Southwest Airline in 2014 Harvard Case Solution & Analysis

Southwest Airline in 2014 Case Solution

OVERVIEW AND BACKGROUND

The company, Southwest Airlines, by servicing a wide number of passengers all over the world, has succeeded in achieving the position of market leader of domestic travel in the US. This airline is also considered as the discount airline as it is the most affordable source for most passengers as compared to the rivals present in the market.

 The profitability of the company is evident from its past history of consistent profit from the year 1973. Southwest Airlines came into existence in the airline industry with the help of the founders, Mr. Rollin King and Mr. Herb Kelleher on June 18, 1971.

 This approach has been the key success factor for the Southwest Airline Company. Currently, Southwest serves about numerous cities with 108 million total passengers carried (in 2013) and with a total operating revenue of $17.6 billion. Southwest is traded publicly under the symbol “LUV” on NYSE.The symbol LUV reflects the fun loving attitude of the management towards its employees.

The company proved to be the first major airline to fly a single type of aircraft which later proved to be Southwest’s strategy in creating as well as sustaining low-cost operations. The company with the prime focus towards its employees was the first major airline to introduce a profit-sharing program for its employees as well as it was the first to develop an online booking system for its passengers by creating its website.

 Almost about 74% of the company’s revenue came from the online sales in 2009 whereas, the result shows an increasing trend in the year 2013 which shows that 80% of all the bookings by passengers is made online. The online booking costs only $1 for the passengers whereas, the booking made through the own internal system reservation cost about $3 to $4 and its cost about $15 if purchased through the travel agents or the professional travel partners.

Despite being a profitable company, the company faces some issues related to the serving of the international passengers, increased competition in the airline industry, issues related to the environmental concerns and difficulty in reducing its labor cost and stock growth despite operating for so many years.

PROBLEM STATEMENT

Despite the consistent profitability situation of the company since 1973, there are some issues and challenges that the company is facing which are identified below:

The company is currently using the outdated information system for its operations which cannot help them serve the international clients for travelling purpose, nor can it tackle complex ticketing mechanisms. The company is not achieving the advantages related to the economies of scale which the other competitors are enjoying due to the increased mergers and acquisitions due to the restriction on the air line consolidation and foreign investment.

The company is missing its large customer segments that are willing to pay top dollar for a full service air travel. Due to the increased fuel cost and issues regarding the environmental concerns that can cause severe impact on the passenger due to high emission and noise pollution, the company is required to play efficiently to overcome such economic concerns which also includes the high taxes, fees and other government mandated cost..................

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