Southwest Airlines is the largest low-cost company in the United States and the world regarding the number of passengers carried. Founded in 1971, the company rapidly gained momentum as it entered the international market. Despite the legal difficulties at a certain period, now, the company performs more than 4 thousand flights a day and is the second most crucial company among all of them. Among the company’s features are a rolling hub and a two-point network, enhancing passenger comfort and making it easier to get to the plane. Southwest Airlines is traded on the New York Stock Exchange and is part of the DJTA and S&P 500 (Southwest Airlines, 2021). Despite its high importance to air travel, the company experienced a crisis in 2019-2020 due to COVID-19 (Macrotrends, 2021). The company has a unique structure and remains in demand in the industry.
History of the Company
On March 15, 1967, the airline was incorporated as Air Southwest Co. but did not begin operating as an in-state company until 1971 in Texas. At the same time as Southwest Airlines, several other companies tried to enter the market and worked hard to destroy someone else’s credibility (Southwest Media, 2019). The airline won the lawsuit and, in 1979, expanded its service from Texas to neighboring states and then in the 1990s to the East and Southeast.
Until 2000, air travel to other states from Texas was entirely regulated by the Wright Amendment, which Southwest actively sought to repeal. It was not until 2006 that the airlines achieved the repeal of the amendments. The company gained a second wind and began actively flying all over the country and conquering airspace (Southwest Media, 2019). Gradually the company reached the global level, becoming the most profitable company for flights in terms of value for money and the services provided.
The company is based in Dallas and operates Boeing 737s, which caused losses in 2019, but has not ceased operations. Southwest Airlines’ mission is a commitment to the highest quality customer service with a sense of warmth, friendliness, and individual pride (Southwest Media, 2019). The company describes its goal as connecting people to important moments through reliable, friendly, and, most importantly, inexpensive air travel. The company’s vision is described as becoming the most beloved, flying, and profitable airline. Thus, Southwest has a long history and aims to provide passengers with comfortable and inexpensive air travel.
Analysis of the Company
Current Industry Position
The company currently describes its operations as a combination of rebuilding processes and increasing capacity. Gary K. Kelly attributes this to the increase in COVID-19 cases in August and September (Southwest Airlines, 2021). The company has experienced operational challenges, but the third quarter of 2021 is recognized as a prosperous and bright productivity uptick. Despite the underachievement in operating performance, the CEO expresses his appreciation to employees, noting their determination and dedication to serving customers.
The fourth quarter of 2021 is expected to be more successful. The assumption is justified by the renewed momentum of traffic and an improvement in reservations for both business and leisure travel (Southwest Airlines, 2021). The company also claims an increase in sales for holiday dates. Overall, the company is showing growth after the pandemic despite remaining in debt (Macrotrends, 2021). It is worth noting the continued overall sentiment and explicit adherence to goals, as the company ranks high in surveys about quality and speed of service.
Financial Position on Stock Exchange
Southwest Airlines has accumulated expertise in sales and management in general, which has allowed it to maintain its status as a highly profitable company. Average annual revenue growth averaged 5.0% annually from 2009 to 2019, which is high for the airline industry (Macrotrends, 2021). However, the company suffered significant losses due to a ban on international traffic during the pandemic. In 2020, its net income reached a negative -$3.07 billion, although it was $2.03 billion in 2019 (Wichita State University, 2021). Net income reached positive levels in March 2021 for the first time since the pandemic began, and by the end of September, it was $446 million (Macrotrends, 2021). This dynamic is considered adequate for airlines during the pandemic, especially for low-cost companies, so that one can judge Southwest Airlines’ recovery in the market.
The company’s stock continues to fall: as of Dec. 10, 2021, the store was only $41.75. The drop is probably due to the expected rise in inflation and fears of debt accumulation. In terms of its financial activity, such tactics are positive and may save it from additional spending (Macrotrends, 2021). However, the stock market position remains unfavorable during the whole period of epidemiological tension.
Employee Management Policy
According to Southwest Airlines’ official data, it has more than 50,000 full-time employees. The company offers health insurance to employees and assumes a large part of the cost of medical care (Southwest Media, 2019). Basic life insurance is included in the company’s free services and is $50,000 (Southwest Airlines, 2021). In addition, the company offers many options to employees in the event of short- or long-term disability, providing protection.
The company has a well-developed union system and a general spirit of unity and work. Southwest encourages its employees to volunteer and donate and supports them with various awards (Southwest Airlines, 2021). Other apparent perks of the company include supporting educational programs related to training and taking care of employees on board. All flight attendants wear comfortable casual clothing because it is much easier to assist in an emergency. For all these reasons, the company evokes a favorable response in society, which positively affects its status.
Throughout Southwest Airlines’ tenure, flights were operated using Boeing 737-800 type aircraft. In 2019, however, they were taken out of service, resulting in significant losses that affected their pandemic status. The company has more than 700 models of Boeing 737 aircraft of various subtypes flying about 4,000 flights per day (Southwest Media, 2019). All planes are equipped only in economy class, but Southwest Airlines wins out over other low-cost airlines due to its many amenities. The company provides flights to more than 100 destinations and includes international flights (Southwest Airlines, 2021). International assistance has been available since 2014 to Cuba, the Bahamas, Costa Rica, Mexico, and many islands.
The company’s transportation policy is affordable, straightforward, and very positive towards the customer. The company’s services are free carry-on of up to two items, free cancellations up to 10 minutes before departure, convenient ticket changes, and more. In addition, the company offers free snacks and beverages during the flight and provides paid meals on order (Southwest Airlines, 2021). Due to its unique seating method (letter and number), the company has reduced the time it takes to serve each customer, dramatically increasing overall productivity. As a result, the airline was a quality leader in 2020 despite the challenges (Wichita State University, 2021). It is a good result in general and an indicator of the company’s responsibility in a difficult situation.
Southwest Airlines has a long history and its ups and downs. It has a clear and understandable policy for its passengers and provides maximum comfort for them and its employees. It keeps the market stable with low prices, economy class, and speed of service. Southwest has had its share of pandemic problems and is losing stock on the stock market, but it is improving.
I like the company’s employee policy: there are many levels of support and that is important for large airlines. The company has been able to maintain its status among other air carriers, which is respectful. I am not sure that using only one aircraft model is a good idea. Using more than one type can significantly increase passenger flow and traffic. Overall, the company is an example of successful internal cohesion and a proactive policy for the benefit of passengers.
Macrotrends LLC. (2021). Southwest Airlines revenue 2006-2021 | LUV. Web.
Southwest Airlines. (2021). Southwest. Web.
Southwest Media. (2019). Southwest corporate fact sheet. Web.
Wichita State University. (2021). Rankings and observations. Web.