STRATEGY RECOMMENDATION

TextbookNoe, R., Hollenbeck, J., Gerhart, B.,
& Wright, P. (2023). Human
resource management: Gaining a
competitive advantage (13th ed.).
McGraw-Hill Education.
People and Organizations
Title: Strategy Recommendation
Assignment Directions
The Southwest HR director would like you to review several strategic reports on the organization and provide feedback on how you think the
organization should move forward.
Compile a strategy recommendation to the HR director to be used for company-wide decisions. Include the following information in your report:
•
An executive summary of the HR strategy project
•
An analysis of current strategies and issues
o
Identify the type of strategy Southwest Airlines is following.
o
Identify 3 HRM implications for Southwest Airlines.
•
Develop and justify business strategies for each of the 3 HRM implications.
•
Determine an HR strategy.
Use at least 2 sources other than those provided. Review the following source to assist with your recommendation:
•
SWOT report in detail on Business Source Complete
Other resources
•
•
Anlesinya, A., Dartey-Baah, K., & Amponsah-Tawiah, K. (2019). A review of empirical research on global talent management. FIIB
Business Review, 8(2), 147–160.
Fenech, R., Baguant, P., & Ivanov, D. (2019). The changing role of human resource management in an era of digital
transformation. Journal of Management Information and Decision Sciences, 22(2), 1-10.
•
•
•
Hadjri, M. I., Perizade, B., Marwa, T., & Hanafi, A. (2019). Islamic human resource management, organizational commitment and
employee performance. International Review of Management and Marketing, 9(1), 123-128.
Mohammad Jaber, Y. A., & Emeagwali, O. L. (2019). Knowledge-based HR practices and innovation in SMEs. Organizacija, 52(1), 6-21.
Poisat, P., & Mey, M. R. (2017). Electronic human resource management: Enhancing or entrancing? South African Journal of Human
Resource Management, 15(1), 1–9.
Competency Assessment Rubric
Assignment/Performance
Criteria
Mastery
100%
1. Executive Summary
(weight 25%)
Thoroughly summarized the
covered strategies, issues, and
recommendations important to
the project from a creative and
innovative perspective.
2. Analysis of current
strategic direction
(weight 25%)
Thoroughly analyzed the
identified directional strategies
and 3 HRM implications for each
strategy from a creative and
innovative perspective.
3. Create business
strategies for HRM
implications
(weight 25%)
Created business strategies and
thoroughly justified strategy for
dealing with each HRM
implication from a creative and
innovative perspective.
4. Determine HR Strategy
(weight 25%)
Provided a thorough, creative,
and innovative HR strategy that
addresses all business strategies
and HRM implications.
A Progressive Digital Media business
COMPANY PROFILE
Southwest Airlines Co
REFERENCE CODE: DEFBDE99-9B78-4A63-BE9C-7EA7568D476E
PUBLICATION DATE: 19 Dec 2023
www.marketline.com
COPYRIGHT MARKETLINE. THIS CONTENT IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED OR DISTRIBUTED
Southwest Airlines Co
TABLE OF CONTENTS
TABLE OF CONTENTS
Company Overview …………………………………………………………………………………………..3
Key Facts …………………………………………………………………………………………………………. 3
SWOT Analysis …………………………………………………………………………………………………4
Southwest Airlines Co
© MarketLine
Page 2
Southwest Airlines Co
Company Overview
Company Overview
COMPANY OVERVIEW
Southwest Airlines Co (Southwest Airlines) is a provider of passenger and cargo air transportation
services. The company provides point-to-point flight services with direct non-stop routing in various
central hub cities. It also offers high-frequency short-haul routes supported with long-haul nonstop service
between markets such as San Diego and Baltimore, Los Angeles and Nashville, Houston and New York
LaGuardia, Oakland and Baltimore, Phoenix and Las Vegas, and California and Hawaii in the US.
Southwest Airlines also offers various ancillary services such as upgraded boarding, EarlyBird Check-In,
and transportation of pets and unaccompanied minors. Southwest Airlines is headquartered in Dallas,
Texas, the US.
The company reported revenues of (US Dollars) US$23,814 million for the fiscal year ended December
2022 (FY2022), an increase of 50.8% over FY2021. In FY2022, the company’s operating margin was
3.5%, compared to an operating margin of 10.7% in FY2021. In FY2022, the company recorded a net
margin of 2.3%, compared to a net margin of 6.2% in FY2021.
The company reported revenues of US$6,525 million for the third quarter ended September 2023, a
decrease of 7.3% over the previous quarter.
Key Facts
KEY FACTS
Head Office
Southwest Airlines Co
2702 Love Field Dr
Po Box 36611
Dallas
Texas
Dallas
Texas
USA
Phone
1 214 7924000
Fax
Web Address
www.southwest.com
Revenue / turnover (USD Mn)
23,814.0
Financial Year End
December
Employees
74,181
New York Stock Exchange Ticker LUV
Southwest Airlines Co
© MarketLine
Page 3
Southwest Airlines Co
SWOT Analysis
SWOT Analysis
SWOT ANALYSIS
Southwest Airlines Co (Southwest Airlines) is a provider of passenger airline services. Financial leverage,
service network, brand portfolio, and fleet base are the company’s key strengths, even as poor operating
performance remains a cause for concern. Growth prospects for the aviation industry, a positive outlook
for the US T&T industry, growth initiatives and the launch of new services could provide new opportunities
to the company. However, fluctuations in fuel prices, increasing manpower costs in the US and stringent
airline regulations could affect the company’s performance.
Strength
Weakness
Fleet Base
Brand Portfolio
Financial Leverage
Service Network
Operating Performance
Opportunity
Threat
Launch of New Services
Fluctuations in Fuel Prices
Growth Prospects: Aviation Industry
Increasing Manpower Costs in US
Growth Initiatives
Stringent Airline Regulations
Positive Outlook for Travel and Tourism Industry in US
Strength
Fleet Base
Southwest Airlines has a strong fleet network which has strengthened the company’s operations. As of
December 31, 2022, the company had 770 Boeing 737 aircraft of which 676 were owned and 94 leased
aircraft. Its fleet comprises of 426 Boeing 737-700 with a seating capacity of 143; 207 Boeing 737-800
with a seating capacity of 175 and 137 Boeing 737- 8 with a total seat capacity of 175.
Brand Portfolio
A well-diversified brand portfolio helps Southwest Airlines to enhance its brand value, drive top-line
performance, and distinguish itself as a benchmark for excellence in the construction market. The
company offers its products under various brands including Business Select, EarlyBird Check-In,
SWABIZ, Wanna Get Away and Chase Visa Credit Card.
