Southwest Airlines Co. is one of the largest airlines in the United States and the largest low-cost airline in the world. It is headquartered in Dallas, Texas, and flies scheduled service to 121 destinations in the United States and ten other countries. In 2018, Southwest carried more domestic passengers than any other U.S. airline.
Let us look into the Overview of Southwest Airlines and then we can move on to the SWOT Analysis of Southwest Airlines and Southwest Airlines Competitors.
Overview of Southwest Airlines
The airline was founded on March 15, 1967, by Herb Kelleher and Rollin King as Air Southwest Co. and adopted its current name, Southwest Airlines Co., in 1971, when it began operations as a domestic carrier exclusively within the state of Texas, initially flying between Dallas, Houston and San Antonio. In 1979, it began interstate regional service and expanded statewide in the following decades. Southwest currently flies to airports in 42 states and several Central American destinations.
Southwest’s business model differs from other U.S. airlines because it uses a rolling hub and point-to-point network and allows free checked baggage. The fleet consists entirely of Boeing 737 aircraft.
The airline employs nearly 60,000 people and offers about 4,000 daily departures during the peak travel season.
SWOT Analysis Of Southwest Airlines
The SWOT Analysis of Southwest Airlines includes its strengths, weaknesses, opportunities, and threats. And in this reading of the SWOT Analysis of Southwest Airlines, we will examine this beauty and wellness company in terms of its internal and external factors.
S Stands For Strengths ( Internal Factor )
- LUV Culture: Making every customer feel like part of the family is an effective way to build customer loyalty. With its warm LUV culture, the airline has mastered the art of welcoming customers into the Southwest family.
- Lower costs: One of the reasons for Southwest Airlines’ large number of loyal customers is its low-cost flights. Passengers can book tickets as low as $45 for a one-way flight through the airline’s Low Fare Calendar.
- Best Employer: Southwest Airlines is consistently ranked as one of the best employers in America. According to the latest Forbes ranking, Southwest Airlines was the No. 2 best employer in America in 2019.
- World’s Most Admired Company: In 2019, Fortune ranked Southwest Airlines as the 11th most admired company in the world.
- Continuously profitable: The primary purpose of entrepreneurial activity is to generate high profits continuously. They promote growth by allowing companies to accumulate capital for expansion, research, and development. In 2019, Southwest Airlines recorded 47 consecutive years of profits. Considering that the airline industry is fiercely competitive, that’s a great accomplishment.
- Brand Value: Southwest Airlines is the world’s fourth most valuable airline brand, with a brand value of $6.6 billion.
- Single aircraft type (Boeing 737): Since its inception, Southwest Airlines has exclusively used Boeing 737s for all its flight operations. As of December 2019, Southwest Airlines has 747 Boeing 737 aircraft. Using a single aircraft type has proven to be an effective and cost-efficient strategy for Southwest Airlines. It allows for simplified training (pilots, staff, and ground crew), maintenance, flight planning, flight operations, and effective aircraft utilization.
- Effective service strategy: Southwest Airlines offers direct nonstop flights as part of its point-to-point service, which reduces lost time.
- High capacity: Airline capacity is measured in terms of available seat miles (ASM). A higher ASM means more seats for more miles, which positively impacts profits. From 2011 to 2019, Southwest Airlines’ ASM increased from 120.58 billion to 157.25 billion, making it one of the few national airlines with ridiculously high capacity.
- Effective management: From financial management to human resource management, effective management from the top to middle levels increases stability and boosts the growth rate. Southwest Airlines’ management is considered one of the best in the industry and the airline’s great strength.
- Market Share-Dominance: Being a dominant player is especially advantageous in industries influenced by intense lobbyings, such as airlines. Dominant companies can use their connections, superiority, and resources to successfully lobby for the passage of legislation that furthers their goals.From February 2019 to January 2020, Southwest Airlines ranked 3rd with a U.S. domestic market share of 16.8%, followed by American (17.6%) and Delta (17.5%).
- Thousands of flights: The more an airline flies, the more revenue it can generate. During peak travel season, Southwest operates over 4,000 flights per day. With this large number of flights, Southwest Airlines is undeniably a force to be reckoned with in the airline industry.
