This paper will discuss the challenges currently facing Southwest Airlines in their attempt to remain the most profitable airline in the United States. Southwest has posted consecutive quarterly profits dating back to 1991. Southwest’s success is built upon a business model to keep costs low while providing great customer service and maintaining employee satisfaction. Led by Gary Kelly, the CEO of Southwest Airlines, the company strives to find ways to improve bottom line in terms of reliability, low fares, and customer service. The most notable action the company took to stay ahead of the competition was investing heavily in fuel hedging as a way to combat against rise in jet fuel costs. The strategy paid off for Southwest as it paid much less in fuel costs than its competitors. With the fuel hedging contracts set to expire, Southwest faces the challenge to maintaining its competitive advantage.
Southwest Airlines is a profitable domestic airline company operating 3,200 flights per day in the United States. Southwest was founded on the premises of being a low fare carrier with a lean operational business model and high aircraft use (Southwest Airlines, 2010). Southwest started out with three 737 Boeing aircraft operating in Texas. The company today operates a fleet of 537 Boeing 737 jets serving 68 cities in 35 states with nearly 35,000 employees (Southwest Airlines Fact Sheet, 2010). Southwest has been profitable for 37 consecutive years and is the largest U.S. carrier based on domestic passengers carried as of September 30, 2009 (Southwest Airlines Fact Sheet, 2010). The company philosophy is to offer low fares on airline travel while treating customers like royalty and their employees even better. The company flies only Boeing 737s, to simplify maintenance and training, and employee productivity is high. Planes are turned around for their next flight within 25 minutes, one-third the...