Financial Leverage
The company’s financial leverage, indicated by debt-to-equity ratio, remained low in FY2022, which
enhances its earnings with less interest payments, and reduces the risk of defaulting. During the year, its
Southwest Airlines Co
© MarketLine
Page 4
Southwest Airlines Co
SWOT Analysis
debt-to-equity ratio was 0.7, while United Airlines Holdings Inc and Delta Air Lines Inc reported respective
ratios of 4.5 and 3.5. In FY2022, the company recorded a 24.6% decrease in debt to US$8,088 million,
compared to US$10,727 million in the previous year.
Service Network
Strong market position enabled it to build brand equity and helped it to establish itself as a leading
provider of airline services globally. It served 121 destinations across 42 states in the US including the
Commonwealth of Puerto Rico, the District of Columbia, and ten near-international countries including
Jamaica, Aruba, Mexico, the Bahamas, Costa Rica, Cuba, Dominican Republic, Belize, Turks, the
Cayman Islands and Caicos. As of December 31, 2022, Southwest served 825 nonstop city pairs.
Southwest currently offers 12-weekday roundtrips between Houston Hobby and Dallas Love Field, eightweekday roundtrips between Chicago Midway and Denver, 10-weekday roundtrips between Las Vegas
and Los Angeles International, 12-weekday roundtrips between Oakland and Burbank and 13-weekday
roundtrips between Phoenix and Denver. The company also offers high-frequency short-haul routes along
with the long-haul nonstop service between the US markets such as San Diego and Baltimore, Los
Angeles and Nashville, Houston and New York LaGuardia, Oakland and Baltimore, Phoenix and Las
Vegas and California and Hawaii. As of December 31, 2022, the company connected passengers to 14
international destinations.
Weakness
Operating Performance
Poor operating performance may reduce investor confidence and impact its ability to pursue growth
plans. Southwest Airlines recorded a significant decline in income levels in FY2022, although the
revenues increased by 50.8% on an annual basis. In FY2022, the company reported a 51.3% fall in
operating income to US$824 million, compared to US$1,693 million in FY2021. The decrease in operating
income was primarily driven by the loss of operating revenue from flight cancellations, combined with
increased operating expenses such as travel reimbursements, goodwill gestures, and additional
compensation for employees. The company’s operating margin was 3.5% and 8.4% in FY2022 and
FY2021. The company also reported return on equity (ROE) of 5%in FY2022, compared to an ROE of
9.4% in FY2021.
Opportunity
Launch of New Services
The launch of new and improved services at regular intervals could help Southwest Airlines retain and
attract new customers. In May 2023, the company launched a new airline, Imua One, in recognition of
Hawaii service in the US. In the same month, the company announced two additional nonstop routes to
Reagan National Airport (DCA). In March 2023, the company announced new routes from Kansas City
and Long Beach. In February 2023, the company extended flight services to 121 new destinations across
Latin America, the United States and the Caribbean. In November 2022, the company added a new route
Southwest Airlines Co
© MarketLine
Page 5
Southwest Airlines Co
SWOT Analysis
to Salt Lake City from Long Beach Airport.
Growth Prospects: Aviation Industry
Southwest Airlines could benefit from the positive outlook for the global aviation industry, which could
drive the demand for its services in the aviation market space. According to the Airports Council
International (ACI) report, the global passenger volume is projected to reach 20.9 billion by 2040, with an
annual growth of 4.1%. China is forecasted to be the largest air passenger market with 4.0 billion
passengers, a 19% share of the global air passenger traffic. The US and India are expected to be second
and third largest air passenger traffic markets with 3.1 billion and 1.3 billion passengers, respectively.
Emerging economies including Indonesia, Turkey and Vietnam are expected to play significant roles in
the global passenger traffic market. The global air cargo volume is also expected to reach 203.4 million
tonnes by 2040. It is also expected that over 20% of all air cargo could be handled in the US alone by
2040, while China and the UAE could be considered as the second and third largest air cargo markets.
The US, China and India are estimated to be the primary markets for global aircraft movements by 2040,
representing 21%, 16% and 4% of aircraft movements, respectively.
Growth Initiatives
Southwest Airlines taking various initiatives to drive growth. The initiatives are expected to strengthen the
company’s operations and increase its returns. In August 2023, the company and the Transport Workers
Union Local 555 entered into a Tentative Agreement for the airline’s Ramp, Operations, Provisioning, and
Cargo Agents. In June 2023, the company announced a three-year contract extension with AVTECH
Sweden AB for the Aventus Enroute and Descent Winds service. In April 2023, the company signed a
multi-year agreement with Amadeus for its Network Revenue Management solution. In March 2023, the
company entered into a partnership with Sabre Corp to begin utilizing PRISM, an industry-standard data
solution. In February 2023, the company entered into a partnership with Animal Planet to celebrate the
Big Game Puppy Bowl. In January 2023, the company selected Auburn University as a partner in
Destination 225°. In November 2022, the company teamed up with Tiffany and Leon Chen to Surprise
and Delight Customers onboard a flight from Austin-Bergstrom International Airport (AUS) to HartsfieldJackson Atlanta International Airport (ATL) with sweet treats. In September 2022, the company and the
Aircraft Mechanics Fraternal Association reached a tentative agreement for aircraft appearance
technicians.
Positive Outlook for Travel and Tourism Industry in US
Southwest Airlines is likely to benefit from the positive outlook for the T&T industry in the US. According to
in-house research, the total domestic tourism expenditure on categories including transportation (airlines),
accommodation, and travel intermediaries is estimated to reach US$484,617.9 million by 2025 (forecast
year), and the expenditure per domestic tourist is expected to reach US$389.6. In the airlines sector, the
total number of available seats, seats sold, and the load factor are estimated to reach 1,354.2 million,
1,123.6 million, and 70.3%, respectively, by the end of the forecast year. The revenue for the airline
industry and revenue per customer are forecasted to reach US$331,237.3 million and US$254.4,
respectively, by 2025. In the hotel sector, hotel establishments by categories such as budget, midscale,
upscale and luxury are expected to reach 60,792 properties, while the number of hotel rooms within these
categories is forecasted to reach 5,776,000 by the end of the forecast year. The travel intermediaries’
Southwest Airlines Co
© MarketLine
Page 6
Southwest Airlines Co
SWOT Analysis
market value is estimated to reach US$291,500 million by the end of 2025. The travel agent revenue from
domestic and international tourism combined is expected to reach US$223,943.9 million by the end of the
forecast year, while the tour operator revenue from domestic and international tourism is forecasted to
reach US$56,827 million by 2025.
