Southwest Airlines
1. I. Executive Summary
Southwest Airlines began operations in 1971, with the companys initial service taking
place between Dallas, Texas, Houston, and San Antonio, Texas. Southwest Airlines
Company is a domestic airline that provides primarily short-haul, high-frequency,
point-point, low-fare service to 53 airports in 52 cities in26 states throughout the United
States.Southwest focuses on point-to-point service, providing more direct nonstop routes
for short-haul customers and, therefore, minimizing connections, delays and total trip time.
Rollin King and Herb Kelleher started the company with a simple mission focused on
being different than other airlines; their chief focus was to provide on time flights at a low
cost, along with a bit of fun. As Welch (2005) argued, Southwest Airlines was the worlds
richest and most profitable airline, illustrating the success the company.
Southwest grew steadily, by 1975 it had operations in eight cities in Texas, and by 1980, It
was attractive to customers that wanted frequent departures and low prices. Southwest
allowing the airline to grow more quickly than estimated.As airfare continued to fall,
passenger traffic increased drastically, but its competitors were losing money. Within 28
years, Southwest Airlines had become the fifth largest major airline in the United
States.Southwest flies to 56 airports in 56 cities, carrying more than 52 million passengers
a year.
1. II. Situational Analysis
1. A. Environment
2. 1. Economic conditions and trends
Typically, airline companies and aircraft manufacturers are more prone to swings in
revenue and equity market prices due to the release of economic indicators. Consumers
tend to reduce travel if personal economic conditions are suboptimal, forcing airlines to cut
capacity and production. Indicators such as unemployment indices, personal income, and
even home sales affect airline industries in exaggerated fashion.
1. 2. Cultural and social values and trends
In an industry plagued with struggles to make profits and to keep employees and
customers happy, Southwest Airlines has been profitable for an industry-record 33
continuous years. It enjoys a total market value that exceeds that of the other Fortune 500
airlines combined.
1. Political and legal issue
Kelleher believed that by providing intrastate service within Texas, the airline could avoid
federal regulation. Three incumbent airlines initiated legal action which was not resolved
for three years. Air Southwest prevailed in 1970 when the Texas Supreme Court upheld Air
Southwest’s right to fly within Texas. The Texas Supreme Courts decision became final on
December 7, 1970, when the U.S. Supreme Court declined to review the case without
