Southwest Airline of the Future
Southwest has a strong excellent reputation shown in the Diamond Award that it won this past year in the Air Cargo World’s Air Cargo Excellence (Southwest Among Repeat Winners, 2013). Another strength of Southwest is that it has been in business for the last 42 years and made it 36 years in a row with a positive profit (Southwest Airlines Co. Focus on Fundamental, 2009). This is a record that any Fortune 500 company would be envious. Southwest when it started, was thinking out of the box.
Most airlines have the mind set of “hub-and-spoke service” were Southwest focused on “point-to-point”. Point-to-point service allows for direct nonstop routing by minimizing connections, delays and total trip time. ” (MarketLine, 2012). This is one of the strategies that let it build a strong faithful customer base that has grown it to where it is today. With its employees always going the extra step, pilots handling baggage and attendants putting provisions on board, have the spirit of let’s be the best and the most on time airline (Muduli & Karua, 2011). This is how you gain market share with employees. Southwest always focused on the family value in its company (Mikeeva, 2011).
It shared its profits with the employee there is no better way in business to get the employee on board then to make them an owner. You cannot do everything right all the time it is a company run by humans. The greatest weakening being done and may get worse is the pending class action lawsuits by the stock holders of Air Trans Holding a cargo airline, which Southwest acquired in 2010 (Datamonitor, 2012). This could strike a fatal blow or near fatal when it is settled. Looming over the operation is not building the company. It is taking manpower and company energy away from the company.
It may even have some responsible for the shrinking profits, but largely that has been due to the economy and fuel prices, which is hurting the rebuilding of the fleet. While depending on only one aircraft and one engine supplier is weak business practice Southwest is doing just that. (Datamonitor, 2012) If there is a glitch in Boeing the supplier in a negative way it will have great impacted the company. There are many opportunities in the future of Southwest Airline also. The growth in the US passenger travel expected to double in the next 20 years according to the Federal Aviation Administration (FAA).
Along with the global air freight market increase which expected in the future (MarketLine, 2012). Southwest is positioned to take advantage of both areas with the acquisition of Air Trans holding, which will increase revenue and profit. This will solve 2 of Southwest’s weaknesses heavy dependents on passage revenue and shrinking profit margin. Attracting the best pilots is another of the opportunities that will come because of the philosophy of the way the company thinks about its employees, they are family. The threats are intense competition that is coming from consolidation of the industry will be an uphill battle.
It is this writer’s opinion that Southwest is in a better position than most other airline to combat the struggle. “The increase market presence of low cost carriers, which engage in substantial price discounting, has diminished the ability of the network carriers to maintain sufficient pricing structure in domestic markets to achieve profitability” (MarketLine, 2012). Increase in fuel cost is out the control of the airline industry. One thing a company can do to low cost of fuel to itself is combined its buying with other companies to get a larger volume discount.
The last threat to talk about is the increasing government regulations. It is the job of the FAA to regulate and keep safe the airline industry which translates into higher ticket pricing if not by the airline by the taxes that hung on the ticket, airline or airport. The federal government has on several occasion proposed a significant increase in the per ticket tax (MarketLine, 2012), to pay the added cost of security and safety needed at the airport and in the airplane caused by the terrorist activity in the past decade.