Threat
Fluctuations in Fuel Prices
The company’s business is highly dependent on the price and availability of jet fuel, and its performance
could be adversely affected by high volatility in fuel costs, increased fuel prices and disruptions in the
supply of jet fuel. The fuel market is volatile and changes according to market, political and economic
movements. According to International Air Transport Association, the global average jet fuel price was
US$123.2 per barrel as of August 2023, which is increasing subsequently. Therefore, a modest decline or
increase in prices could have a significant impact on the company’s business operations. Several factors
are responsible for such changes including domestic and foreign supply of oil, global economic
conditions, price and availability of alternative fuels, governmental regulations, weather conditions and
technological advances, among others. In FY2022, the company reported jet fuel oil expenses of
US$5,975 million, which increased 80.5% YoY. An increase in jet fuel prices could affect the company’s
overall profitability.
Increasing Manpower Costs in US
Increasing manpower costs could increase the company’s operating costs and hamper its profits. The
tight labor markets, government-mandated increases in minimum wages and a higher proportion of fulltime employees are increasing labor costs. Effective January 2023, 24 states in the US increased their
minimum wages. Alaska, Florida, Minnesota, Montana, Nebraska, Ohio, South Dakota, and Vermont
increased their hourly minimum wage based on the cost of living to US$10.85, US$11, US$10.59,
US$9.95, US$10.50, US$10.10, US$10.80, and US$13.18, respectively. Arizona, California, Colorado,
Delaware, Illinois, Maine, Maryland, and Massachusetts increased their hourly minimum wages to
US$13.85, US$15.50, US$13.65, US$11.75, US$13, US$13.80, US$13.25, and US$15.00, respectively.
Whereas states such as Michigan, Missouri, New Jersey, Rhode Island, Virginia, New Mexico, New York,
and Washington increased their hourly minimum wages due to previously approved legislation to
US$10.10, US$12, US$14.13, US$13, US$12, US$12, US$14.20, and $15.74, respectively.
Stringent Airline Regulations
The company is required to comply with the Federal Aviation Administration (FAA) and Department of
Transportation (DOT) regulations under the provisions of the Federal Aviation Act of 1958. The FAA
prescribes standards and licensing requirements for both aircraft and components. The DOT regulates
economic issues that could affect air service, including competitive practices, consumer protection,
insurance, certification, and fitness and citizenship. The company is also subject to regulations by foreign
government agencies and aviation agreements signed between the US and other countries. The
company is subject to the U.S. Transportation Security Administration (TSA) that regulates aviation
security to ward off unauthorized access to freighter and passenger aircraft and prohibits firearms and
Southwest Airlines Co
© MarketLine
Page 7
Southwest Airlines Co
SWOT Analysis
explosives on an aircraft and others. The company is subject to the US Environmental Protection Agency
(the EPA) regulating the air quality. Introduction or changes in the labor and employment regulations; and
administrative regulations could erode the profitability of the company. The company is also subject to
inspection by the FAA and other regulatory agencies, with non-compliance leading to possible fines and
other penalties.
Southwest Airlines Co
© MarketLine
Page 8
Copyright of Southwest Airlines Co. SWOT Analysis is the property of MarketLine, a
Progressive Digital Media business and its content may not be copied or emailed to multiple
sites or posted to a listserv without the copyright holder’s express written permission.
However, users may print, download, or email articles for individual use.
A Progressive Digital Media business
COMPANY PROFILE
Southwest Airlines Co
REFERENCE CODE: DEFBDE99-9B78-4A63-BE9C-7EA7568D476E
PUBLICATION DATE: 18 Mar 2024
www.marketline.com
COPYRIGHT MARKETLINE. THIS CONTENT IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED OR DISTRIBUTED
Southwest Airlines Co
TABLE OF CONTENTS
TABLE OF CONTENTS
Company Overview …………………………………………………………………………………………..3
Key Facts …………………………………………………………………………………………………………. 3
SWOT Analysis …………………………………………………………………………………………………4
Southwest Airlines Co
© MarketLine
Page 2
Southwest Airlines Co
Company Overview
Company Overview
COMPANY OVERVIEW
Southwest Airlines Co (Southwest Airlines) is a provider of passenger and cargo air transportation
services. The company provides point-to-point flight services with direct non-stop routing in various
central hub cities. It also offers high-frequency short-haul routes supported with long-haul nonstop service
between markets such as San Diego and Baltimore, Los Angeles and Nashville, Houston and New York
LaGuardia, Oakland and Baltimore, Phoenix and Las Vegas, and California and Hawaii in the US.
Southwest Airlines also offers various ancillary services such as upgraded boarding, EarlyBird Check-In,
and transportation of pets and unaccompanied minors. Southwest Airlines is headquartered in Dallas,
Texas, the US.
The company reported revenues of (US Dollars) US$26,091 million for the fiscal year ended December
2023 (FY2023), an increase of 9.6% over FY2022. In FY2023, the company’s operating margin was
0.9%, compared to an operating margin of 3.5% in FY2022. In FY2023, the company recorded a net
margin of 1.8%, compared to a net margin of 2.3% in FY2022.
Key Facts
KEY FACTS
Head Office
Southwest Airlines Co
2702 Love Field Dr
Po Box 36611
Dallas
Texas
Dallas
Texas
USA
Phone
1 214 7924000
Fax
Web Address
www.southwest.com
Revenue / turnover (USD Mn)
26,091.0
Financial Year End
December
Employees
74,806
New York Stock Exchange Ticker LUV
Southwest Airlines Co
© MarketLine
Page 3
Southwest Airlines Co
SWOT Analysis
SWOT Analysis
SWOT ANALYSIS
Southwest Airlines Co (Southwest Airlines) is a provider of passenger airline services. Financial leverage,
service network, brand portfolio, and fleet base are the company’s key strengths, even as poor operating
performance remains a cause for concern. Growth prospects for the aviation industry, a positive outlook
for the US T&T industry, growth initiatives and the launch of new services could provide new opportunities
to the company. However, fluctuations in fuel prices, increasing manpower costs in the US and stringent
airline regulations could affect the company’s performance.
Strength
Weakness
Fleet Base
Brand Portfolio
Financial Leverage
Service Network
Operating Performance
Opportunity
Threat
Launch of New Services
Fluctuations in Fuel Prices
Growth Prospects: Aviation Industry
Increasing Manpower Costs in US
Growth Initiatives
Stringent Airline Regulations
Positive Outlook for Travel and Tourism Industry in US
Strength
Fleet Base
Southwest Airlines has a strong fleet network which has strengthened the company’s operations. As of
December 31, 2022, the company had 770 Boeing 737 aircraft of which 676 were owned and 94 leased
aircraft. Its fleet comprises of 426 Boeing 737-700 with a seating capacity of 143; 207 Boeing 737-800
with a seating capacity of 175 and 137 Boeing 737- 8 with a total seat capacity of 175.
