Analysis of Southwest Airlines

EXECUTIVE SUMMARY

Southwest Airlines has come across some issues and the one with the most concern is expansion. Southwest must meet the current and forecasted demand, find sufficient facilities, keep their strategy coherent and consistent, and ensure that the entry into a new market is timely. These issues main constraint is finding facilities at a low cost to remain profitable. What has to be taken into account would be new construction costs in a major city airport, addition of two new gates, more labor costs, etc.

The management of Southwest must strive to keep its competitive advantage and strategic coherence when faced with future expansion decisions. The airline must make certain that any expansion decisions are consistent with its short-haul, high frequency, low-cost, "luv" strategy. Competition in the airline industry is tough, but also the risk of substitutes to air travel threatens to take travelers out of airplanes.

Southwest's main advantage is their price (as much as 80% when compared to other major airlines).

A Southwest Airlines Boeing 737 aircraft parked on...

English: View of the front of Southwest Airlines F...

English: A Southwest Airlines Boeing 737-700 taxii...

This strategy is highly sustainable, dramatically increasing their size of the market where they enter.

From the three routes given, we chose that Southwest should implement the Baltimore - Chicago route, since financially it seems sustainable. The labor conditions in both of these airports are good (there is a lot of room for expansion), and the route is about 611 miles long, which still constitutes a short haul route.

PROBLEM STATEMENT

Despite the overwhelming success Southwest has maintained, the airlines does face several major issues that play vital roles to its continued profitability. Based on a conservative growth strategy, Southwest's top concern is expansion. The airline faces an urgent expansion decision regarding where and how to commit two new Boeing 737's into service. This decision is comprised of several important components. Southwest must meet the current...