Environmental Analysis: Southwest Airlines

Topics: Southwest Airlines, Airline, Federal Aviation Administration Pages: 9 (2418 words) Published: June 30, 2014
Environmental Analysis


Environmental Analysis


Environmental Analysis: Southwest Airlines

Environmental Analysis: Southwest Airline


Southwest Airlines Co. began its operations in 1971 and has been serving the industry for the past 43 years now (Southwest Airlines, n.d.). It is the major domestic airline, and ranked number one in 2014 by the Bureau of Transportation Statistics (United States Department of Transportation, 2014). Back in 1971 the airline began its services in Texas in the cities of Houston, San Antonio, and Dallas. The company has been ranked as the nation's largest low cost carrier (Mergent, 2012). It offers the lowest fares, and has the lowest cost structure in the industry.

Southwest Airlines Co. also acquired AirTran Holdings Inc. in 2011 and now owns AirTran Airways. The company has been ranked 9th among the 50 most admired companies in the world according to a survey by Fortune magazine (Fortune Magazine, 2013). Southwest uses the exchange symbol LUV on the New York Stock Exchange (NYSE).

This paper will summarize an environmental scan of Southwest Airlines to include an analysis of the most important external environmental factors in the remote, industry, and external operating environments, the most important strengths and weaknesses of the organization, an assessment of the company's competitive position, and analyze the structure of the organization and how this affects organizational performance (University of Phoenix, 2013).


The Airline and Aviation industry underwent Governmental Regulations by the passage of the Civil Aeronautics Act of 1938 and the simultaneous creation of the Civil Aeronautics Board (CAB). This Act enabled the CAB to control the service fares, the entry of new airlines from the market and the exit of existing airlines from the same, and the assigning of air routes to different airlines. Then the Federal Aviation Act was passed in 1958 and led to the formation of the Federal Aviation Administration in August 1958. The rule making was shifted to the FAA and it had control of the air routes, the airline safety and air traffic controls.

The Airline Deregulation Act was passed in 1978 and falls in the category of Federal Law. It eliminated the governmental authority over determination of service fares and control of routes and new airlines entry into/exist from the airline industry. As a result of the act, the CAB was dissolved in 1984. The FAA was not eliminated and it remained in control of airline safety and air traffic control (United States Government Accountability Office, 2006). This Amendment came into force in 1979 and comes within the category of federal law. It manages the air traffic at Dallas Airfield in Texas. Initially, this amendment posed such restrictions on nonstop flights that their routes got limited to Texas and its neighboring states only. However, the restrictions were taken off in 1997 and 2005. The Amendment was revoked in 2006 but some restrictions will expire in 2014. Soon after the passage of the Airline Deregulation Act of 1978, Southwest was about to begin interstate flights. But restrictions were imposed by the Congress and the airline was disqualified to ticket/operate flights beyond Texas and the states touching its borders.


A number of economic constraints are also there in the environment that have their relative impacts on Southwest's operations. These include:

Higher unemployment rates, which Southwest had been challenging by refusing to lay off employees even during surging unemployment.

Increase in operating costs.

Instable credit market and capital market.

Declining demand for air travel.

Economic Recession in the country (Southwest Airlines, et al., 2013).


Social factors influencing performance include an increase air pollution caused by the airline industry as a whole; gases are emitted in upper atmosphere...

References: Forbes. (2013). _The 25 Best Places to Work in 2013_. Retrieved June 8, 2014, from Forbes: http://www.forbes.com/pictures/efkk45eddil/no-12-southwest/
Fortune Magazine
Gittell, J. (2003). _The Southwest Airlines Way: Using Power of Relationships to Achieve High Performance._ New York: McGraw-Hill. Retrieved June 8, 2014
Southwest Airlines. (n.d.). _Company Profile_. Retrieved June 8, 2014, from LUV Investor Relations: http://southwest.investorroom.com/
Tellex, T
United States Department of Transportation. (2014, May 15). _Airline Traffic Data_. Retrieved June 8, 2014, from Bureau of Transportation Statistics: http://www.rita.dot.gov/bts/press_releases/bts024_14
United States Government Accountability Office, (
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