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....

SW does not fly to significant large cities such as Atlanta and Charlotte.
9. The airline does not have a first or business class service for its customers-it does not offer assigned seats

10. The airline does not cater in-flight meals of any form (Therith, 2010).

Internal Factor Evaluation (IFE) Matrix

By evaluating the internal audit above, the IFE matrix is as follows:

"Key External Factors" or "KEF"

Weighted Between

0.0 to 1.0

Rating Between

1 to 4

Total

Score

Strengths

1. Southwest has effectively implemented a cost leadership approach

0.07

3

0.21

2. Southwest Airlines is known for its great customer service

0.07

3

0.21

3. Staff loyalty

0.07

4

0.28

4. 37 successive years of profitability

0.04

4

0.16

5. 85% fuel hedge position

0.07

4

0.28

6. 42.2 billion RPMs

0.04

3

0.12

7. Excellent public image

0.07

4

0.28

8. Strong and professional management team

0.07

4

0.28

9. $13 billion market value

0.04

3

0.12

10. By 2009 the firm had 388 jets

0.04

3

0.12

11. The average age of its jets is 8.4 years

0.04

4

0.16

12. 4th largest local airline

0.03

4

0.12

13. Southwest airlines also consistently record higher than industry growth rates

0.07

3

0.21

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)

0.02

3

0.06

15. 75% of its flights are online tickets (Therith, 2010).

0.03

4

0.12

Weaknesses

1. The firm has a weak mission statement.

0.02

1

0.02

2. The firm relies on a single producer for all its jets

0.01

1

0.01

3. A very high proportion of Southwest staffs are full-time employees resulting in very high overhead costs.

0.03

2

0.06

4. The firm only operates one type of jet the Boeing 737

0.01

1

0.01

5. Southwest does not fly to destinations outside continental United States-only services 63 cities in 23 states.

0.04

2

0.08

6. It is difficult to convince passengers that Southwest offers benefits that other airlines do not

0.01

2

0.02

7. Using only one type of jet could attract a lot of negative press if problems with that airplane model arise

0.01

1

0.01

8. The firm does have special seats or facilities for the severely handicapped

0.01

1

0.01

9. SW does not fly to other significant large cities such as Atlanta and Charlotte.

0.05

1

0.05

10. The airline does not have a first or business class service for its customers-it does not has assigned seats

0.01

1

0.01

11. The airline does not cater for any form of in-flight meals

0.01

2

0.02

12. The firm only flies to local destinations and no international flights

0.02

1

0.02

TOTAL

1.00

3.05

SWOT Analysis chart

Strengths

Weaknesses

Financial means

Southwest is a reputable brand

It has a strong domestic network

Exceptional business leadership

A deliberate effort at employing individuals who have a team spirit

Negligible revenue opportunities

Obsolete products

Falling revenues and profits

Heavy reliance on passenger revenues

Has many contractual obligations

Opportunities

Threats

Recovery of the domestic airline industry

Acquisition of AirTran Holdings

Revival of the U.S. tourism industry

Affordable airfares

Diversification to international flights

Stiff competition

Regulatory restrictions

Volatility in oil markets

Increasingly rising costs

Terrorist attacks

Strengths

1. Financial means

2. Southwest is a reputable brand

3. It has a strong domestic network (CAPA, 2014).

4. Exceptional business leadership

5. A deliberate effort at employing individuals who have a team spirit (Gittell, 2003).

Weaknesses

1. Negligible revenue opportunities

2. Obsolete products (CAPA, 2014).

3. Falling revenues and profits

4. Heavy reliance on passenger revenues

5. Southwest has too many contractual obligations (DataMonitor, 2010).

Reasons for Strength

Financial means

In the second quarter of 2014 the Southwest reported its 5th straight quarter of record breaking profits. Its dependable profitability as well as its strong balance sheet have won Southwest Airlines the enviable status of being the only U.S. airline to attain an investment grade status up until early 2014 when Alaska Air Group also achieved that status.

The firm managed to sustain profitability throughout the 2008-2009 economic recession, and it recorded a $754 million profit in CY2013 that was the highest since the end of the financial downturn.

Additionally, the firm…