has successfully infused this type of attitude into all aspects of the organization, and created a fun-filled...
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