Southwest Airlines
Executive Summary: The commercial airline business is highly capitalintensive and competitive, and is characterized by boom and bust periodsthat largely correspond with global and/or domestic economic cycles.Indeed, the fortunes of most major airlines rise and fall in keeping witheconomic growth and recession (Industry Profile, 2004). One airline,however, which has consistently managed to grow and that too profitably,irrespective of periods of economic growth or downturns is SouthwestAirlines. Southwest's impressive performance is evidenced by the fact thatthe airline has managed to earn a profit every year since 1973 (SouthwestFact Sheet, 2004). The key to understanding Southwest's success lies in itsunique business model of rock bottom fares, low operating costs, andoutrageous customer service (Freiberg, cited Peters, 1998, p. xiv). It istherefore not surprising that Southwest Airlines has grown steadily tobecome America's fourth largest major airline, with a fleet of 355 jetsthat fly more than 64 million passengers a year to 59 airports, all overthe Southwest and beyond (Southwest History, 2002, para. 2-3).Interestingly, Southwest Airlines can be said to be still in the growth
Southwest's strongperformance is clearly evident in its profit margin of 7. Southwest, however, does differ from other airlines in terms of itsvastly different culture and style of operations. Typically, both business and leisuretravel increase during economic boom periods and decrease during downturnsas corporations and individuals tend to cut travel budgets. Besides these ongoing issues, airlines today are increasinglyconcerned over security issues. Indeed, such value creation hasresulted in higher operating costs. This is indeed remarkable for a player in the capital-intensiveairline industry. The importance of theeconomic environment for the airline industry is also reflected in the factthat ". The airline industry has steep entry and exit barriers given the capital-intensive nature of the business, the complex infrastructure andoperations, excess capacity and thin margins. economy may be showing signs of recovery,businesses continue to look for ways to reduce costs as a way of enhancingprofitability in an increasingly competitive world. For, ironically, thecompany's continued profitability is leading to demands for higher pay fromthe flight attendants union (Lagorce, 2004).
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