Brand Portfolio
A well-diversified brand portfolio helps Southwest Airlines to enhance its brand value, drive top-line
performance, and distinguish itself as a benchmark for excellence in the construction market. The
company offers its products under various brands including Business Select, EarlyBird Check-In,
SWABIZ, Wanna Get Away and Chase Visa Credit Card.
Financial Leverage
The company’s financial leverage, indicated by debt-to-equity ratio, remained low in FY2022, which
enhances its earnings with less interest payments, and reduces the risk of defaulting. During the year, its
Southwest Airlines Co
© MarketLine
Page 4
Southwest Airlines Co
SWOT Analysis
debt-to-equity ratio was 0.7, while United Airlines Holdings Inc and Delta Air Lines Inc reported respective
ratios of 4.5 and 3.5. In FY2022, the company recorded a 24.6% decrease in debt to US$8,088 million,
compared to US$10,727 million in the previous year.
Service Network
Strong market position enabled it to build brand equity and helped it to establish itself as a leading
provider of airline services globally. It served 121 destinations across 42 states in the US including the
Commonwealth of Puerto Rico, the District of Columbia, and ten near-international countries including
Jamaica, Aruba, Mexico, the Bahamas, Costa Rica, Cuba, Dominican Republic, Belize, Turks, the
Cayman Islands and Caicos. As of December 31, 2022, Southwest served 825 nonstop city pairs.
Southwest currently offers 12-weekday roundtrips between Houston Hobby and Dallas Love Field, eightweekday roundtrips between Chicago Midway and Denver, 10-weekday roundtrips between Las Vegas
and Los Angeles International, 12-weekday roundtrips between Oakland and Burbank and 13-weekday
roundtrips between Phoenix and Denver. The company also offers high-frequency short-haul routes along
with the long-haul nonstop service between the US markets such as San Diego and Baltimore, Los
Angeles and Nashville, Houston and New York LaGuardia, Oakland and Baltimore, Phoenix and Las
Vegas and California and Hawaii. As of December 31, 2022, the company connected passengers to 14
international destinations.
Weakness
Operating Performance
Poor operating performance may reduce investor confidence and impact its ability to pursue growth
plans. Southwest Airlines recorded a significant decline in income levels in FY2022, although the
revenues increased by 50.8% on an annual basis. In FY2022, the company reported a 51.3% fall in
operating income to US$824 million, compared to US$1,693 million in FY2021. The decrease in operating
income was primarily driven by the loss of operating revenue from flight cancellations, combined with
increased operating expenses such as travel reimbursements, goodwill gestures, and additional
compensation for employees. The company’s operating margin was 3.5% and 8.4% in FY2022 and
FY2021. The company also reported return on equity (ROE) of 5%in FY2022, compared to an ROE of
9.4% in FY2021.
Opportunity
Launch of New Services
The launch of new and improved services at regular intervals could help Southwest Airlines retain and
attract new customers. In May 2023, the company launched a new airline, Imua One, in recognition of
Hawaii service in the US. In the same month, the company announced two additional nonstop routes to
Reagan National Airport (DCA). In March 2023, the company announced new routes from Kansas City
and Long Beach. In February 2023, the company extended flight services to 121 new destinations across
Latin America, the United States and the Caribbean. In November 2022, the company added a new route
Southwest Airlines Co
© MarketLine
Page 5
Southwest Airlines Co
SWOT Analysis
to Salt Lake City from Long Beach Airport.
Growth Prospects: Aviation Industry
Southwest Airlines could benefit from the positive outlook for the global aviation industry, which could
drive the demand for its services in the aviation market space. According to the Airports Council
International (ACI) report, the global passenger volume is projected to reach 20.9 billion by 2040, with an
annual growth of 4.1%. China is forecasted to be the largest air passenger market with 4.0 billion
passengers, a 19% share of the global air passenger traffic. The US and India are expected to be second
and third largest air passenger traffic markets with 3.1 billion and 1.3 billion passengers, respectively.
Emerging economies including Indonesia, Turkey and Vietnam are expected to play significant roles in
the global passenger traffic market. The global air cargo volume is also expected to reach 203.4 million
tonnes by 2040. It is also expected that over 20% of all air cargo could be handled in the US alone by
2040, while China and the UAE could be considered as the second and third largest air cargo markets.
The US, China and India are estimated to be the primary markets for global aircraft movements by 2040,
representing 21%, 16% and 4% of aircraft movements, respectively.
Growth Initiatives
Southwest Airlines taking various initiatives to drive growth. The initiatives are expected to strengthen the
company’s operations and increase its returns. In August 2023, the company and the Transport Workers
Union Local 555 entered into a Tentative Agreement for the airline’s Ramp, Operations, Provisioning, and
Cargo Agents. In June 2023, the company announced a three-year contract extension with AVTECH
Sweden AB for the Aventus Enroute and Descent Winds service. In April 2023, the company signed a
multi-year agreement with Amadeus for its Network Revenue Management solution. In March 2023, the
company entered into a partnership with Sabre Corp to begin utilizing PRISM, an industry-standard data
solution. In February 2023, the company entered into a partnership with Animal Planet to celebrate the
Big Game Puppy Bowl. In January 2023, the company selected Auburn University as a partner in
Destination 225°. In November 2022, the company teamed up with Tiffany and Leon Chen to Surprise
and Delight Customers onboard a flight from Austin-Bergstrom International Airport (AUS) to HartsfieldJackson Atlanta International Airport (ATL) with sweet treats. In September 2022, the company and the
Aircraft Mechanics Fraternal Association reached a tentative agreement for aircraft appearance
technicians.
Positive Outlook for Travel and Tourism Industry in US
Southwest Airlines is likely to benefit from the positive outlook for the T&T industry in the US. According to
in-house research, the total domestic tourism expenditure on categories including transportation (airlines),
accommodation, and travel intermediaries is estimated to reach US$484,617.9 million by 2025 (forecast
year), and the expenditure per domestic tourist is expected to reach US$389.6. In the airlines sector, the
total number of available seats, seats sold, and the load factor are estimated to reach 1,354.2 million,
1,123.6 million, and 70.3%, respectively, by the end of the forecast year. The revenue for the airline
industry and revenue per customer are forecasted to reach US$331,237.3 million and US$254.4,
respectively, by 2025. In the hotel sector, hotel establishments by categories such as budget, midscale,
upscale and luxury are expected to reach 60,792 properties, while the number of hotel rooms within these
categories is forecasted to reach 5,776,000 by the end of the forecast year. The travel intermediaries’
Southwest Airlines Co
© MarketLine
Page 6
Southwest Airlines Co
SWOT Analysis
market value is estimated to reach US$291,500 million by the end of 2025. The travel agent revenue from
domestic and international tourism combined is expected to reach US$223,943.9 million by the end of the
forecast year, while the tour operator revenue from domestic and international tourism is forecasted to
reach US$56,827 million by 2025.
