Internal Analysis and SWOT Analysis of Southwest Airlines

Internal Analysis and SWOT Analysis of Southwest Airlines

Thesis Statement

“The paper focuses on the internal analysis and SWOT analysis of Southwest Airlines.”

Introduction

Southwest Airlines is the largest local Airlines of United States that mainly offers facility of point-to-point and inexpensive fare services. This Airlines operates only in United States and it's headquarter is in Dallas, Texas. Southwest Airlines Company was established in 1967 and it holds more than 34,000 employees. It offers more than 3300 flights a day. The mission of Southwest Airlines is to provide highest quality of customer service at lowest price. JetBlue, Continental Airlines and AMR Corporation are the top competitors of Southwest Airlines. Therefore, they offer lowest competitive prices for customers. (Ranson, Lori, 2011)Southwest Airlines has served almost 1.5 million customers since its inception.

Discussion

The resource based view of Southwest Airlines depends mainly on the low fare of their flights which has created a competitive advantage in the airline industry. The lower cost of fuel and labor has helped them in maintaining their position in the market. both the strategies of Southwest of lower fare and highest quality of customer service had not been imitated by many other airlines this shows their strength. Southwest Airline's non-stop flight service at lowest fare is considered as its brand equity due to its unmatched service positioning in the airline industry. It is not possible for any other airline to go for that much cost cutting and still earn good revenues.

The overall corporate strategy of Southwest Airlines is based on the following four internal operations pillars.

Operational Costs and Efficiency

Employee/Labor Relations

Customer Service

TechnologyOperational Costs and Efficiency

Southwest Airlines has lower cost beside strongest balance sheet in the entire airline industry. The two biggest operating costs for an airline are the fuel costs and labor costs. Southwest is having approximately 40% labor cost and approximatly18% fuel cost. This low cost is due to their effective operational strategy i.e. flying point-to-point routes, maintaining high aircraft utilization, e-ticketing facility, consistent aircrafts etc.

Labor Costs

Although, the labor costs of Southwest airlines is low but its labor productivity is high. A southwest airline is the “most heavily unionized” US airline almost 81% of its employees belongs to a union and it is paying above average salary rates as compared to the US airline industry. It offers flexible work rules for its employees and it encourages cross-utilization culture.

Fuel Costs

The second largest expense for an airline after labor is fuel. If this cost is effectively managed it can give great edge to an organizational objective. Southwest Airline is using the hedge approach to overcome the increasing fuel expenses. (Bailey, 2007)

Point-to-Point Service

Point-to-point flight service used by Southwest airlines is maximizing its operational efficiency and cost effectiveness. Almost, all of its flights have short hauls ranging about 590 miles. They follow capacity utilization principle as their flights are more often found in the air. (Ford et.al. 2001)

Consistent aircraft

Southwest Airlines owns a consistent fleet of aircrafts, which are Boeing 737 jet planes. Its training expenses for pilots, technicians ...