W Stands For Weaknesses ( Internal Factor )
- Lack of diversification: Over-reliance on a single source of revenue exposes a company to catastrophic losses in the event of uncertainty or economic turmoil in that sector. In the fiscal year 2019, Southwest Airlines reported total revenue of $22.4 billion, of which passenger traffic accounted for $20.7 billion, or 93% of total income, while cargo revenue was $172 million, or less than 1%.
Passenger revenue (airline tickets): $20.77 billion (~93% of total revenue), Other revenue (loyalty points): $1.48 billion (~6% of total revenue), Cargo revenue (freight and mail): $172 million (~1% of total revenue)
Southwest Airlines should diversify its revenue sources. Any issues that hinder tourism or travel during uncertain times can be disastrous for the airline.
- Dependent on the U.S. market: Southwest Airlines does not offer international flights and ultimately depends on the U.S. domestic market (except for some tropical resort islands in Mexico, Central America, and the Caribbean).”You should not put all your eggs in one basket.” Southwest may lose its profitability and sustainability if the U.S. market suddenly dries up.Over-reliance on Boeing 737 aircraft: Since its inception, Southwest Airlines has been solely dependent on Boeing 737s. On March 13, 2019, the Federal Aviation Administration (FAA) ordered all aircraft from MAX grounded following two fatal accidents. Southwest Airlines owns 31 Boeing 737 Max out of its total fleet of 747 aircraft.
The grounding of Boeing 737 MAX aircraft has resulted in lost revenue as fewer aircraft are being used; this highlights the issue of reliance on only one aircraft model.
O Stands For Opportunities ( External Factor )
- Global expansion: Southwest Airlines recently expanded its local flights to Hawaii. They may continue to grow to serve increasing air traffic in emerging markets due to globalization and improved financial conditions.For starters, South America offers an unsaturated market and maybe a perfect springboard for Southwest’s global expansion.
- Improved booking process: In 2019, Southwest launched PayPal and Apple Pay on its website, mobile app, and in-flight WiFi purchase page. This is an excellent opportunity to expand e-payment options for its customers.
- Expanding cargo business: Southwest Airlines can expand its cargo business to tap into the ever-growing global logistics market with a market size of $6 trillion in 2019.
- Exploit new technologies: The ever-growing number of use cases for the Internet allows Southwest Airlines to market its services directly to a broad audience. In addition, the airline can leverage emerging technology trends, such as biometric boarding kiosks, to speed up the security process
- Offer long-haul flights: The market for long-haul flights is overgrowing as more Millennials enter the workforce and dare to work and live farther from home than previous generations. Southwest Airlines can expand from short-haul to long-haul flights to take advantage of the growing demand.
T Stands For Threats ( External Factor )
- Global recession: From Southeast Asia to Europe, Africa, Americas to Australia, economies worldwide are nosediving into economic turmoil due to uncertain times. With record unemployment in the U.S. and the threat of recession, Southwest’s operations are also at risk.
- Problems with the Boeing 737 Max: Boeing’s Max aircraft are critical to Southwest Airlines’ growth plans and modernization initiatives. The Boeing 737 Max aircraft’s grounding significantly impacts Southwest Airlines’ operations, as its fleet consists primarily of this aircraft model.If the situation continues, the airline may suffer the following consequences: Loss of revenue due to cancelations 1. Negative impact on customer choice of airline 2. Negative publicityA U.S. government report revealed that the airline flew aircraft without confirmed maintenance protocols for over two years and exposed over 17 million passengers to a safety risk.
- Intense competition: From Jet Blue to Delta, American, Spirit, United, and Alaska, Southwest Airlines faces stiff competition from other carriers in the U.S. airline industry.In addition, Southwest Airlines considers the airline industry, cars, buses, and trains as other forms of competition.In times of economic downturn, customers limit their discretionary spending and opt for lower-cost surface transportation alternatives.