Threat
Fluctuations in Fuel Prices
The company’s business is highly dependent on the price and availability of jet fuel, and its performance
could be adversely affected by high volatility in fuel costs, increased fuel prices and disruptions in the
supply of jet fuel. The fuel market is volatile and changes according to market, political and economic
movements. According to International Air Transport Association, the global average jet fuel price was
US$123.2 per barrel as of August 2023, which is increasing subsequently. Therefore, a modest decline or
increase in prices could have a significant impact on the company’s business operations. Several factors
are responsible for such changes including domestic and foreign supply of oil, global economic
conditions, price and availability of alternative fuels, governmental regulations, weather conditions and
technological advances, among others. In FY2022, the company reported jet fuel oil expenses of
US$5,975 million, which increased 80.5% YoY. An increase in jet fuel prices could affect the company’s
overall profitability.
Increasing Manpower Costs in US
Increasing manpower costs could increase the company’s operating costs and hamper its profits. The
tight labor markets, government-mandated increases in minimum wages and a higher proportion of fulltime employees are increasing labor costs. Effective January 2023, 24 states in the US increased their
minimum wages. Alaska, Florida, Minnesota, Montana, Nebraska, Ohio, South Dakota, and Vermont
increased their hourly minimum wage based on the cost of living to US$10.85, US$11, US$10.59,
US$9.95, US$10.50, US$10.10, US$10.80, and US$13.18, respectively. Arizona, California, Colorado,
Delaware, Illinois, Maine, Maryland, and Massachusetts increased their hourly minimum wages to
US$13.85, US$15.50, US$13.65, US$11.75, US$13, US$13.80, US$13.25, and US$15.00, respectively.
Whereas states such as Michigan, Missouri, New Jersey, Rhode Island, Virginia, New Mexico, New York,
and Washington increased their hourly minimum wages due to previously approved legislation to
US$10.10, US$12, US$14.13, US$13, US$12, US$12, US$14.20, and $15.74, respectively.
Stringent Airline Regulations
The company is required to comply with the Federal Aviation Administration (FAA) and Department of
Transportation (DOT) regulations under the provisions of the Federal Aviation Act of 1958. The FAA
prescribes standards and licensing requirements for both aircraft and components. The DOT regulates
economic issues that could affect air service, including competitive practices, consumer protection,
insurance, certification, and fitness and citizenship. The company is also subject to regulations by foreign
government agencies and aviation agreements signed between the US and other countries. The
company is subject to the U.S. Transportation Security Administration (TSA) that regulates aviation
security to ward off unauthorized access to freighter and passenger aircraft and prohibits firearms and
Southwest Airlines Co
© MarketLine
Page 7
Southwest Airlines Co
SWOT Analysis
explosives on an aircraft and others. The company is subject to the US Environmental Protection Agency
(the EPA) regulating the air quality. Introduction or changes in the labor and employment regulations; and
administrative regulations could erode the profitability of the company. The company is also subject to
inspection by the FAA and other regulatory agencies, with non-compliance leading to possible fines and
other penalties.
Southwest Airlines Co
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COMPANY PROFILE
Southwest Airlines Co
REFERENCE CODE: DEFBDE99-9B78-4A63-BE9C-7EA7568D476E
PUBLICATION DATE: 27 Mar 2023
www.marketline.com
COPYRIGHT MARKETLINE. THIS CONTENT IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED OR DISTRIBUTED
Southwest Airlines Co
TABLE OF CONTENTS
TABLE OF CONTENTS
Company Overview …………………………………………………………………………………………..3
Key Facts …………………………………………………………………………………………………………. 3
SWOT Analysis …………………………………………………………………………………………………4
Southwest Airlines Co
© MarketLine
Page 2
Southwest Airlines Co
Company Overview
Company Overview
COMPANY OVERVIEW
Southwest Airlines Co (Southwest Airlines) is a provider of passenger airline services. The company
provides point-to-point flight services with direct nonstop routing in various central hub cities. It also offers
high-frequency short-haul routes supported with the long-haul nonstop service between markets such as
San Diego and Baltimore, Los Angeles and Nashville, Houston and New York LaGuardia, Oakland and
Baltimore, Phoenix and Las Vegas and California and Hawaii in the US. It also offers various ancillary
services such as upgraded boarding, EarlyBird Check-In, and transportation of pets and unaccompanied
minors. Southwest Airlines is headquartered in Dallas, Texas, the US.
The company reported revenues of (US Dollars) US$23,814 million for the fiscal year ended December
2022 (FY2022), an increase of 50.8% over FY2021. In FY2022, the company’s operating margin was
3.5%, compared to an operating margin of 10.7% in FY2021. In FY2022, the company recorded a net
margin of 2.3%, compared to a net margin of 6.2% in FY2021.
Key Facts
KEY FACTS
Head Office
Southwest Airlines Co
2702 Love Field Dr
Po Box 36611
Dallas
Texas
Dallas
Texas
USA
Phone
1 214 7924000
Fax
Web Address
www.southwest.com
Revenue / turnover (USD Mn)
23,814.0
Financial Year End
December
Employees
66,656
New York Stock Exchange Ticker LUV
Southwest Airlines Co
© MarketLine
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Southwest Airlines Co
SWOT Analysis
SWOT Analysis
SWOT ANALYSIS
Southwest Airlines Co (Southwest Airlines) is a provider of passenger airline services. Increase in
passenger revenue, brand portfolio, fleet network and financial leverage are the company’s key strengths,
even as declining cash reserves remains a cause for concern. Growth prospects for the aviation industry,
a positive outlook for the US T&T industry, growth initiatives and launch of new services could provide
new opportunities to the company. However, fluctuations in fuel prices, increasing manpower costs in the
US and stringent airline regulations could affect the company’s performance.
Strength
Weakness
Fleet Network
Brand Portfolio
Business Performance- Passenger Revenue
Financial Leverage
Declining Cash Reserves
Opportunity
Threat
Launch of New Services
Growth Prospects: Aviation Industry
Growth Initiatives
Positive Outlook for US T&T Industry
Fluctuations in Fuel Prices
Increasing Manpower Costs in US
Stringent Airline Regulations
Strength
Fleet Network
Southwest Airlines has a strong fleet network. Based on the US Department of Transportation’s most
recent data, the company is the US’s largest carrier in terms of originating domestic passengers boarded.
As of December 31, 2022, the company had 770 Boeing 737 aircraft of which 676 were owned and 94
leased aircraft. Its fleet comprises of 426 Boeing 737-700 with a seating capacity of 143; 207 Boeing 737800 with a seating capacity of 175 and 137 Boeing 737- 8 with a total seat capacity of 175. It served 121
destinations across 42 states in the US including the Commonwealth of Puerto Rico, the District of
Columbia, and ten near-international countries including Jamaica, Aruba, Mexico, the Bahamas, Costa
Rica, Cuba, Dominican Republic, Belize, Turks, the Cayman Islands and Caicos.
