Southwest Airlines began as an ambitious company by offering flights from Love Field Airport Dallas to Houston and San Antonio. It began modestly with just three planes and three Texan destinations and currently owns hundreds of planes and flies millions of people to many cities. Even though Southwest was operating in a sector of the economy that was known at that time for its bankruptcies and huge financial losses, the firm reported its 38th straight profitable year in 2010 (The Saylor Foundation, 2014).
The company started its operations in 1971 at Dallas Love Field airport after winning a 4-year court case against two local airlines, Texas International Airlines and Braniff, which are now defunct. The two firms argued before a Texas law court that there was insufficient demand to sustain three intrastate airlines. The legal and later bruising pricing battles between Southwest and the two other firms forced it to create a new operating model that eventually helped the firm survive and thrive. The firm introduced affordable fares and a lively advertising campaign that was based on the "Luv" theme; this helped it to develop a reputation for fun and cost-effectiveness (Johnson & Hall, 2009)
The firm has grown from three airplanes to become the largest domestic airline in the United States (U.S.) with 38 straight years of profitability. Since its inception, the firm has put more emphasis on customer satisfaction rather than on automation as the key to its business success. However, by 2002 its then chief financial officer and later CEO Garry Kelly acknowledged that automation would be crucial to meet the firm's strategic goals. Based on this realization, the company started developing a firm IT foundation. This automation infrastructure was started to aid in key processes in the firm such as the sector's first ever paperless ticketing and web application (Afshar, Saeb, Tadros, Mehra, & Gautam, 2010).
What caused Southwest airlines to succeed where other airlines have not? Historically, the company has differed from others in the industry in various significant ways. Many of the large U.S. airlines operate in a "hub and spoke" system. This means that, these large airlines route their passengers via a hub airport on their way to other cities and Southwest is no exception. The firm has, however, managed to become more efficient than its competitors. While many large airlines operate a variety of different airplane models, Southwest utilizes only one type of jet, the Boeing 737. This enables the airline to service its fleet easily and efficiently. The maintenance mechanics and flight engineers need only to learn how to fix on type of jet in contrast to their counterparts in other airlines who need the technical know-how to fix different types of airplanes. Also, unlike its rivals, the firm does not offer assigned seats in advance making it more efficient than its peers (The Saylor Foundation, 2014).
Southwest Airlines also had the lowest operating-cost models in the local airline industry. The firm also consistently had the lowest air fares on offer. Its customer service was also among the best in the airline industry. By the year 2001, the airline had more than 35,000 employees and recorded about $5.6 billion dollars in operating revenues from a 68.1% passenger load factor. Its trading abbreviation in the securities exchanges was LUV, which symbolized the airline's headquarters the Dallas Love Field Airport, in addition to its relationships with clients and staff (Govindarajan & Lang, 2002).
Internal Factor Evaluation (IFE) Matrix
An evaluation of the internal strengths and weaknesses-based on case study, in addition to several references (by 2009) gives the following information:
Strengths
1. Southwest Airlines has effectively implemented a cost leadership approach.
2. Southwest Airlines is known for its great customer service: the airline bagged the Department of Transportation's (DoT) Triple Crown for 5 years straight courtesy its on-time service, baggage handling and the lowest number of passenger complaints. The firm has also won the first place in the National Airline Quality Rating for 3 years in a row.
3. Staff loyalty: the airline has a loyal, lively and employee-centred culture. The firm's mission statement concentrates on these business aspects. The outcome is a loyal workforce that is willing to put in more effort to achieve the firm's objectives.
4. Thirty seven successive years of profitability (1972-2009).
5. The airline also has an 85% fuel hedge position.
6. Southwest Airlines have also accumulated over 42.2 billion Revenue Passenger Miles (RPMs)
7. An impeccable public image
8. A strong and professional management team
9. The firm boasts of a $13 billion market value
10. By 2009 the firm had 388 jets
11. The average age of its jets is 8.4 years
12. The company is the fourth largest U.S. airline
13. Southwest airlines also recorded consistently higher than industry growth rates
14. The company also has a strong IT infrastructure with 54% of its revenues generated via its online ticketing system through its website (50% in 2003)
15. 75% of its flights tickets are booked online (Therith, 2010).
Weaknesses
1. The firm has a weak mission statement. Even though there seems to be a clear message of the firm's goals, the mission statement does not even state what industry the firm's operations are in explicitly.
2. The firm relies on a single producer for all its jets. Using only one type of jet could attract a lot of negative press if problems with that airplane model arise.
3. A very high proportion of Southwest staffs are full-time employees resulting in very high overhead costs.
4. The firm operates only one type of jet- the Boeing 737.
5. Southwest does not fly to destinations outside continental United States-it services only 63 cities in 23 states within the U.S.
6. It is difficult to convince passengers that Southwest offers benefits that other airlines do not offer.
7. The firm does have special seats or facilities for the severely handicapped.
8....
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