...Happy Flier: A Financial Analysis on Southwest Airlines Thomas J. Baucus FIN 200 12/20/2014 Executive Summary The purpose of this report is an in-depth analysis on the financial position of Southwest Airlines Co. (LUV). As it stands, Southwest Airlines is a big player in the Regional Airline Industry due to the company’s focus on efficiency and consumer support. The company is prepared to handle the conditions cause by the decline in the economic cycle due to a conservative approach. Southwest Airline’s financial statements and ratios indicate a large increase in operations and profitability in the last three years. However, recent financing activities indicate an increase in current liabilities, PPE and a decrease in long-term debt. Analysts are worried that the company’s market price is inflated and are recommending the company less because of this. Despite these worries, Southwest Airlines is projected to be profitable in the upcoming years. This report is organized as so: the title page, the executive summary, the introduction, the current financial climate, financial statement and ratio analysis, short and long-term financing, risk management, and at last, the conclusion. A page containing my references used is available at the end of the report. Introduction Southwest Airlines Co. (LUV) is a leader in the regional airlines industry. Yahoo Finance states that “as of December 31, 2012, the company operated 694 aircraft… (and)... served 97 destinations...
Words: 1876 - Pages: 8
...TO MANAGEMENT Semester 2, AY2011/2012 Individual Report A Report on Southwest Airlines Prepared for: Mr. Balasubramanian Shankar Due date: Monday, 5th October 2015 Submitted by: Jiyeon | CT00000000 | TABLE OF CONTENTS 1. INTRODUCTION 2 2. COMPANY BACKGROUND 3 3. PESTEL ANALYSIS 4 3.1 Political 4 3.2 Economic 4 3.3 Social 5 3.4 Technological 5 3.5 Environment 5 3.6 Legal 6 4. PORTER’S FIVE FORCES ANALYSIS 7 4.1 Threat of New Entry 7 4.2 Threat of Substitution 7 4.3 Buyer Power 7 4.4 Supplier Power 8 4.5 Competitive Rivalry 9 5. STRATEGIC RECOMMENDATIONS 10 5.1 Managing Technology Advancements 10 5.2 Maintain Cost Advantage 10 5.3 Geographical Expansion 10 5.4 Product Diversification 11 6. CONCLUSION 12 7. REFERENCES 14 1. INTRODUCTION The focus company in this report is Southwest Airlines (SA), a major low cost carrier in the United States (US). The aim of this report is to examine the current market environment and competitive power of Southwest Airlines. In order to have a substantial overview of its environment, two analyses, the PESTEL analysis and Porter’s Five Forces analysis, will be used to evaluate SA. With the findings, strategic recommendations will be made for the problems that the airline is facing or may encounter in the near future. 2. COMPANY BACKGROUND Southwest Airlines is a budget airline established in 1967 by Rollin King and Herb Kelleher and had its first flight...
Words: 3086 - Pages: 13
...The Airline Industry: A Strategic Overview of Southwest Airlines Terra Thompson Ohio Dominican University Running head: SOUTHWEST AIRLINES 1 The Airline Industry: A Strategic Overview of Southwest Airlines Terra Thompson Ohio Dominican University SOUTHWEST AIRLINES The Airline Industry: A Strategic Overview of Southwest Airlines Table of Contents 2 The History of Southwest Airlines ................................................................................................. 3 Target Market and Business Model ................................................................................................ 3 Current Product............................................................................................................................... 4 Southwest’s Culture ........................................................................................................................ 5 Mission Statement .......................................................................................................................... 5 Mission and Corporate Culture....................................................................................................... 6 Employees and the Mission ............................................................................................................ 7 The Importance of the Mission Statement and Corporate Vision................................................... 7 Strategic Analysis .................
Words: 6158 - Pages: 25
...Strategic Management Case Analysis: Southwest Airlines Southwest Airlines Co. (Southwest) is often cited as a success story in terms of strategic management. Southwest is a passenger airline that provides scheduled air transportation in the United States. Primarily, the company offers passengers low-fare, point-to-point air transport services in 72 cities in 37 states all throughout America (MarketLine, 2012). Southwest is headquartered in Dallas, Texas, and has about 45,392 employees as of FY2011. For FY2011, the company generated revenues of $15.658 billion, increasing by 29.4% over FY2010 (MarketLine, 2012). Southwest reported net profit of $178 million in FY2011. It must be noted that the airline industry is famed for its cut-throat competitiveness. However, since its inception in 1971, Southwest has been able to steadily rise to the top of airline rankings due to its Low Cost Leadership strategy (Muduli & Kaura, 2011); Box & Byus, 2009). Southwest also consistently offers on-time arrival that, combined with low-priced fares, makes it highly favorable for passengers. Southwest is able to achieve its strategy by using a linear, point-to-point network and does not have an airport hub (Tierney & Kuby, 2008). As a result, the company’s aircraft are seldom idle while its competitors spend prolonged idle time while passengers switch planes at the hub (Tierney & Kuby, 2008). Because of the impact of this strategy on passengers and the industry as a whole, competitors tend to...