- Fuel price increases: Airline profitability and sustainability are highly dependent on fuel prices. Increased fuel prices could threaten Southwest’s profitability and sustainability due to higher operating costs. Airline operating costs in the Swot analysis of Southwest Airlines
- Incidents of Terrorism: The airline industry has struggled with the decline in leisure travel due to the September 11, 2001, terrorist attack. Any terrorist attack in the future could have devastating consequences not only for Southwest Airlines but also for the entire industry and economy.
- Stringent regulations: From FAA inspections to regulatory compliance, Southwest Airlines’ operations can be jeopardized by stringent regulations in the airline industry. For example, the government recently announced that it would take action against the airline’s decision to fly 49 used aircraft purchased from foreign airlines without proper inspection.
- Uncertain times (economic shock): These uncertain times have highlighted the vulnerability of the aviation sector. Aircraft have been grounded, and demand for air travel is at an all-time low, resulting in millions of dollars in losses.In March 2019, Southwest warned investors that first-quarter revenue is expected to fall by $200 million to $300 million. If the situation continues, Southwest’s profitability and sustainability may be more severely impacted.
SWOT Analysis Of Southwest Airlines Key Takeaways
The SWOT Analysis of Southwest Airlines highlights where the brand currently stands and its threats in this era. Following the detailed SWOT Analysis of Southwest Airlines Here are a Few Important Key Points.
- Senior in the Industry
- Huge line of Products
- Strong Brand Image & Social Media Presence
Suggestion By Business Mavericks
- Need to focus on other markets too instead of highly deepening on US Market.
Southwest Airlines STP & USP
STP: Southwest Airlines is a low-cost airline that offers point-to-point service. The airline has a strong presence in the southwestern United States, with a focus on leisure travel.
Southwest Airlines does not use a hub-and-spoke model like other airlines, which means that its passengers can avoid the hassle and expense of connecting flights. The airline also offers a variety of amenities, such as free checked bags and in-flight entertainment.
Southwest Airlines USP: Southwest Airlines is known for its low fares, friendly customer service, and its unique business model. The airline has a very efficient operations system, which allows it to offer low fares and excellent customer service.
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Southwest Airlines Competitors
1. American Airlines [NASDAQ: AAL] is an American international airline headquartered in Fort Worth, Texas. It began operations in 1936 and is the largest airline by fleet size, with over 881 aircraft, according to Statista. American Airlines is also one of the largest airlines in the world in terms of the number of passenger miles flown on scheduled flights.
As of October 2021, the company had a market capitalization of $13.137 billion and a 2020 PE ratio of -1.03. American Airlines incorporates cross-selling tactics into its overall marketing strategy. It ensures maximum benefits and an immersive experience for its customers. These efforts enable the company to maintain a competitive advantage and provide quality service.
In July 2021, American Airlines announced its second-quarter results. They reported operating revenues of $7.5 billion, an 87 percent increase over the first quarter of 2021. In 2020, American Airlines had the most significant domestic market share at 19.3 percent, followed by Southwest Airlines at 17.4 percent. The company offers an average of 6700 flights daily to more than 350 destinations in 50 countries.
Southwest Airlines’ competitive advantage lies in its extensive global route network and significant business and corporate customers in its major markets. Southwest must maintain a competitive advantage to counter the threat of American Airlines’ strength in global markets by expanding its domestic route network and introducing strategically priced international flights.
2. Delta Airlines, Inc [NYSE: DAL] is an American airline headquartered in Atlanta, Georgia. The company became an airline in 1928 and began crop dusting in the Great Mississippi Delta. It operates a fleet of 750 aircraft in all commercial segments and has a market capitalization of $27.862 billion.
The price-to-earnings ( P/E) ratio for 2020 was -4.5, but it is projected to grow at 62.02% by the end of 2021. Delta Airlines, Inc. is no stranger to competition; it is one of the most competitive companies in U.S. commercial aviation. In 2020, it controlled 15.5% of the domestic air travel market, ranking third behind American Airlines and Southwest Airlines.
Delta promotes vertical integration to differentiate itself from the competition, meaning it controls every aspect of its business, from production to service. This allows the company to keep the upper hand on customers by offering lower fares and a better user experience. The company also buys used aircraft and is committed to low unionization of workers.
