Question

Please analyze Southwest Airlines, identify the reasons why the company has been successful in the unattractive industry, and predict its future. You need to research the company, using a variety of reliable sources such as books, journal articles, library database, trustworthy news media, credible Web sources, etc. After collecting relevant information, you need to evaluate and draw conclusions based on deductive reasoning. Your response should include the following segments:

1. Operational overview of Southwest Airlines. Why is the company so successful?
2. Current economic condition of the airline industry. How would this affect Southwest Airlines?
3. Current operational issues or challenges within Southwest Airlines. How can Southwest Airlines take on the issues or challenges?
4. Trends for the future within the operational segment. How can Southwest Airlines remain competitive in the future?

To effectively address the above questions, you are expected to write an evaluation essay (with the headings preferred) using deductive reasoning. Here are a few tips:

• The purpose of an evaluation essay is to present an opinion or viewpoint on a subject or body of work. The writer should firstly provide a summary of the article in question, then present a point-of-view supported with clear examples and evidence, using a thorough, well-structured argument so that the evaluation seems reasoned and unbiased.
• Deductive reasoning starts with a general principle and deduces that it applies to a specific case. Deductive reasoning moves with exacting precision from the assumed truth of a set of premises to a conclusion which cannot be false if those premises are true. Explain the deductive reasoning process applied to analyze the firm’s performance.

Answer 1

Southwest Airlines is one of the leading low-cost airlines in America having it's headquarters at Dallas, Texas. The airlines is one of the most successful airlines in the United States. In the recent years, the company has received an great response for it's expansion goals. In an era where a lot of airlines finding it difficult to stay afloat, it is impressive that Southwest Airlines has maintained its reputation and financial performance.

There are various reasons for it's success-

Instead of flying different types of aircraft, Southwest flies just one plane type, the Boeing 737 . That saves it millions of dollars in maintenance costs—spare-parts inventories, mechanic training and other issues. It also gives the airline unique flexibility to move its 527 aircraft throughout the route network without any costly disruptions.

In the case of Southwest, most of its flying is nonstop between two locations. That minimizes the idle time for planes on the ground at crowded, delay-prone hubs and allows the aircraft to be in the air for more than an hour longer each day than a similarly jet flown by a competitor. Southwest's avoid-the-hubs strategy has a very positive effect on it's on-time operations. It's on time average is above the industry average.

Southwest believes in simple in flight service. There is just one class of service, a coach cabin, slightly more spacious than those of competitors. There are no assigned seats. Instead of meals, only beverages and snacks are offered. This strategy allows Southwest to unload a flight, clean the plane and then restock it, and board another flight with passengers in as little as 20 minutes.

Southwest has kept its fare structure streamlined and transparent. The airline only sells one-way fares and that too in a few price buckets. That keeps costs down, complex fares are expensive to manage, it also convinces fliers that they are getting a decent value for their money deal. Prices are all-inclusive which doesn't include fuel surcharges, doesn't charge for standby travel or ticket changes and continues to permit travelers to check two pieces of luggage free. All seats on every flight is almost identical, hence flyers know what they will get when they buy a ticket.

Management structure of the company is lean, but strong and, most importantly, productive. The top executives of Southwest generated 10 times more revenue per dollar of compensation than did similar executives at some of the other network carriers. The management style is very disciplined.

Even though more than 80 percent of the workforce is affiliated to the union, Southwest has never had a strike. Although the competition has reduced salaries and benefits,of it's workforce, Southwest employees are generally the highest paid in the industry. Southwest has about 30 percent fewer employees per aircraft than its network competitors, and it emphasises on keeping them happy.

The airline's aggressive fuel-hedging program has saved it billions of dollars. Due to this it pays less for fuel than its competitors.

Due to this, Southwest has comfortably survived every airline-industry downturn, then grown rapidly and profited hugely when the business cycle turns.

Current economic condition of the airline industry-

They are mostly familiar and persistent reasons like cyclical nature of business, slowing down of global economy, uncertainty of fuel prices, technology, Environment, and slow pace of liberalization.

Also deregulation of air traffic market in the current world economic scenario has removed the administrative hurdles for airlines in some of the markets and enabled all airlines to strive for new markets. With intention to conquer a big portion of the market, the low-cost carriers like Southwest came into direct conflict with traditional carriers, trying to capture part of the market as well, especially in the segment of regional and middle-route traffic. Using the factors like disproportionately high prices of air tickets of traditional carriers and reduced paying capacity of passengers in times of economic crisis, Southwest tried to change market conditions and offered the passengers a service adjusted to their needs at much lower prices.

Inspire of it's relatively successful business model, Southwest like other carriers too faces it's own share of challenges which it is trying to overcome

The challenges currently facing Southwest Airlines are-

Competition is a big challenge that Southwest Airlines is facing mostly from carriers like Delta Air Lines, American Airlines, and United Airlines who are aggressive competitors. This affects business expansion in markets where these competitors are present. On the other hand, regulatory changes in commercial aviation is also a threat that imposes challenges and associated costs in compliance efforts. Southwest Airlines also faces the challenge of volatile fuel prices. This factor is important because airlines depend on fuel, which account for major operating costs. Southwest Airlines corporate social responsibility strategy helps address this threat. Furthermore, the company faces the challenge of limited pilot staff that is inadequate to support the airline's future needs.

To emphasise more on expansion, currently, the airlines provides services to only sixty three cities which mean there is an opportunity for tremendous expansion. The problem here is that its competitors have learnt all the tactics that Southwest uses and they are also using them to get more customers. Although southwest has always used the tactic to remain on top in the market, this might work against it because its competitors are using faster growth means for competition. Many cities have requested Southwest airlines to start operation in their areas due to the good services they offer. However, if it does not provide the same, some other carrier will take it's place.

There are other smaller challenges like effect of terrorism of airline travel, new government regulations, annual increase in security costs, tense labor negotiations that were earlier plaguing competitors are now being faced by Southwest, this has already created problems in the otherwise favorable employee culture of the airlines.

Nonetheless, the company still has the potential to grow through new strategies to exploit opportunities in the global civil aviation market, such as business expansion and the establishment of new partnerships. It should consider innovative strategies for long-term business success. Hence it is advisable that the company expand its operations to various other air travel markets. Doing this will address Southwest’s potential revenue and profit growth through international expansion. Another is to develop new alliances with other airlines or complementary non-airline businesses, as a way to increase the company’s reach in the global market.