The moment you started reading this, more than 10 Southwest flights have landed and flown to the sky, serving thousands of people each hour. With consistency and the goal of providing affordable pricing, the company has become one of the largest, favorite, and go-to airlines for thousands of Americans.
It took them four decades to reach where they are now, and in that way, their strengths helped them while weaknesses and threats tried to bring them down. But, by utilizing and capturing opportunities, the company has survived this far, and we will get to know more in this Southwest Airlines swot analysis.
Southwest Airlines: Company Overview
| Company | Southwest Airlines Co. |
| Industry | Airline |
| Founded | 9 March, 1967 |
| Founder | Herb Kelleher, Rollin King |
| President & CEO | Bob Jordan |
| Headquarter | Dallas, Texas, U.S. |
| No. of Employees | 66,100+ |
| Annual Revenue | $15.790 billion (FY 2021) |
| Website | southwest.com |
With just three aircraft serving three cities in Texas, Southwest founded in 1967 by Herb Kelleher and Rollin King and began operating in 1971. And now, the company is the world’s largest operator of the Boeing 737, with a fleet of over 700 aircraft.
The company reported total revenue of $23.8 B, with over 66,656 employees, and operates flights to 121 destinations in the United States, Mexico, and the Caribbean. Southwest Airlines aims to provide high-quality air travel at an affordable price, focusing on customer satisfaction and operational efficiency.
Product & Services of Southwest Airlines
Passenger Airline
Southwest Airlines Competitors
American Airlines | Delta Air Lines | United Airlines | JetBlue | Virgin America | US Airways Group | AirTran Holdings | Continental Airlines
Did You Know?
The company has around 3K flights daily, which goes through the roof with about 5K during peak seasons.
Strengths – Southwest Airlines SWOT Analysis
High Brand Value: Focusing on low fares, friendly customer service, and unique company culture has helped build a strong brand that resonates with customers. In 2022, the airline’s brand value was estimated at $7.3 B, a massive increase from the previous year and ranking as the world’s 4th most valuable airline brand.
Economical Pricing: By offering low fares for its flights compared to its competitors, Southwest Airlines has made a name for its economical pricing strategy. Southwest’s average domestic fare was $142 in 2022, lower than the average $397 for all U.S. airlines, which helped Southwest to remain a popular choice for budget-conscious travelers.
Steady Finance: The airline reported revenue of $23.8 B and a net income of $723 M in 2022. And the data shows this stable performance in the last few years, which is why it has maintained a positive cash flow, with $$11.049 B in operating cash flow, and the balance sheet remains strong.
Effective Customer Service: With a focus on providing passengers with a positive and friendly experience, Southwest Airlines is known for its excellent customer service. According to the various customer satisfaction Indexes, Southwest Airlines had a customer satisfaction score of 77 out of 100 in 2022, the second highest in the US airline industry.
Operational Excellence: The airline’s point-to-point system and efficient turnaround times have contributed to its success in providing customers with reliable and affordable air travel. According to the J.D. Power North America Airline Satisfaction Study, the airline ranked first in economy class with the lowest customer complaint rate.
Weaknesses – Southwest Airlines SWOT Analysis
Unbalanced Revenue: The company is highly dependent on a single segment for revenue, the passenger, which covered over 80% of the total revenue in the last eight years. Besides, its niche-based offerings and focus on economical pricing have made it almost impossible for the company to keep a balanced revenue stream.
Single Market Overdependency: Southwest generated over 90% of its revenue from domestic operations in the USA, making it vulnerable to domestic economic and consumer behavior changes. It creates an overdependency on the market, limits the airline’s growth opportunities, and increases its exposure to domestic financial risks.
Lower International Options: Most of Southwest’s flights are domestic, with limited international destinations, making it hard to target a mass market. As a result, the overdependency on a single market, unbalanced revenue, and various threats and weaknesses are taking away many opportunities for the company.
Weak Supply Chain: Southwest Airlines has recently faced some supply chain challenges, particularly concerning its maintenance operations. The Federal Aviation Administration fined the company $325,000 for improperly maintained Boeing 737 aircraft, and recently, in 2022, the company had a severe SCM meltdown.
Lack of Offerings: The company has emphasized its commitment to providing affordable and reliable air travel, which comes at a cost. Because of that, the airline does not offer first-class seating, and its aircraft doesn’t have in-flight entertainment systems.
Opportunities – Southwest Airlines SWOT Analysis
Multidomestic Strategy: As mentioned, international flights accounted for approximately 7.7% of Southwest airline’s total revenue in 2022, so there are opportunities to expand internationally to more countries, focusing on a multi-domestic strategy. Finding new international routes and starting with them would be an excellent start.