Brand Portfolio
A well-diversified brand portfolio helps Southwest Airlines to enhance its brand value, drive top-line
performance, and distinguish itself as a benchmark for excellence in the construction market. The
company offers its products under various brands including Business Select, EarlyBird Check-In,
SWABIZ, Wanna Get Away and Chase Visa Credit Card.
Southwest Airlines Co
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Southwest Airlines Co
SWOT Analysis
Business Performance- Passenger Revenue
The company’s Passenger revenue was the major contributor to its revenue stream. In FY2022, it
recorded revenue of US$21,408 million, which accounted for 89.9% of the company’s revenue and
reported YoY growth of 52.2%. The improvement was driven by easing of Covid-19 restrictions, increased
demand of travel and booking. Also due to 4.9 points increase in the load factor.
Financial Leverage
The company’s financial leverage, indicated by the debt-to-equity ratio, remained low in FY2022, which
enhances its earnings with fewer interest payments, and reduces the risk of defaulting. During the year,
its debt-to-equity ratio was 0.75 while United Airlines Holdings Inc and Spirit Airlines, Inc. reported
respective ratios of 4.55 and 2.25. In FY2022, the company recorded a 24.6% decrease in debt
US$8,088 million, compared to US$10,727 million in the previous year.
Weakness
Declining Cash Reserves
Declining cash position of the company makes it difficult to meet its short-term obligations. In FY2022, the
company had cash and cash equivalents of US$9,492 million as compared to US$12,480 million in
FY2022, showing a decrease of 23.9%. This resulted in the company recording decrease in positive cash
flows from investing activities and an increase in negative cash flows from operating activities.
Opportunity
Launch of New Services
The launch of new and improved services at regular intervals could help Southwest Airlines retain and
attract new customers. In February 2023, the company extended flight services to 121 new destinations
across Latin America, the United States and the Caribbean. In November 2022, the company added a
new route to Salt Lake City from Long Beach Airport. In September 2022, the company announced
opened a new route between Denver and Costa Rica. In August 2022, the company launched Southwest
Business Assist, a self-service tool. Such product launches are expected to serve the changing needs of
Southwest Airlines’ customers and attract a new customer base.
Growth Prospects: Aviation Industry
Southwest Airlines could benefit from the positive outlook for the global aviation industry, which could
drive the demand for its services in the aviation market space. According to the Airports Council
International (ACI) report, the global passenger volume is projected to reach 20.9 billion by 2040, with an
annual growth of 4.1%. China is forecasted to be the largest air passenger market with 4.0 billion
passengers, a 19% share of the global air passenger traffic. The US and India are expected to be second
and third largest air passenger traffic markets with 3.1 billion and 1.3 billion passengers, respectively.
Southwest Airlines Co
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Southwest Airlines Co
SWOT Analysis
Emerging economies including Indonesia, Turkey and Vietnam are expected to play significant roles in
the global passenger traffic market. The global air cargo volume is also expected to reach 203.4 million
tonnes by 2040. It is also expected that over 20% of all air cargo could be handled in the US alone by
2040, while China and the UAE could be considered as the second and third largest air cargo markets.
The US, China and India are estimated to be the primary markets for global aircraft movements by 2040,
representing 21%, 16% and 4% of aircraft movements, respectively.
Growth Initiatives
Southwest Airlines taking various initiatives to drive growth. The initiatives are expected to strengthen the
company’s operations and increase its returns. In February 2023, the company entered into a partnership
with Animal Planet to celebrate the Big Game Puppy Bowl. In January 2023, the company selected
Auburn University as a partner in Destination 225°. In November 2022, the company teamed up with
Tiffany and Leon Chen to Surprise and Delight Customers onboard a flight from Austin-Bergstrom
International Airport (AUS) to Hartsfield-Jackson Atlanta International Airport (ATL) with sweet treats. In
September 2022, the company and the Aircraft Mechanics Fraternal Association reached a tentative
agreement for aircraft appearance technicians. In August 2022, the company partnered with Atlanta
International Airport to start trials of self-driving robot pods to support passengers with reduced mobility
(PRM).
Positive Outlook for US T&T Industry
The company is likely to benefit from the positive outlook for the US Travel and Tourism (T&T) industry. In
spite of being affected by the COVID-19 pandemic, the Travel and Tourism (T&T) sector is optimistic
about growth as vaccine distribution across the world gains momentum and economic activities return to
pre-Covid levels. According to the World Travel & Tourism Council (WT&TC), in 2028, the direct
contribution of the US T&T industry to the country’s GDP is expected to reach US$673.9 billion, while the
industry’s contribution to the US economy is expected to reach US$1,954.1 billion. Visitor exports are
expected to reach US$291.7 billion in 2028. The increase in investments to US$246.2 billion in 2028 is
likely to spur growth in the US T&T industry.
Threat
Fluctuations in Fuel Prices
The company’s business is highly dependent on the price and availability of aircraft fuel, and its
performance could be adversely affected by high volatility in fuel costs, increased fuel prices and
disruptions in the supply of aircraft fuel. The fuel market is volatile and changes according to market,
political and economic movements. Therefore, a modest decline or increase in prices could have a
significant impact on the company’s business operations. Several factors are responsible for such
changes including domestic and foreign supply of oil, global economic conditions, price and availability of
alternative fuels, governmental regulations, weather conditions and technological advances, among
others. Volatile prices could affect the company’s overall profitability.
Increasing Manpower Costs in US
Southwest Airlines Co
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Southwest Airlines Co
SWOT Analysis
Increasing manpower costs could increase the company’s operating costs and hamper its profits. The
tight labor markets, government-mandated increases in minimum wages and a higher proportion of fulltime employees are increasing labor costs. Effective January 2023, 24 states in the US increased their
minimum wages. Alaska, Florida, Minnesota, Montana, Nebraska, Ohio, South Dakota, and Vermont
increased their hourly minimum wage based on the cost of living to US$10.85, US$11, US$10.59,
US$9.95, US$10.50, US$10.10, US$10.80, and US$13.18, respectively. Arizona, California, Colorado,
Delaware, Illinois, Maine, Maryland, and Massachusetts increased their hourly minimum wages to
US$13.85, US$15.50, US$13.65, US$11.75, US$13, US$13.80, US$13.25, and US$15.00, respectively.
Whereas states such as Michigan, Missouri, New Jersey, Rhode Island, Virginia, New Mexico, New York,
and Washington increased their hourly minimum wages due to previously approved legislation to
US$10.10, US$12, US$14.13, US$13, US$12, US$12, US$14.20, and $15.74, respectively.
