SOUTHWEST AIRLINES

Southwest Airlines

Southwest Airlines

Introduction

Southwest Airlines is one of the largest airlines measured by the passengers carried every year in the United States. The airline is also known discount airline, in comparison with its competitors. Southwest was founded by Rollin King and Herb Kelleher in 1971. The first operation of airline was Dallas to Houston and San Antonio with simple operating structure. The airline started with a simple strategy; which was to provide the customers airline service with very affordable rates as compare to other airlines. Southwest's excellent human resource and people management is the key behind the success. The mission of Southwest is based on the excellence of customer satisfaction and superior quality service (Surhone, 2011, pp. 10). There is a strong commitment by the airline to ensure good working atmosphere to its employees. There is an encouragement of innovation and creativity to be more effective. There is an overall caring attitude in the organization which is the reason behind the Southwest success and growth.

Industry

Southwest airlines belong to the airlines industry (domestic). The Domestic Airlines industry has experienced its share of ups and downs in the five years to 2013. The industry was flying high until 2008 as solid income growth and the weak US dollar increased demand for travel within the United States. However, major negative influences affected the industry, including skyrocketing oil prices, the recession, the global economic downturn in 2009 and the swine flu outbreak. Demand and revenue began to improve in 2010, as the economy began to recover and consumers and business customers loosened their pocketbooks and traveled more. Over the five years to 2013, industry revenue will grow at an estimated annualized rate of 0.7% to $164.6 billion, including a 5.3% jump in 2013 (Mertens, 2012, pp. 53).

The industry is cyclical and sensitive to a number of factors, including corporate profit and the number of domestic and international travelers. Poor economic conditions over 2008 and 2009 reduced demand for business travel, particularly from the financial sector, which experienced high-profile bankruptcies and government bailouts. The total number of domestic trips taken by US residents was down in 2009, as households cut back on discretionary spending (Muduli, 2011, pp. 115).

While international tourism has been a solid source of demand for travel across the United States in the past, a global slowdown in 2009 reduced the number of inbound tourists during the year. To make matters worse, an outbreak of the swine flu scared people away from air travel as their first option of transportation. To attract business, operators cut prices significantly. Industry revenue declined 16.8% in 2009, with prices and demand sloping downward. The number of inbound tourist visits has since rebounded.

External Analysis

Corporate profit

Business customers account for a significant portion of domestic flying. Companies tend to pay for travel when business activity is strong and profit is high. When corporate profit is down, demand for air travel also declines; likewise, when it increases, demand improves. Corporate profit is expected to increase during 2013, ...