Case Analysis: SOUTHWEST AIRLINES BUDGETS FOR FUTURE|
This case analysis looks at Southwest Airlines and how the company is in a vital financial position. The analysis was done using news articles, the company’s website and finance websites. The research was used to focus on how they have a strong employee to company relationship and customer to company relationships that they do not want to jeopardize and ruin but they need to bring forth $100 million without laying off employees and losing customers due to raising fare prices. This analysis shows how Southwest is looking into new ideas that will enhance the brand and in the long run make them successful.
Rollin King and Herbert D. Kellher started Southwest Airline services in 1971. Southwest serves as a low-fare air transportation in many states with over 20 million customers annually. (Yates, 2012.) The airline industry suffered a major financial decrease in 1991 from the critical economic conditions, but Southwest was still holding strong, while other airline companies were in debt. The key to their success and continued success was due to the company being known as having low-costs and keeping their employee to company and company to customer relationships strong, by making every customer and employee feel important. Also, competitors knew that they could not match Southwest airline’s low prices or the other competitors would go bankrupt, leaving Southwest Airlines to be at the top of the industry.
Southwest Airlines has been a sturdy company for more than 38 years. “If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline” (Southwest Airlines History, n.d., para. 1) stated King and Kelleher, the starters and Presidents of the airline. Using its low-cost, no checked baggage fees, great customer service, and point-to-point strategy, which allows them to pick the most profitable routes to operate, Southwest has been able to expand year after year and stay profitable. As of today, Southwest Airlines is one of the most successful airlines in the struggling airlines economy. Over the past few years many airlines have had large losses and five of the ten largest airlines have filed for bankruptcy. Southwest has been able to continue to grow but they have started to experience some financial difficulties. The October 18, 2012 Star-Telegram article entitled, “Southwest Airlines plans to cut expenses without layoffs,” (Ahles, 2012) describes the airline company as an organization known for its workplace culture and low airline fees but needs to “reduce corporate overhead costs by $100 million” (Ahles, 2012). The status of the company was examined in detail by the article and it revealed the carrier has a substantial problem that needs to be resolved quick before they have to file for bankruptcy. Facing Difficulties
The airline industry the past few years have had many problems due to increasing energy costs, expensive labor contracts and reduced consumer demand. The heaping problems facing Southwest can be traced to five major causes. The difficulties began with a dramatic change in business travel demand and consumer demand. The terrorist attacks of Sept. 11, 2001 had an immense negative impact on consumer demand. People were afraid to fly and Southwest along with all the other airlines had to find ways to make customers feel safe again. Around the end of May, beginning of June, business travel in the overall airline economy decreased 5.4 percent, (Martin, 2012) the largest decline in any month since April 2010, showing signs of a slowing economy. Businesses are still doing their core business travel, but converting to more of an electronic approach, for example, Skype, to save on costs. Skype is a free computer program that people can video chat for as long as they want, whereas...