Southwest Airlines
Southwest Airlines 2008
Introduction :
While the airline industry in the USA has not made thriving financial headlines, Southwest Airlines has emerged as a successful organization. It has been able to make profit consistently and has sustained itself through difficult situations like recession, energy crisis, and September 11 terrorist attacks.
Problem Statement :
The problem under consideration here is: How can Southwest Airlines achieve a sustainable growth in future in spite of increasing operational expenses?
Detailed Analysis :
a) External Environment Analysis:
Political - Legal
* 1978 Airline Deregulation Act intended to remove government control over fares, routes and market entry (of new airlines) from commercial aviation. When airline deregulation came in 1978 Southwest Airlines began planning interstate flights from Dallas Love Field. * Under the 1979 Wright amendment, Southwest and other airlines were barred from operating, or even ticketing, passengers on flights from Love Field to destinations beyond the states bordering Texas. * Change in the federal ticket tax in 1997 on flight routes that are one thousand plus miles also affected Southwest Airlines. This tax system replaced a percentage tax with a tax that included a flat segment fee that caused conflict with the low-fare carriers. This caused Southwest to lose some of their cost advantage. * In 2006, Wright related legislation was passed by the US government. Because of the agreement, nationwide service became possible for Southwest. * Strict safety regulations post September 11 terrorist attacks increased operating expenses. * Open Skies Agreement in 2007 allowing European carriers greater access in U.S market tends to increase competitive pressure.
Economical
* Rising fuel cost ( Fuel cost consisted of 17% of total operating cost of Southwest Airlines in 2004 but the limit increased to 31 % in 2008) * Economic turmoil in US after
Introduction :
While the airline industry in the USA has not made thriving financial headlines, Southwest Airlines has emerged as a successful organization. It has been able to make profit consistently and has sustained itself through difficult situations like recession, energy crisis, and September 11 terrorist attacks.
Problem Statement :
The problem under consideration here is: How can Southwest Airlines achieve a sustainable growth in future in spite of increasing operational expenses?
Detailed Analysis :
a) External Environment Analysis:
Political - Legal
* 1978 Airline Deregulation Act intended to remove government control over fares, routes and market entry (of new airlines) from commercial aviation. When airline deregulation came in 1978 Southwest Airlines began planning interstate flights from Dallas Love Field. * Under the 1979 Wright amendment, Southwest and other airlines were barred from operating, or even ticketing, passengers on flights from Love Field to destinations beyond the states bordering Texas. * Change in the federal ticket tax in 1997 on flight routes that are one thousand plus miles also affected Southwest Airlines. This tax system replaced a percentage tax with a tax that included a flat segment fee that caused conflict with the low-fare carriers. This caused Southwest to lose some of their cost advantage. * In 2006, Wright related legislation was passed by the US government. Because of the agreement, nationwide service became possible for Southwest. * Strict safety regulations post September 11 terrorist attacks increased operating expenses. * Open Skies Agreement in 2007 allowing European carriers greater access in U.S market tends to increase competitive pressure.
Economical
* Rising fuel cost ( Fuel cost consisted of 17% of total operating cost of Southwest Airlines in 2004 but the limit increased to 31 % in 2008) * Economic turmoil in US after