Words: 811 - Pages: 4
...WEEK 9 Jonathan Jackson Dr. Daniel Terfassa 9/11/2015 FIN 534 Introduction Southwest Airlines was founded in 1971 by Herb Kelleher and Rolling king. The company started its services for San Antonio, Dallas and Houston. In the mid-1980s, the company was first to offer the frequent miles program. This program allowed travelers to bank traveled air miles to be used latter credit for a reduced airfare or free ticket. It was the first airline company to offer senior discounts, fun packs and fun fans. From 1981 to 1984, the company continuously received the top ranking of number 1. By 1998 Southwest Airlines had become 5th largest US air carrier, caring more than 50 million passengers per year servicing the Southwest and Northwest and other primary locations all across the United States. In 1987, the company took over TranStar Airlines and Morris Air in 1994. This gave Southwest Airlines a stronger edge in the market. Originally the company was incorporated for serving three cities in Texas as Air Southwest on March 15, 1967, by Herb Kelleher and Rollin King. The airline experienced a great history of success, it adopted the first profit sharing plan in the US airline industry 1971. Employees own almost 10% of the company stock through this plan and others as well the company is almost 87 percent unionized. The pilots are represented by the pilot association of Southwest Airlines which is a union separate from the much larger Air Line Pilots Association. Rationale...
Words: 3083 - Pages: 13
...School of Management Coursework hand-in sheet Student name(s) | % | | % | Naomi Wai | 20% | Chukwudubem Joseph Onochie | 20% | Nevena Rakovska | 20% | Anish Rai | 20% | Warren Cannon | 20% | | | For group work – individual % contributions need to be stated only where they are not equal. Department (e.g. Management): School of Management | Programme and Year of Study: Accounting and Finance, Y3 | Name of lecturer: Dr. Sarah Park | Unit title and code (eg MN20010): MN30449 | Number of pages in assignment:17Word count: 2845 | Declaration I/we certify that I/we have read and understood the entry in the relevant Student Handbook for the School of Management on Cheating and Plagiarism and that all material in this assignment is my/our own work, except where I/we have indicated with appropriate references. I/we agree that, in line with Regulation 15.3(e), if requested I/we will submit an electronic copy of this work for submission to a Plagiarism Detection Service for quality assurance purposes. I/we also confirm that the percentage allocation of work is as shown above. Student Signature(s) | | | | | | | If assessment is group based, all members of the group must sign this form When to hand in You should aim to hand your work in before the deadline given by your lecturer/ tutor. The University guidelines on penalties...
Words: 4250 - Pages: 17
...research and understand how the changes of globalization and technology have impacted the Airline industry. This paper will also apply the industrial organization model and the resource-based model to determine how the Airline industry earn above-average returns. This paper will explain how the Airline industry’s success is through its mission and vision statements with Southwest Airlines as an example. Finally, this paper will evaluate how the importance each category of the stakeholder impacts are to the overall success of the Airline industry. Globalization and Technology In today’s business industry, the globalization process has become an important aspect and fundamental force. The elements that contribute to globalization is the environment, culture, regulation and technology and production. While the advancements globalization has increased greatly, so has the advancements in airline industry with their aircraft (Shevell, 1999). Globalization also provides a great amount of potential profits to nations and their corporations (Button, 2008). Air transportation has evolved into a major industry (Kroo, 1999). The airline industry’s continuously grows and is facilitated through its international investment, tourism, world trade and economic growth (Kroo, 1999). According to Siliang Yang, due to the advancements of technology, airlines have been able to increase its distribution of tickets by e-commerce and the internet (Yang...
