Southwest Airlines SWOT and PESTLE Analysis

Strength

1. Good profitability, revenue growth and a strong brand image: For the 47th consecutive year, southwest was profitable, earning $2.3 billion net income for the year 2019. Operating revenues rose to a record $22.48 billion in FY19. It had an impressive 83.5% load factor, which is an indication of the percentage of seats filled. The year 2020 was an exception due to the severe impact of pandemic which saw the trend broken with Southwest registering a net loss of $3.1 billion with operating revenues at just $9.0 billion. However once impact of pandemic subsides the company is expected to be on track again. Thus, Southwest has a legacy of strong profits year on year and also growth in revenues. This indicates the good overall profitability of the airline. Moreover, the strong brand image that the airline has built over the years has built great customer loyalty as well. It is one of the major airlines who pioneered ticketless travelling and the only airlines in the United States to offer bags-fly-free service (first 2 checked pieces of luggage with size and weight limits applicable) to everyone, no change fess, although differences in fares might be applicable.

As launch Customer of the Boeing 737 MAX 8 in North America, Southwest Airlines boasts of the largest fleet in the world of Boeing aircraft, all of which are equipped with satellite-based WiFi. Passengers using the WiFi network through personal devices are permitted to engage in on-demand content streaming i.e view movies and television shows, as well as nearly 20 channels of free, live TV.

2. A robust network and highest domestic market share: Southwest Airlines has effectively implemented the model of point-to-point network of connecting destinations as compared to the hub and spoke network of other airlines. As of January 2020, it serves 720 nonstop city pairs, serving 101 destinations with 747 aircraft in its fleet. As per records of the U.S. Department of Transportation (the “DoT”), "Southwest was the largest domestic air carrier in the United States, as measured by the number of domestic passengers boarding it”. In 2019, Southwest Airlines was the leading airline in the U.S., with a domestic market share of just over 20 percent. This indicates a very successful network connecting destinations that has indeed contributed to its industry leading market share in a highly competitive market. In spite of it being a low-cost no-frills airline, it persistently wins the passenger-satisfaction awards year after year. Southwest flies 4000 flights on weekdays to about 100 locales in America and 10 additional countries during surges in peak travel period.

3. Lowest operating cost in the airline industry: Southwest has operating costs which are lowest in the industry. It has the world’s largest Boeing fleet of any airline. Southwest is able to achieve this distinction by being able to keep costs low. They have done this by including a single aircraft type, the Boeing 737, in their fleet. Similar operations requirements for the fleet ensures operating an efficient point-to-point route structure, ongoing work, reduced fuel consumption, and highly productive employees as there is no variation in the maintenance of the fleet. The low-cost structure is one of the competitive advantages, as it has enabled southwest to offer low fares, drive traffic volume, and grow market share year on and also lead the industry in the segment.

Weakness

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Opportunity

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Threat

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Political

1. Political interference and control: Domestic operations of Southwest airlines are controlled by The Federal Aviation Administration (FAA). In 1979 ‘Wright Amendment’ promulgated by the USA government, restricted Southwest Airlines to fly non-stop or provide through-plane service from Dallas Love Field to any other than 7 designated cities. This impacted business for almost over 26 years and the law was repealed only recently in 2014. Southwest wanted to fly all between states from Love Field Airport which was quite close to downtown Dallas. Apprehensions over Southwest to acquire larger market share prompted rivals to conspire with Fort Worth Congressman Jim Wright and block inter province flights from Love Field Airport. Southwest fought against this injustice and finally arrived at an understanding with the courts which is known as Love Field Compromise. It enabled Southwest to operate from Love Field airport non-stop flights cities in and around Texas viz. Louisiana. Arkansas. Oklahoma. and New Mexico, but at the same time the jurisprudence restricted South West to publish agendas or menus or look into luggage of any airlines flying from Love Field.

Economic

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Social

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Technological

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Legal

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Environmental

1. Regulations by the Government and respective changes: The company is subject to various federal laws and regulations relating to the protection of the environment, including the Clean Air Act, the Resource Conservation and Recovery Act, the Clean Water Act, the Safe Drinking Water Act, and the Comprehensive Environmental Response, Compensation and Liability Act, as well as state and local laws and regulations. The airlines deals with drinking water supplied on the aircraft, emissions, storm water release, aircraft decibel levels, disposal of materials such as jet fuel, chemicals, hazardous substances, and aircraft deicing fluid from its daily operations. Southwest uses a lot of new technologically advanced components to minimize adverse effects on the environment. In order to minimize the release of these into the environment it has installed “blended winglets” to reduce drag and enhance fuel efficiency. It also uses electric ground power for aircraft air and power support, auto throttle and fuel efficient initiatives.