Introduction
Southwest Airlines prides itself on keeping the flight fares as low as possible. Over the course of its history, Southwest Airlines was able to adopt numerous policies that brought the company its rightful place as the leader of the airline industry (Reed, 2021). However, there are obstacles in the company’s path that can prevent it from following the chosen strategy. This essay analyzes strengths, weaknesses, opportunities, and threats posed to Southwest Airlines and provides a set of recommendations for the company that can help it keep its current course.
SWOT Analysis
Southwest Airlines operates in a highly competitive environment for many years and remains profitable by utilizing its strengths. However, recent market shocks and declining revenue push the company towards exploring new possibilities. There are many weaknesses that can be eliminated via newly opened opportunities, such as increased demand in e-commerce among customers. Recognition of threats will be a vital step for Southwest on this route, as the pressure from outside forces forms the market.
Table 1. SWOT Analysis.
In the airline industry, there are many threats that are outside of the company’s grasp. Many costs associated with flights are fixed, depend on external sources, or vary greatly depending on the competitors’ moves (Inkpen, 2017). Federal and global regulations also shape the environment. In the past, increased fuel costs were negated by a federal tax overhaul, allowing the company to provide its services with no additional fares (Jansen, 2018). However, this is not a permanent solution, and the environmental regulations that aim to make the air travel industry more sustainable will continue to push these prices further up.
Southwest exhibits a high level of influence in the airline industry and remains one of the top low-cost flight providers. However, as its competitors close down, it has to recognize the need to work towards necessary changes actively. Southwest Airlines also has a high brand value that makes it possible to diversify its portfolio relatively quickly (“Proven business strategy,” n.d.). Moreover, the company was able to consistently bring the fares down through constant innovations in the optimization of its processes. It is traceable in one of the highest load factors among U.S. flight providers (Inkpen, 2017). One of the significant controversial points is the company’s relationship with Boeing 737. While it allows more accessible pilot training and plane maintenance, it gives Boeing considerable bargaining power and reduces options that limit the customer base.
Recommendations
It is possible to link opportunities and strengths with existing weaknesses and strengths to improve the company’s standing on the market. As it can be seen from SWOT analysis, Southwest Airlines heavily relies on Boeing 737. Moreover, the company was unable to successfully incorporate any new type of planes into its fleet, leaving Airbus A220 for another 10-year deal with Boeing (Unnikrishnan, 2021). Other types of partnerships, such as deals with foreign or cargo carrier providers, can increase the company’s standing on the market by covering several of its weaknesses.
Another issue with the lack of diversification is that Southwest is limited in its customer base. The company is keen on keeping its fares low and does not consider adding any fees that are typical to the industry (Jansen, 2018). However, there are issues that stem from this notion that can be resolved by adding new options for passengers that are willing to pay for comfort. Online ticket purchases can also be improved and become more accessible.
Conclusion
In conclusion, despite a significant and continuous success on the market, Southwest Airlines is not infallible as a company. There are many threats that have the potential to hinder the company’s growth, and their number continues to increase. As was addressed, the firm must focus on exploring new opportunities, such as new regional markets or different customer bases, to compensate for instabilities in the domestic environment. Moreover, close links to Boeing can be detrimental to Southwest’s future. The overall situation signals the need for the company to explore new partnership opportunities and expand the diversity of its services.
References
Inkpen, A. (2017). Southwest Airlines. Thunderbird: School of Global Management.
Jansen, B. (2018). Southwest says fares are down despite rising fuel costs. USA TODAY. Web.
Proven business strategy. (n.d.). Southwest Airlines. Web.
Reed, D. (2021). Happy 50th birthday, Southwest Airlines. Here’s to doing things very differently—And succeeding. Forbes. Web.
Unnikrishnan, M. (2021). Southwest Airlines reports a profit courtesy of U.S. taxpayers. Skift. Web.