Southwest Case Study

Case Study written for Managerial Accounting and Control. I received a B because I was told it didn't have enough of a business style writing.

Executive Summary

Southwest is a low cost, high frequency airline that targets low cost and value conscientious customers. They are able to keep costs low through improving efficiency in many ways other carriers do not. Southwest operates multiple direct flights a day for consumer convenience. Through their cost saving measures, they pass on the savings to the customer. The customers that are drawn to Southwest are those that do not want first class, perks other then frequent flyer miles, and in-flight items like televisions, pillows and blankets, and meals. These are items that Southwest has eliminated from their flights and instead offers low costs, efficient direct flights, and an atmosphere of fun. By treating their customers like people, having fun, and keeping costs low, Southwest is able to stand out from their competition.

Company Background

Southwest started their service on June 18, 1971 with three Boeing 737 airplanes. The company started out by offering flights between three Texas cities; Dallas, Houston, and San Antonio. By 2004 Southwest grew to 417 airplanes and provided service to 60 airports in 31 states. The company grew using a conservative growth strategy that operated within the current route structure. External expansion was driven by opportunity. For example, the collapse of Midwest Airlines left space available at Chicago Airport. Southwest was able to step in and take over the empty space made by Midwest.

Southwest based their business on the culture they wanted to promote instead of basing the culture on the business. In the beginning, flight attendants were chosen for their “unique” personalities. They were often described as long legged dancers, majorettes, and cheerleaders. The original uniforms were hot-pants and go-go boots. This basis for “fun” employees evolved over the years into the culture Southwest has today of a fun loving, customer based, and caring company.

Southwest Performance

Southwest boasted 38 consecutive years of profitability in January 2010. This is a record that has not been matched by any other airline. Southwest operates as a low cost airline and passes the savings onto the customers. In 2004 there were 31,000 employees and had a total operating revenue of $6.5 billion dollars with a passenger load of 69.5%. In 2010 there were nearly 35,000 employees and had a total operating revenue of $12.1 billion dollars with a passenger load of 79.3%. Southwest was recognized by Fortune magazine in 2005 for the ninth year in a row as the most admired airline in the world. The American Customer Satisfaction Index recognized Southwest as leading the industry