Words: 1359 - Pages: 6
...Company Analysis Project – Final Paper – Southwest Airlines Charles M Mohr MBA 6008 – Global Economic Environment Capella University Doctor Halstead February 19, 2016 Abstract The aircraft carrier business contends in an oligopoly showcase. This implies just a few of airline companies control the significant bit of the business. Southwest Airlines is one of these organizations. They make up 16.6% of the business sector, second only to Delta. The motivation behind this paper is to talk about the microeconomic and macroeconomic situations that Southwest Airlines faces every day. The Airline Deregulation Act that was passed in 1978 was a huge impact on the aviation industry. There are administrative contemplations on financial choices, for example, group clamor and air quality. Southwest Airlines has moral (ethical) contemplations that should be tended to at whatever time financial choices are made. This paper additionally touches on the monetary hypotheses and models, including the Bertrand Model that Southwest Airlines ought to audit and consider for future accomplishment of the organization. Southwest Airlines must take after the Sustainability Accounting Standard for Airlines for all their bookkeeping purposes. Table of Contents Abstract 2 Microeconomic Environment 5 Macroeconomic Environment 8 Economic Implications 10 Regulatory Considerations on Economic Decisions 11 Ethical Considerations on Economic Decisions 13 Economic Theories and Models 14 ...
Words: 3947 - Pages: 16
...organization is strategic planning. To develop a successful plan would require the organization to have a comprehensive understanding of their current environment. Environmental scanning is used to establish the focus of the strategic plan. To conduct an environmental scan external and internal information should be evaluated. A SWOT analysis will focus on the strengths, weaknesses, threats, and opportunities. We will discuss the most signification environmental threats for Southwest Airlines. There are many environmental factors that could influence the performance of the company, Southwest Airlines, which provides low-cost air travel and service. This student will discuss two environmental threats pertaining to Southwest Airlines. Two environmental factors that have a major impact on how businesses operate are: economic factors and regulations. September 11, 2001 terrorist attack on the World Trade Center was a moment in history that effected Nation and the U.S. economy. Most importantly the airline industry was threatened by the aftermath of the economy. “The events of September 11 have had some of their worst economic effects on the airline industry, leading to a dramatic fall-off in passenger demand and substantially higher costs” (Gowrisankaran, 2002). After the attack in 2001 the Transportation Security Administration (TSA) within the Department of Homeland Security were given the safety and security regulation responsibilities (Smith Jr. & Cox, 2008)....
Words: 1860 - Pages: 8
...MARKETING TERM PAPER FOR [pic] AIRLINES: A MODEL OF EXCELLENCE IN THE CIVIL AVIATION INDUSTRY Table of Contents 1.0 INTRODUCTION 3 1.1 Company Background 3 1.2 Research Topic 5 2.0 ENVIRONMENTAL ANALYSIS 6 2.1 Political, Economic, Social and Technological Analysis 6 2.2 Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis 7 2.3 Summary 9 3.0 SEGMENTATION, TARGET AND POSITIONING (STP) 10 4.0 PRODUCT, PRICE, PLACE AND PROMOTION (4Ps) 11 5.0 CONCLUSION 12 6.0 REFERENCES 13 6.1 ANNEX I 14 INTRODUCTION The Airline Industry has experienced global economic and ecological turmoil in the past two decades. This turmoil has brought to the fore the challenges being faced by the Aviation Industry in the world which have, in most cases, led to decreased profitability, lower growth rates, safety concerns and employee lay-offs among others. However, in-spite of the above mentioned challenges in the industry, Southwest Airlines has emerged as one of the most creative, most price competitive, safe, innovative and flexible company in the industry. The company has overcome unsurmountable challenges to become what is perceived today as a successful model of excellence in the industry with an extraordinary safety record in the last 40 years. In its forty-three years of service, the Dallas-based Airline continues to differentiate itself from other carriers with exemplary customer service delivered...
Words: 3971 - Pages: 16
...Behavior Consumer Behavior: Contrast Jet Blue vs. Southwest Airlines Trident University MKT501 CS1 Identify key external factors that affect the passenger airline industry and explain how that impact occurs There are several external factors that affect the passenger airline industry. Some of the factors that affect the industry are economic crisis, instability in aviation fuel price, and environmental factors. I will elaborate more in detail in the following paragraphs on these factors. The first area I want to talk about is our countries current Economic Crisis, and in my opinion drives all the other factors that affect airline industry’s the most. The current economic situation is not good and therefore will have an effect on what a customer will or will not do. Air travel is very expensive as it is, in my opinion, so a sluggish economy will add more pressure on an individual or family thinking of flying anywhere. The second area that affects the airline industry is the cost of aviation fuel. If fuel prices are high, the airline will have to charge more for tickets. As I mentioned earlier, higher ticket prices is not what the public wants in our current economy. The airline industry is a business and in order to make money and continue to provide the service, the company has a breakeven price, approximately 66% of their operating cost (Airline Economics Break Even Load Factors Paragraph). If the company doesn’t break- even...
