Southwest Airlines Co. Analysis
* Introduction and Mission
Southwest Airlines Co. is a major U.S airline and the world's largest low-cost carrier. It was established in 1967 and adopted its current name in 1971. The airline operates more than 3,400 flights per day and has more than 46,000 employees as of August 2012. In 2013, Southwest Airlines has scheduled service to 84 destinations in 41 states and Puerto Rico. In 2012, Southwest Airlines was the market share leader in domestic air travel in the United States; it transported more passengers from U.S airports to U.S destinations than any other airline, and it offered more regularly scheduled domestic flights than any other airlines. ...view middle of the document...
Due to the fact of size of Southwest Airlines, this market share is not very high. However, I believe in future couple years, Southwest airlines will increase their market share in total domestic market.
For the 40th consecutive year, the Company was profitable, earning $421 million ($.56 per share, diluted) in net income in 2012, compared to the Company's 2011 net income of $178 million (.23 per share, diluted). On a non-GAAP basis, the Company's 2012 net income was $417 million ($.56 per share, diluted), which was a 26.4 percent increase versus the Company's 2011 net income on a non-GAAP basis of $330 million ($.43 per share, diluted).
Operating revenues for 2012 increased by $1.4 billion, or 9.1 percent, compared to 2011. Freight revenues for 2012 increased by $21 million, or 15.1 percent, compared to 2011, primarily due to an increase in shipments as a result of better domestic economic conditions that the prior year. Other revenues for 2012 increased by $70 million, or 9.2 percent, compared to 2011, of which approximately $69 million was due to the inclusion of the full year of AirTran results in 2012, while 2011 results only include AirTran other revenues following the acquisition date.
* STEP Analysis
* Social Environment - Customer satisfaction is very important to SWA and cheap airfare could attract customers. Also on the mission statement of Southwest airline, the company focuses on the high quality customer service.
* Technological Environment - Customers are buying more items online and airlines have been trying to keep up with website functions to meet this demand. Also, more individuals desire WIFI during their flight which has caused airlines to adapt and purchase the technology to provide during flights
* Economic Environment - The rising price of Aviation Turbine Fuel (ATF) will lead to burning a big hole in flyers' pockets. And airlines will have to ensure flights are filled up to keep airfare cheap in order to keep their customers.
* Political Environment - The United States has developed strict safety regulation since the terrorist acts on September 11th. This has caused all airlines to fork over more money than ever to meet these regulations.
During 2012, the Company continued the process of integration of AirTran. The SWA began converting AirTran 737-700aircraft to the Southwest livery. As of December 31, 2012, 11 out of a total of 52 AirTran 737-700 aircraft had completed the conversion process and re-entered service as Southwest aircraft. Also the company significantly grew the Southwest network by converting AirTran service to Southwest service in several new markets, such as Seattle, Key West and in January 2013, the Company converted its AirTran operations in Phoenix, Arizona to Southwest.
During 2012, the Company continued to benefit from, and aggressively market, Southwest's points of differentiation from its competitors. For example, Southwest continues to be...