Southwest Airlines Overview
Southwest Airlines is a highly renowned American airline that serves more than 47 states within the US and also offers international flights to more than 10 countries. The airline was founded in 1967 and is headquartered in Dallas, Texas in the United States. With a market share of around 17 percent in the US airline industry, Southwest Airlines is one of the most successful airline companies in the United States.
This article presents a fastidious and well-researched SWOT Analysis of Southwest Airlines looking into the comparisons between the strengths and weaknesses of the company. Furthermore, the analysis highlights the different opportunities and threats for Southwest Airlines in the external business environment. In case you wish to learn about conducting a SWOT analysis in detail, you should definitely go through our meticulous Swot Analysis guide. So, let us get started.
Table of Contents
A meticulous SWOT Analysis of Southwest Airlines
Southwest Airlines’s strengths
- Strong financials- Southwest Airlines has abundant financial resources with its revenue in 2021 increasing by a huge margin of 74.5% to $15.8 billion. Further, the company had net cash of $4.8 billion which can help it overcome negative situations and exploit new opportunities (Southwest 2022).
- Brand value- Southwest Airlines is valued highly in the US market. The company has featured 22 times in various rankings including the strongest and most valuable US brands, the biggest Airlines brands, and the best global brands. It is currently the 4th most valuable airlines brand and is valued at $6.8 billion.
- Strong market share- Southwest Airlines has a strong foothold in the US market with a 17.4% market share (Salas, 2022).
- Customer service- Southwest Airlines provides various facilities to enhance customer satisfaction. These include Early Bird Check-In, wherein the customers can check-in through the web and are assigned boarding passes prior to commencement of regular boarding. Further, most of the planes have inflight entertainment and Wi-Fi services on the majority of their fleet.
Southwest Airlines’s weaknesses
- Limited routes- Southwest Airlines operates to limited destinations that include the US, 4 destinations of Mexico, and Puerto Rico along with Bahamas, Cuba, and a couple of other Caribbean destinations.
- Over-dependence on Boeing 737- The whole fleet of Southwest Airlines comprises of Boeing 737 out of which 69 are the Max 737 and further the delivery is pending for 234 Max 737’s and 149 Max 8 (Josephs, 2021). Governments all around the world banned Max 737s for about two years due to safety issues. The over-dependence of the company on Max 737 can cause disruption in the operations.
Southwest Airlines’s opportunities
- Expansion to more countries- Currently Southwest Airlines flies in 47 US states along with Mexico and a few Latin American countries. The company can expand its operations in emerging economies like India and China. Indian aviation has grown tremendously over the years and would be the third-largest aviation market by 2024. Further, China is also witnessing high growth and it is expected that China’s fleet size would rise to close to 10,000 planes by 2040, almost 22% of the world’s fleet, thus highlighting huge growth opportunities.
- More investment in cargo shipment- The revenues from the freight operations constitute just 1% of the total sales (Forbes, 2020). The company can enhance its cargo operations by tying up with several cargo operators that would enable it to penetrate more into the markets. Furthermore, Southwest airlines can also tie-up with US Postal Services to deliver the packages to the customers.
- Integration of latest technology- Southwest Airlines can use the latest technologies like robotics for conducting ground operations and can tie up with wearable tech companies to provide facilities for storing boarding passes on the device and providing them real-time information on the devices themselves. This would ease the passenger experience.
Southwest Airlines’s threats
- Competition- Southwest Airlines has intense competition with Delta Airlines, and American Airlines among others. American Airlines is the top airline in the US market with a 19.5% market share and has a fleet of 860 planes. Delta Airlines is also a significant player with a 16.3% market share, 860 aircraft and it earned a profit of $280 million in 2021 (Josephs, 2022).
- Increase in crude prices- The prices of crude have risen by more than 70% in the last 12 months to $113/barrel. Further, the US government’s decision to cease oil imports from Russia could add to Southwest Airlines’ worries as the prices would rise further and there can be disruptions in supply as well which could impact the financials of the company.
- Negative publicity- The company flew its airplanes for two years by violating the federal aviation administration’s laws wherein it didn’t possess any records for maintenance (Slotnick, 2020). This type of behavior can result in fatal accidents and loss of trust among the passengers.
- Pandemic- The increase in the intensity of the virus can pose a threat to the business of the company as it would have to ground the planes, which would result in huge financial loss to the company.
- Variation in demand for travel- Most of the revenues are generated during the summer months when the demand for air travel is at its peak while the demand is low in the first and third quarters of the calendar year.
To conclude, it can be said that Southwest Airlines is one of the best and most trustworthy in the industry which is evident from the fact that in spite of difficult times because of COVID, Southwest Airlines has been able to maintain positive financial growth and its customer service is one of the best in the industry despite it being the low-cost carrier with the limited operations. This showcases the company’s dedication to its customers and other stakeholders. However, the governments worldwide are not satisfied with the operations of the Boeing 737 because of its failure on various occasions, and the company’s over-dependence on the 737 can lead to disruption in the operations if the governments gain plan to ban the fleet. Also, you can read the PESTLE Analysis of Southwest Airlines to determine how the macroenvironment factors influence the company or the automotive industry.
SLOTNICK, D. (2020). Southwest flew millions of passengers on planes that were missing maintenance records, according to a new report. Retrieved 11 April 2022, from https://www.businessinsider.in/business/news/southwest-flew-millions-of-passengers-on-planes-that-were-missing-maintenance-records-according-to-a-new-report/articleshow/73813012.cms
Gilbertson, D. (2020). 'Diversion, distraction and power': Audit blasts Southwest's safety culture, FAA oversight. Retrieved 11 April 2022, from https://www.usatoday.com/story/travel/airline-news/2020/02/11/southwest-airlines-audit-blasts-safety-culture-faa-oversight/4729635002/
Global Times. (2021). COMAC predicts China to become world's largest aviation market by 2040. Retrieved 11 April 2022, from https://www.globaltimes.cn/page/202109/1235463.shtml
Josephs, L. (2021). Southwest Airlines raises order for smallest Boeing 737 Max by 34 planes. Retrieved 11 April 2022, from https://www.cnbc.com/2021/06/08/southwest-orders-34-more-of-boeings-smallest-737-max-plane.html#:~:text=The%20Dallas%2Dbased%20airline%20said,the%20company%20retires%20older%20737s.
Walther, B. (2021). Spotlight on North America: Top 10 Biggest American Airlines By Fleet Size. Retrieved 11 April 2022, from https://www.id1.de/2021/07/07/spotlight-on-north-america-top-10-biggest-american-airlines-by-fleet-size/