SOUTHWEST AIRLINESSouthwest Airlines

Introduction

Southwest Airlines has been a strong growth company over the last 35 years and is one of the companies listed in the fortune 500 list. Using its low-cost, passenger friendly, point-to-point operational strategy, Southwest has been able to sustain considerable growth year after year and remain profitable for 33 straight years. Southwest Airlines now has a market capitalization of $14 billion and is positioned as one of the strongest airlines in the struggling airlines industry. (Strauss, 2010)

Over the last five years as many airlines have reported record losses and five of the ten largest airlines have filed for bankruptcy, Southwest has been able to remain profitable and continue to grow. While Southwest has gained market share in recent years, legacy carriers have struggled due to depressed market conditions. The entire airline industry has endured expensive labor contracts, soaring energy costs and reduced consumer demand. Southwest has continued to grow in the harsh airline industry because it's no frills business model focuses on controlling costs. Southwest targets routes with high consumer demand and the advanced experience of Southwest's personnel allow southwest to quickly turnaround aircraft and keep their planes in the air more hours per day than its rivals. Though the airline industry appears to be on the mends, Southwest has firmly positioned itself as a price leader and a strong market force with the lowest CASM of any airline. (Strauss, 2010)

Buyer Power

Consumers currently have considerable buyer power over the airline industry. The economic recession beginning in 2000 and the terrorist attacks of Sept. 11, 2001 had a significant negative impact on consumer demand. From their high in 2000, revenue passenger-miles (RPM) have decreased dramatically and though they have rallied recently they remain at a suppressed level [Revenue passenger-miles are an industry measure for consumer demand which is calculated ...