Delta Airlines released its July quarter financials, showing total revenue of $7.1 billion and adjusted operating profit of $6.3 billion. The reports show liquidity of $17.8 billion, which includes undrawn revolving credit facilities, cash equivalents, and short-term investments.
3. United Airlines, Inc [NYSE: UAL] is a major U.S. airline holding company headquartered in Chicago, Illinois. It began operations in March 1931 and currently operates a fleet of 849 aircraft. As of October 2021, it had a market capitalization of $16.074 billion and a 2020 PE ratio of -1.8
United Airlines follows a mass-market business model that targets all market segments without specific differentiation. Nevertheless, it offers options for price-sensitive customers with its Basic Economy fares.
United Airlines flies to 111 international destinations in 74 countries and 79 domestic destinations in the United States. United Airlines also has partnership agreements with airlines in Asia, Europe, and Latin America. In July 2021, United Airlines released its second quarter 2021 results and reported total revenue of $5.5 billion, a 25 percent decrease from 2019. The airline said a net loss of $0.4 billion with available liquidity of approximately $23 billion.
United Airlines’ competitive advantage over Southwest is its large fleet of aircraft and international flights. Its focus on promoting environmentally friendly travel also makes United Airlines a strong competitor. The company’s commitment to innovation by promoting a digitized travel experience makes it likely to be the next major airline.
4. Spirit Airlines, Inc. [NASDAQ: SAVE] is an American ultra-low-cost carrier (ULCC) headquartered in Miramar, Florida. Founded in 1983 as Charter One, a Michigan-based charter airline, the company changed its name to Spirit Airlines in 1996 and became a low-cost airline.
It currently operates a fleet of 168 Airbus aircraft. As of October 2021, it had a market capitalization of $2.803 billion and a 2020 P/E ratio of -3.05. The company competes for market share in U.S. domestic air travel with a customer-centric approach that emphasizes low fares, flexibility, and quick turnaround. The company also factors in additional costs for customizable itinerary changes and carry-on baggage.
In 2020, Spirit Airlines controlled 5.8 percent of the domestic air travel market. The company reported operating revenues of $859.3 million and adjusted net income of $36.3 million in its second quarter 2021 reports.
How Southwest Airlines sets itself apart from its competitors
Southwest Airlines maintains its position as one of the leading low-cost carriers. The company’s competitive advantage stems from its low-cost business model, superior customer service, and first-mover advantage among low-cost carriers.
Despite its strong position, the company focuses on hiring the right people, creating a relaxed atmosphere, and committing to its core values to strengthen its market position. The company is not only an industry leader but also competes on reputation.
Its flexible policies make flying with Southwest Airlines convenient and allow customers to travel without hidden fees. Passengers can cancel their flight up to 10 minutes before departure without incurring costs. This customer-friendly policy sets the company apart from its competitors.
Southwest Airlines’ commitment to the environment through eco-friendly practices also contributes to the company’s value proposition. The website
FAQs For Southwest Airlines Competitor Analysis
- Question: Who are Southwest Airlines’ main competitors? Answer: Southwest Airlines’ main competitors include Delta Airlines, American Airlines, JetBlue Airways, Alaska Airlines, and United Airlines. Others include Frontier Airlines, Spirit Airlines, and Sun Country.
- Question: How does Southwest Airlines compete? Answer: Southwest Airlines has a low-cost business model with an open seating policy that is unique among airlines. The company’s agility provides the opportunity to take advantage of emerging opportunities in niche markets. Southwest Airlines is also improving its customer service by hiring the right people and offering benefits to its employees.
- Question: Why is Southwest Airlines more successful than its competitors? Answer: Southwest Airlines differentiates itself from its competitors through its low-cost business model, superior customer service, and first-mover advantage among low-cost carriers. The company features a high degree of flexibility that allows customers to travel without the inconvenience of hidden fees. In addition, the company positions itself as an industry leader by capitalizing on emerging opportunities, such as its strong digital customer service strategy and environmentally friendly practices.
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