Stringent Airline Regulations
The company is required to comply with the Federal Aviation Administration (FAA) and Department of
Transportation (DOT) regulations under the provisions of the Federal Aviation Act of 1958. The FAA
prescribes standards and licensing requirements for both aircraft and components. The DOT regulates
economic issues that could affect air service, including competitive practices, consumer protection,
insurance, certification, and fitness and citizenship. The company is also subject to regulations by foreign
government agencies and aviation agreements signed between the US and other countries. The
company is subject to the U.S. Transportation Security Administration (TSA) that regulates aviation
security to ward off unauthorized access to freighter and passenger aircraft and prohibits firearms and
explosives on an aircraft and others. The company is subject to the US Environmental Protection Agency
(the EPA) regulating the air quality. Introduction or changes in the labor and employment regulations; and
administrative regulations could erode the profitability of the company. The company is also subject to
inspection by the FAA and other regulatory agencies, with non-compliance leading to possible fines and
other penalties.
Southwest Airlines Co
© MarketLine
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Copyright of Southwest Airlines Co. SWOT Analysis is the property of MarketLine, a
Progressive Digital Media business and its content may not be copied or emailed to multiple
sites or posted to a listserv without the copyright holder’s express written permission.
However, users may print, download, or email articles for individual use.
A Progressive Digital Media business
COMPANY PROFILE
Southwest Airlines Co
REFERENCE CODE: DEFBDE99-9B78-4A63-BE9C-7EA7568D476E
PUBLICATION DATE: 24 Nov 2022
www.marketline.com
COPYRIGHT MARKETLINE. THIS CONTENT IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED OR DISTRIBUTED
Southwest Airlines Co
TABLE OF CONTENTS
TABLE OF CONTENTS
Company Overview …………………………………………………………………………………………..3
Key Facts …………………………………………………………………………………………………………. 3
SWOT Analysis …………………………………………………………………………………………………4
Southwest Airlines Co
© MarketLine
Page 2
Southwest Airlines Co
Company Overview
Company Overview
COMPANY OVERVIEW
Southwest Airlines Co (Southwest Airlines) is a provider of passenger airline services. The company
provides point-to-point flight services that offer direct nonstop routing as compared to hub-and-spoke
service. It also offers high-frequency short-haul routes supported with the long-haul nonstop service
between markets such as Dallas Love Field and Houston Hobby, Denver Chicago Midway, Los Angeles
International and Las Vegas, Phoenix and Denver, Los Angeles and Nashville, Los Angeles and
Baltimore, and San Diego and Baltimore in the US. It also offers various ancillary services such as
upgraded boarding, EarlyBird Check-In, and transportation of pets and unaccompanied minors.
Southwest Airlines is headquartered in Dallas, Texas, the US.
The company reported revenues of (US Dollars) US$15,790 million for the fiscal year ended December
2021 (FY2021), an increase of 74.5% over FY2020. The operating profit of the company was US$1,693
million in FY2021, compared to an operating loss of US$3,816 million in FY2020. The net profit of the
company was US$977 million in FY2021, compared to a net loss of US$3,074 million in FY2020.
The company reported revenues of US$6,220 million for the third quarter ended September 2022, a
decrease of 7.6% over the previous quarter.
Key Facts
KEY FACTS
Head Office
Southwest Airlines Co
2702 Love Field Dr
Po Box 36611
Dallas
Texas
Dallas
Texas
USA
Phone
1 214 7924000
Fax
Web Address
www.southwest.com
Revenue / turnover (USD Mn)
15,790.0
Financial Year End
December
Employees
62,333
New York Stock Exchange Ticker LUV
Southwest Airlines Co
© MarketLine
Page 3
Southwest Airlines Co
SWOT Analysis
SWOT Analysis
SWOT ANALYSIS
Southwest Airlines Co (Southwest Airlines) is a provider of passenger airline services. Operational
performance, fleet network and business expansion are the company’s key strengths, even as increasing
trade receivables remains a cause for concern. Growth prospects for the aviation industry, a positive
outlook for the US T&T industry and growth initiatives could provide new opportunities to the company.
However, fluctuations in fuel prices, increasing manpower costs in the US, coronavirus (COVID-19) and
stringent government regulations could affect the company’s performance.
Strength
Weakness
Fleet Network
Operational Performance
Business Expansion
Increasing Trade Receivables
Opportunity
Threat
Positive Outlook for US T&T Industry
Growth Prospects: Aviation Industry
Growth Initiatives
Coronavirus (COVID-19)
Fluctuations in Fuel Prices
Increasing Manpower Costs in US
Stringent Government Regulations
Strength
Fleet Network
Southwest Airlines has a strong fleet network. Based on the US Department of Transportation’s most
recent data, the company is the US’s largest carrier in terms of originating domestic passengers boarded.
As of December 31, 2021, the company had 728 Boeing 737 aircraft of which 70 were finance leased and
67 were under operation. Out of 737 aircraft, 452 are Boeing 737-700; 207 are Boeing 737-800, and 69
are Boeing 737 MAX 8. The company also has plans to add 380 aircraft by 2026 comprising 219 MAX 8
Firm aircraft, 115 Max 8 aircraft and 30 Max 7 Firm aircraft. It served 107 destinations in 40 states, the
District of Columbia, the Commonwealth of Puerto Rico, and ten near-international countries: Mexico,
Jamaica, The Bahamas, Aruba, Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and
Turks and Caicos.
Operational Performance
Operational performance helps in enhancing investor confidence and the company’s ability to pursue
growth plans. Southwest Airlines recorded a strong operating performance in FY2021 during which it
recorded revenues of US$15,790 million, with an annual growth of 42.7%. The increase was primarily a
result of improvement in revenue of its Passenger, Freight and Other segments. The company reported
an operating income of US$1,693 million in FY2021 as compared to an operating loss of US$3,816
Southwest Airlines Co
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Southwest Airlines Co
SWOT Analysis
million in FY2020. The company’s operating margin was 10.7% in FY2021, which was higher than the
operating margin of -42.2% in FY2020. Its return on equity (ROE) was 9.4% in FY2021, significantly
higher than ROEs of -34.6% in FY2020.
Business Expansion
Southwest Airlines has strengthened its business operations by expanding the existing businesses that
complement its operations. An inorganic growth strategy enhances the company’s depth of expertise,
broadens its product and service portfolio, and increases its shareholder value. The company launched
six new destinations, which are Hilo International Airport, Cozumel International Airport, Miami
International Airport, Palm Spring International Airport, Montrose Regional Airport and Yampa Valley
Regional Airport. The company has plans to add other new destinations, which are Chicago O’Hare
International Airport, Sarasota Bradenton International Airport, Colorado Springs Municipal Airport,
Savannah/Hilton Head International Airport, Houston’s George Bush Intercontinental Airport, Santa
Barbara Airport, Fresno Yosemite International Airport and Jackson-Medgar Wiley Evers International
Airport in Mississippi.
