Article: Southwest Airlines Case Analysis

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[. . .] This is the strength of the company and something that the other carriers, with the exception of Jet Blue which was set up the same way as Southwest, have not been able to match.

Financial Analysis

Recently, Southwest Airlines has been in the red for the first time in company history. Even as other airlines were folding, Southwest was able to maintain a profit because of its no frills approach. However, the financial crisis finally produced the first non-profitable years Southwest had ever seen. Despite that, the company has tried to grow revenue by doing the opposite of what every other carrier does, namely no bag fees and even more low cost flights, which has increased the number of people per flight even while numbers of flight needed decreased. This action has allowed the airline to regain some of its lost revenue. The company remains financially sound because it has maintained its reputation with the public.

SWOT Analysis

A SWOT Analysis look at the strengths, weaknesses, opportunities and threats to a company. The primary strength of Southwest Airlines is that it has remained true to its low cost roots. A weakness that has been recently noticed due to the inspection failures of many older planes in the Southwest fleet, is the fact that Southwest has not maintained its fleet as it should. The opportunity for Southwest is to publicize the upgrades it is making to its fleet and to its maintenance procedures to regain the confidence of its customers. The threat is that the competition will take this opportunity to further degrade Southwest in the customer's eyes.

Identification of strategic Issues

The key issues for the company are the problems that it has had since the announcement was made that it had not maintained its faultless maintenance record, and the financial downturn has exacerbated this financial issue. Maintenance issues are very worrying to people who are trusting an airlines equipment as they fly. Because of passenger discomfort with the news that has emerged, Southwest has lost significant revenue over the past year. The main issue is that maintenance people were either nit well-trained or that they did not follow the prescribed maintenance schedule. Another issue is with the loss of revenues due to the financial downturn.

The key issue is the fact that FAA guidelines for maintenance on the older planes in the fleet was not followed. The fact that the airline was fined for the oversight is not the biggest issue. The larger concern is the loss of revenue incurred by the airline because people have lost confidence in Southwest Airlines. Previous to this problem, the airline had built a reputation that has made it the top U.S.-based carrier. However, this loss of reputation has a direct effect on where people will spend their travel money. Customers are more concerned with reaching their destination safely than saving a few dollars on the flight.

Strategic Alternatives & Recommended Action

There are several courses of action that the airline can take, but the need for an immediate solution is critical. The first possibility is to retire old airplanes and replace them with newer models. This action would show the public that Southwest Airlines takes the safety of its passengers very seriously, and that they realize that the maintenance issue were so serious that they needed to do complete upgrades to the fleet. Whereas this would demonstrate and extreme level of concern, this option could be detrimental if the public believes that Southwest should have made this change prior to the degradation of its fleet. It is also a very expensive alternative which could take years to pay back. Another possibility, is to implement new, tougher maintenance schedules which would ensure that this issue never happened again. The people who were responsible could be reprimanded and the new maintenance schedules could show timelines that were far in advance of the FAA timeline guidelines for preventative maintenance protocols.

The best option is the second one. First of all it is an immediate fix that does not cost the company a great deal of money. The change to maintenance schedules and double checking that the maintenance was done will help the public gain its confidence back. It is also possible to develop the new schedules with the people in place in the department already, so there is no need to outsource the issue. All planes that are deemed too old can be scrapped and new ones ordered. Also, the company can look at upgrading its fleet a little more quickly than it had originally planned.

Reference

Thompson, A.A., Strickland, A.J., & Gamble, J.E. (2011). Crafting and executing strategy: Concepts and cases. New York: McGraw-Hill/Irwin. [END OF PREVIEW]

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Southwest Airlines Case Analysis.  (2012, July 26).  Retrieved March 24, 2019, from https://www.essaytown.com/subjects/paper/southwest-airlines-case-analysis/3929487

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"Southwest Airlines Case Analysis."  Essaytown.com.  July 26, 2012.  Accessed March 24, 2019.
https://www.essaytown.com/subjects/paper/southwest-airlines-case-analysis/3929487.