Read through Case 20—Southwest Airlines in 2010: Culture, Values, and Operating Practices Begin with

Read through Case 20—Southwest Airlines in 2010: Culture, Values, and Operating Practices Begin with a SWOT analysis, in which strengths include the firm’s market share and weaknesses include the firm’s cost trends.

Expert Answer

Strength Weakness
  • The man focus of firm’s operating strategy is on point to point trips
  • The company has substantial fleet operations with 537 Boeing 737 aircrafts.
  • It has a very strong presence in North America with more than 101.3 million passengers in 2009.
  • It is known for having the most friendly staff as it was selected as “Friendliest Flight Attendants and Crew” in a survey conducted by Smarter Traveler readers.
  • It is considered to be the largest airlines in the world in terms of highest number of     passengers per year
  • Firm has attained economies of scale and is in industry for more than 40 years.
  • Despite having 82% employees as unionized, it offers flexible working hours.
  • It has a very strong brand name in low fare aviation industry and thus it is expanding its market.
  • In comparison to any other American airline, it has the highest domestic departures.
  • High Current Ratio
  • High Quick Ratio
  • High Cash Ratio
  • Low Debt-to-Assets
  • High Times Interest Earned
  • High Net Working Capital Turnover
  • High Gross Margin
  • High Operating Margin
  • High Pre-Tax Margin
  • High Profit Margin
  • High Pre-Tax ROA
  • High After Tax ROA
  • High Pre-Tax ROIC
  • High After Tax ROIC
  • Long Accounts Payable Turnover (days)
  • Falling margin profits from 2007 – 2009
  • Depends mainly on passenger revenues which is almost 95%.
  • Rely heavily on Boeing.
  • Conservative growth strategy
  • Only 57 cities are covered domestically.
  • Booking is done onlu through company owned counters.
  • No market segmentation policy
  • Limited ability to carry freight and cargo
  • Low market share – 10.8% compared to market leader (15.2%)
  • High Debt-to-Equity
  • High Long-term Debt to Net Working Capital
  • High Days of Inventory (days)
  • Low Operating Cycle (days)
  • Low Total Asset Turnover
  • Low Fixed Asset Turnover
  • Low Accounts Payable Turnover
  • Low Cash Turnover
  • Low Pre-Tax ROE
  • Low After Tax ROE
  • High Inventory to Net Working Capital
Opportunity Threat
  • Domestic airline industry is expected to grow by 2.3% per year till 2025.
  • By acquiring Air Tran, the firm can have reach in global aviation too.
  • Improved performance of tourism in USA which has a growth of 3-4% in 2010.
  • By having joint ventures with Volaris, it can expand its operation.
  • Due to fuel efficiency and aerodynamics , longer flight hours are possible.
  • Traveler traffic is expected to grow by 3.5% through 2019
  • Due to economic turmoil, a lot of competition and reduced profits.
  • Low fare policy can be threaten by high price of oil.
  • Low flying frequency due to higher unemployment and inflation.
  • Greater regulations from government.h

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