Tech Adaptation: In recent years, the tech has disrupted and efficiently brought operational excellence and better customer experience. The company can implement self-service kiosks, mobile boarding passes, and other digital tools to streamline check-in and reduce customer wait times, and launching a new reservation system is part of the process.
Diversify Offerings: One opportunity for Southwest Airlines to continue to grow and expand its business is to diversify its offerings. As only a limited number of service offerings are available in the portfolio, the company can offer new services with different price sets. That will help to bring new consumer bases and increase revenue.
Sustainability Practices: To become a part of the sustainability practitioners, the company can recognize the importance of environmental responsibility and social impact. The airline has set a goal to reach carbon neutrality by 2050. It has implemented several initiatives, such as investing in more fuel-efficient aircraft and using sustainable aviation fuel.
Effective Partnerships: To expand the company’s reach and offer new services to customers, it has always tried to bring in new partnerships. The airline announced a partnership with Expedia in 2021. And recently, in 2022, the company partnered with a giant like Amazon to give the consumer a better experience.
Threats – Southwest Airlines SWOT Analysis
Competitive Market: Southwest Airlines faces intense competition in the U.S. airline industry with giant competitors such as Delta Air Lines, Spirit Airlines, American Airlines, and Frontier Airlines, etc. It had a market share of 17.1%, behind American Airlines (17.6%%), and a similar market share with Delta Air Lines (17.1%) in 2022.
Rising Fuel Price: Fuel is one of the most significant expenses for airlines, and rising prices can lead to increased operating costs and lower profitability. In 2022, the airline’s fuel costs were up 85% compared to 2021 and still increasing, a significant threat to Southwest Airlines.
Economic Downfall: Inflations and recessions or downturns can lead to decreased demand for air travel, as it did during the pandemic or 2008 recession, impacting Southwest Airlines’ revenue and profitability. As inflation already affects the airlines, the recession will make it difficult for Southwest Airlines to keep a stable cash flow in 2023.
Strict Regulations: Changes in government regulations or policies can significantly impact Southwest Airlines. The FAA grounded the Boeing 737 MAX aircraft following two fatal crashes, which affected Southwest Airlines’ operations in 2019. The grounding resulted in the cancellation of thousands of flights and negatively impacted the airline’s revenue.
Labor Shortage: As the recession hit the economy, many industries are on a streak of letting go of labor, which also impacted the airline industry. In December 2022, the company had to cancel 60% of the flights, a total of 2600 flights, because of labor shortage, including pilots to field workers, including staff in the headquarters.
[Bonus Infographic] SWOT Analysis of Southwest Airlines
Recommendations for Southwest Airlines
Every company has to overcome all its weaknesses and mitigate threats to survive in the market long-term, and Southwest is no different. Here are some recommendations for them.
- Expanding its international offerings could help the company reach new customers, increase its revenue, reduce one market dependency, and balance the revenue stream.
- The company should continue to invest in employee retention and satisfaction.
- Exploring new partnerships and offerings that could help it to reach new customers.
- Adapting new techs will make the overall operations more effective and efficient.
- Practicing sustainability will create a positive impact on the consumer.
Frequently Asked Questions (FAQs)
Is Southwest a Budget Airline?
Yes, Southwest is a budget airline.
Is Southwest an International Airline?
Yes, Southwest is an international airline.
Final Words on Southwest Airlines SWOT Analysis
Southwest Airlines is a significant player in the aviation industry, known for its commitment to affordable and reliable air travel. The company’s focus on operational efficiency and employee satisfaction has helped it to maintain low costs and a unique company culture that sets it apart from its competitors. While Southwest Airlines faces threats such as competitive pressure, regulations, rising fuel price, and a labor shortage, it has a track record of adapting and innovating to maintain its success.
References
- Wikipedia contributors. (n.d.). Southwest Airlines. Wikipedia.
- Second Quarter 2022 Average Air Fare Increases 22% from Second Quarter 2021. (2022, October 18). Bureau of Transportation Statistics.
- O’Marah, K. (2022, December 30). Southwest Airlines Meltdown: A Supply Chain Management Perspective. Forbes.
- Banker, S. (2022, May 2). Southwest Airlines’ Flight Path To Carbon Neutrality. Forbes.
- Gabriele, A. (2023, March 9). Southwest Airlines Partners With Amazon After the Colossal Mess That Was Late 2022. InsideHook.
- Pande, P. (2022, April 24). How Rising Jet Fuel Prices Will Hurt Airlines and Travelers. Simple Flying.
- Kulisch, E. (2022, June 1). Airline industry economist sees recession risk in 2023. FreightWaves.
- Isidore, C. (2020, January 23). The 737 Max grounding cost Southwest $828 million in 2019. CNN.
- Zilber, A. (2022, December 29). Southwest scrambles to fill key staff shortages with HQ workers, memo reveals. New York Post.