Weakness
Increasing Trade Receivables
Southwest Airlines has reported an increasing trend in its trade receivables for the past years. Increasing
trade receivables could adversely affect the company’s cash flows. The company’s trade receivables
stood at US$490 million in FY2021, and US$320 million in FY2020, reflecting an increase of 34.6% over
the previous year. The company maintains a substantial amount of current assets in the form of
receivables. In FY2021, the company’s trade receivables accounted for 2.7% of its current assets.
Opportunity
Positive Outlook for US T&T Industry
The company is likely to benefit from the positive outlook for the US Travel and Tourism (T&T) industry. In
spite of being affected by the COVID-19 pandemic, the Travel and Tourism (T&T) sector is optimistic
about growth as vaccine distribution across the world gains momentum and economic activities return to
pre-Covid levels. According to the World Travel & Tourism Council (WT&TC), in 2028, the direct
contribution of the US T&T industry to the country’s GDP is expected to reach US$673.9 billion, while the
industry’s contribution to the US economy is expected to reach US$1,954.1 billion. Visitor exports are
expected to reach US$291.7 billion in 2028. The increase in investments to US$246.2 billion in 2028 is
likely to spur growth in the US T&T industry.
Growth Prospects: Aviation Industry
Southwest Airlines could benefit from the positive outlook for the global aviation industry, which could
drive the demand for its services in the aviation market space. According to the Airports Council
Southwest Airlines Co
© MarketLine
Page 5
Southwest Airlines Co
SWOT Analysis
International (ACI) report, the global passenger volume is projected to reach 20.9 billion by 2040, with an
annual growth of 4.1%. China is forecasted to be the largest air passenger market with 4.0 billion
passengers, a 19% share of the global air passenger traffic. The US and India are expected to be second
and third largest air passenger traffic markets with 3.1 billion and 1.3 billion passengers, respectively.
Emerging economies including Indonesia, Turkey and Vietnam are expected to play significant roles in
the global passenger traffic market. The global air cargo volume is also expected to reach 203.4 million
tonnes by 2040. It is also expected that over 20% of all air cargo could be handled in the US alone by
2040, while China and the UAE could be considered as the second and third largest air cargo markets.
The US, China and India are estimated to be the primary markets for global aircraft movements by 2040,
representing 21%, 16% and 4% of aircraft movements, respectively.
Growth Initiatives
Southwest Airlines taking various initiatives to drive growth. The initiatives are expected to strengthen the
company’s operations and increase its returns. In June 2022, the company announced an investment into
SAFFiRE Renewables LLC to develop and produce scalable, sustainable aviation fuel (SAF). In May
2022, the company launched a new fourth fare product in Wanna Get Away Plus providing travellers with
more flexibility and additional perks. In April 2022, the company launched new routes in San Diego and
San Jose Gain Big. In March 2022, the company announced the opening of a new Technical Operations
complex at Denver International Airport. In February 2022, the company and Travelport bring EarlyBird
Check-In to Travelport. In February 2022, the company collaborated with Luck Reunion to become the
Official Airline of Luck Reunion. In January 2022, the company launched interest-free payment
instalments to Hawaii with Buy Now Pay Later Leader, Uplift. In the same month, the company and iAero
Thrust signed an MRO services agreement to provide CFM56-7 engine hospital repair, on-wing support,
and test services.
Threat
Coronavirus (COVID-19)
The coronavirus (COVID-19) pandemic affected global economy severely. It resulted in huge human loss,
and protection measures such as isolation, lockdown, quarantine, and social distancing to contain the
spread of the virus brought economic activity to a standstill. It affected international economic and trade
functions, ranging from tourism and hospitality, medical supplies and other global value chains, consumer
electronics, and financial markets to energy, transportation, food, and various social activities. If the
pandemic continues to ravage the world, it might have a negative impact on the global economy.
Fluctuations in Fuel Prices
The company’s business is highly dependent on the price and availability of aircraft fuel, and its
performance could be adversely affected by high volatility in fuel costs, increased fuel prices and
disruptions in the supply of aircraft fuel. The fuel market is volatile and changes according to market,
political and economic movements. Therefore, a modest decline or increase in prices could have a
significant impact on the company’s business operations. Several factors are responsible for such
changes including domestic and foreign supply of oil, global economic conditions, price and availability of
Southwest Airlines Co
© MarketLine
Page 6
Southwest Airlines Co
SWOT Analysis
alternative fuels, governmental regulations, weather conditions and technological advances, among
others. Volatile prices could affect the company’s overall profitability.
Increasing Manpower Costs in US
Increasing manpower costs could increase the company’s operating costs and hamper its profits. The
tight labor markets, government-mandated increases in minimum wages and a higher proportion of fulltime employees are increasing labor costs. Effective January 2021, 21 states in the US increased their
minimum wages. Alaska, Florida, Minnesota, Montana, Ohio, South Dakota, and Vermont increased their
hourly minimum wage based on the cost of living to US$10.34, US$8.65, US$10, US$8.8, US$9.45 and
US$11.7, respectively. Arizona, Arkansas, California, Colorado, Illinois, Maine, Maryland and
Massachusetts increased their hourly minimum wages to US$12.15, US$11, US$13, US$12.32, US$11,
US$12.15, US$11.75 and US$13.5, respectively. Whereas states such as Michigan, Missouri, New
Jersey, New Mexico, New York, and Washington increased their hourly minimum wages due to previously
approved legislation to US$9.65, US$10.3, US$12, US$10.5, US$12.5 and $13.69, respectively.
Stringent Government Regulations
Airlines are subject to extensive regulatory and legal compliance requirements that result in significant
expenditures. For instance, the Federal Aviation Authority (FAA) is an authority body, which regulates all
safety issues in civil aviation operations. FAA’s safety jurisdiction includes aircraft maintenance and
operations such as equipment, ground facilities, dispatch, communications, flight training personnel, and
other matters affecting air safety. These will increase the aircraft operations cost significantly. The
company expects to continue incur expenses to fulfill the FAA’s regulations. These authorization laws,
regulations, taxes and airport rates and charges have also been imposed from time to time that
significantly increase operating expenses or reduce profit margins. As a result, complying with such laws,
regulations and actions increases the operating costs of Southwest Airlines which could have a significant
effect on its profitability and margins.
Southwest Airlines Co
© MarketLine
Page 7
Copyright of Southwest Airlines Co. SWOT Analysis is the property of MarketLine, a
Progressive Digital Media business and its content may not be copied or emailed to multiple
sites or posted to a listserv without the copyright holder’s express written permission.
However, users may print, download, or email articles for individual use.