Words: 2861 - Pages: 12
...Southwest Airlines SWOT Analysis Beresford Doherty February 16, 2009 The Mission Statement 1 The mission statement of Southwest Airlines declares that it is "dedicated to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit." And to its employees, Southwest Airlines pledges a commitment "to provide our Employees a stable work environment with equal opportunity to learn and for personal growth. Creativity and innovation are encouraged for improving the effectiveness of Southwest Airlines. Above all, Employees will be provided the same concern, respect, and caring attitude with the organization that they are expected to share externally with every Southwest Customer" [1]. Southwest Airlines is a principal supplier of air transportation in the United States for the conveyance of passengers for business and leisure purposes. In accordance with its mission statement, Southwest Airlines has recognized the importance of customer service and has trained its employees to conform, in accordance with responsible awareness of their customers and their needs. Southwest Airlines Co is arguable the most efficient, best performing domestic airline in the United States today. Based on 3 criteria’s from the Federal Aviation Administration (FAA) they are the enforcement of regulations and standards related to the manufacture, operation, certification and maintenance of aircraft. Southwest...
Words: 3130 - Pages: 13
...Southwest Airlines Case Study By Andrea Kirkland In 1995 top executive Dave Ridley vice president of marketing and sales sat down with the other executives for their regular Tuesday meeting to discuss and converse with each other on responsibility, coordination pricing and marketing activities that were both internal and external. These meeting helped to encourage communication amongst these varies department heads. An incessant topic over the last six months has been Continental Airlines and United Airlines competitive programs Continental Lite and Shuttle by United. Each is designed to cut into the Southwest’s strategic marketing plan. In early January of 1995 Continental Airlines endeavor to encroach on Southwest’s market resulted in operational issues financial loss causing the airline to scale back their plan of attack. United Airlines had actually launched their “Shuttle by United” program in October of the previous year. At the time they were already offering fourteen routes in California and by January of 1995 they had on neighboring states. Over half of these routes put them in direct competition with Southwest. It became clear the only threat to Southwest was United Airlines by copying the Southwest blueprint. This became the new focus of the meeting. A few key actors play a factor in what Southwest needs to consider in order to stay number one in their field. The actors identified in this case study are: (1) Economic (2) Technology (3) Service (4)...
Words: 798 - Pages: 4
...Southwest Airlines Co. Analysis * Introduction and Mission Southwest Airlines Co. is a major U.S airline and the world's largest low-cost carrier. It was established in 1967 and adopted its current name in 1971. The airline operates more than 3,400 flights per day and has more than 46,000 employees as of August 2012. In 2013, Southwest Airlines has scheduled service to 84 destinations in 41 states and Puerto Rico. In 2012, Southwest Airlines was the market share leader in domestic air travel in the United States; it transported more passengers from U.S airports to U.S destinations than any other airline, and it offered more regularly scheduled domestic flights than any other airlines. For the 40th consecutive year, the Company was profitable, earning $421 million in net income. The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit. The mission statement has always regulated the way the company conducts their business. The company mission statement also highlights their desire to serve customers better and it provides them with direction when they have to make certain service-related decisions. The company mission statement is also another way of saying, "We always try to do the right thing!" According to the U.S. Department of Transportation, Southwest Airlines has the best cumulative consumer satisfaction record. * Market Share These three...
Words: 1804 - Pages: 8
...How Do Certain Economic Factors Affect Stock Prices? Introduction For our analysis, we chose to examine how different economic factors such as GDP, CPI, and unemployment affect stock prices. More specifically, we analyzed how these economic factors affected the stock prices of three different companies during the period from 2000-2009. The three companies that we chose were Exxon Mobil, Tiffany & Co, and Southwest Airlines. We chose those particular companies because each one offers products or services that represent a different degree on the price elasticity of demand spectrum. Exxon Mobil represents a company that offers a good which is inelastic. This means that no matter what economic conditions are present in the market, the quantity demand for this product is going to stay constant since consumers feel they cannot live without it. On the other hand, Tiffany & Co. represents a company that sells products which are elastic. This means that consumers will choose to buy their products depending on the conditions present in the market. Southwest Airlines represents a company that offers a service which can be viewed as both inelastic and elastic depending on the type of travel being studied. For business travelers who are required to fly for their jobs, the service that Southwest Airlines provides is inelastic since they generally have no choice in whether they fly or not. On the other hand, there are travelers who view flights...
Words: 2061 - Pages: 9
