Southwest Airlines

1
Southwest Airlines

• Emily Farr
• Tyler Green
• Nicole Veth
• Keigha St Clare

Business 499 Capstone May 8, 2007
2
Table of Contents

• Tyler
• Facts Flight Method
• Porters 5 Forces
• Looking Into The Future
• Nicole
• Mission Statement Timeline
• Industry Life Cycle
• Financial Stability
• Emily
• In The Beginning
• Value Chain
• RBV
• Resources capabilities
• Competitive advantage
• VRIO
• Keigha
• Leadership SW cities
• P.E.S.T.E.L

3
In The Beginning
As company legend goes,
the very first route map
was drawn on
a cocktail napkin during
a meeting between
Herb Kelleher and Rollin King.
http//www.southwest.com/programs_services/adopt/a
bout_southwest.html
4
http//www.southwest.com/about_swa/customer_servic
e_commitment/customer_service_commitment.pdf
5
Timeline

• June 18, 1971
• Began airline service
• Flights to Houston, Dallas, and San Antonio
• 1977
• SW stock listed on NYSE as "LUV"
• 1982
• Appointed Herbert D. Kelleher
• President, CEO, Chairman of the Board
• 1984
• 1 in customer satisfaction (4th year in a row)
• 1990
• announce billion dollar revenue mark
• Officially declared a "Major" airline!
• May 2003
• Top ranked domestic passenger airliner
• 2006
• Southwests 34th consecutive year of profitability

http//www.southwest.com/about_swa/airborne.html
6
Facts / Milestones

• Low-fare, high frequency
• Point-to-point carrier
• Largest domestic U.S. carrier
• 4th largest major airline in America
• More than 34,000 Employees
• Fly more than 64 mil. passengers a year
• 58 destination cities (59 airports)
• More than 3,200 flights a day
• Top competitors
• AMR Corp.
• Continental Airlines
• JetBlue

http//www.swabiz.com/about_swa/press/factsheet.ht
mlLeadership
7
Flight Method
Few amenities / no frills

• No assigned seats
• No meals
• Only snacks peanuts
• No electronic entertainment
• No fees to change same-fare tickets

• "point to point" (city to city)
• NOT hub-and-spoke model
• Domestic flights only
• Quantity focused
• Flies only Boeing-737 aircrafts

http//ostpxweb.ost.dot.gov/aviation/airlinebusine
ssmodel.htm
8
Leadership / Structure
http//gallery.swamedia.com/photos/valueopen/type
jpg
9
Map SW Cities / Destinations
10

• POLITICAL
• Deregulation in 1978
• 1st big political win for airlines
• Post 9/11
• Gov. helped 2 major airlines get out of
  financial trouble

• ECONOMIC
• When economic conditions are unfavorable
• - Airliners very susceptible / vulnerable
• - Discount airlines see profits
• - People look for cheaper travel options

11
P.E.S.T.E.L

• SOCIAL
• Flying on planes to get to where you need to be
  has been the norm for the last 30 years and will
  continue to be the norm in to the foreseeable
  future.
• As more and more Spanish speakers come to live
  and travel in the US there is more need for
  airlines to be bi-lingual.

• TECHNOLOGICAL
• Some airlines have converted to e-tickets, and
  have a self checking machine.
• Many people use the internet to compare prices to
  find the best option for their trip.

12
P.E.S.T.E.L

• ENVIRONMENTAL
• Airlines have cut prices and offered expensive
  frequent flyer programs just to grab customers
  away from other airlines.
• The regular airlines are starting to get away
  from the hub system and switch to the point to
  point system that SW uses.

• LEGAL
• Legal issues have hindered airlines from making a
  full 9/11 recovery.
• According to the Air Transportation Association
• Airlines constitute about 2/3 of FAA-controlled
  flights but pay more than 90 of the bill. In
  return, the airlines are stuck using a 1950s
  ground-based, radar-dependent navigation system
  with legacy facilities and processes.

13
Porters 5 Forces

• High cost of entry
• High competition
• Many other forms of transportation
• Many other airlines
• Suppliers
• Food and drink
• Coke products
• Fuel Sources

14
Industry Life Cycle

• Customer Knowledge
• Increasingly sophisticated
• Over 50 ticket price in 25 years
• Expenses
• Drastic compression of airline yield premium
• Exploring new ways to revenue
• Labor and fuel (largest costs)
• The first mover effect
• Security
• Carriers assets, personnel assets and customers
  interest
• Regulations enforced by government
• Anticipating, managing, paying
• Innovation will be key!

15
Resources Capabilities
TANGIBLE Financial Physical Technological Organiz
ational INTANGIBLE Human Innovation Reputation
http//www.mdcegypt.com/Pages/Management20Approac
hes/Strategy,20Business20Plan/Develop20or20val
idate20the20Strategic20Plan.aspii._Value_Chain
_Analysis_
16
Value Chain Model
www.web.hec.gov.pk/.../0/chp_value_chain.jpg
17
V.R.I.O.
18
Financial Ratios
Short Term Liquidity
Long Term Solvency
19
Financial Ratios Cont.
Profitability
Dividend Market Price
20
Financial Stability

• Southwest Financial Statements

21
In The News

• Airlines are constantly in search of new revenue
  sources. Travelers have gotten used to paying for
  food on board. But it's going to be harder to
  adjust to fees for services that used to be
  free.
• Chris McGinnis
• The Ticket editor (travel newsletter)

http//biz.yahoo.com/hmoney/070430/043007_airline_
fees_moneymag.html?.v4
22
Future Plan

• Follow-up system
• Entire meal served
• Seat classes
• Differentiate strategies
• Other services (shuttle)
• Consider amenity change
• Expand internationally?
• Penetrate more domestically

GO GREEN!
23

• Questions? Comments?