Beruflich Dokumente
Kultur Dokumente
Brittany Bryant
Table of Contents
Case Statement
Vision Statement
Mission Statement
Milestone
Table 1: EFE Matrix
External Factor Evaluation
Table 2: IFE Matrix
Internal Factor Evaluation
SWOT Analysis
Industry Analysis
Table 3: SWOT Matrix
SO Strategies
WO Strategies
ST Strategies
WT Strategies
Financial Analysis
Table 4: Ratios
Strengths and Weaknesses
Short-Term Capital
Long-Term Capital
Working Capital
Capital Budgeting
Dividend Pay-out
Investors and Stockholders
Financial Managers
Table 5: QSPM Matrix
Recommendation
Implementation Plan
Marketing
Operations
MIS
Financing
Table 6: EPIS/EBIT Analysis
References
Appendix A: Projected Statements
Appendix B: Income Statement
Appendix C: Balance Sheet
Senior Project – Southwest Airlines 3
Case Statement
Southwest Airlines is challenged by a high competitive industry with low cost flights
“To become the world’s most loved, most flown, and most profitable Airline.”
The vision statement for Southwest Airlines seems short and sweet. It tells everyone what
they want to become and what is to be expected of future growth. The only issue I see is using
the same word redundantly; most. Having a word repeated several times can lose customer’s
attention. The one thing I would add to the vision statement would be to include family oriented
service delivered with a sense of warmth, friendliness, individual pride, and company
The Mission statement is straightforward and to the point. It explains what their business is
about; dedication, but it does not detail what they want. Within the mission statement, I have
notices 6 of the 9 components are used in Southwest Airlines mission. The six that are used are:
customers, products/services, philosophy, self-concept, public image, and employees. In the brief
description they have for the mission statement, their products/services flow within the
Senior Project – Southwest Airlines 4
customers because this company is dedicated to making their customers happy, making them feel
Milestones
Southwest Airlines was formed in 1967 by Rollin King and Herb Kelleher. This airline is
a U.S based carrier and the largest low-cost carrier in the world. Southwest is dedicated to giving
their customers and employees the best experience they have to offer in the airline industry.
Below are a few milestones that I picked off Southwest Airlines company page, showing
what they have done. I thought these selective milestones fit well with a background to the
assessments.
Spanish-speaking customers the best online experience in the language of their choice. (Major
Initiatives. (n.d.).)
Southwest announced that movies on demand are now available on all Wi-Fi-equipped
Southwest aircraft for only $5 per movie, per device. The airline also announced an upgrade to
their television package. Now, in addition to eight channels of live news and sports, Customers
can also select on-demand episodes of popular television shows. (Major Initiatives. (n.d.).)
Senior Project – Southwest Airlines 5
Southwest Airlines partners with Points International Ltd., announced that members can
now buy, gift, and transfer Rapid Rewards Points to friends and family through the Rapid
Just in time for the busy holiday season, Southwest Airlines announced that the airline
will officially join the Transportation Security Administration's (TSA) expedited screening
program known as TSA Pre Check. Beginning immediately, select Rapid Rewards Customers
will be able to use dedicated security checkpoint lanes for TSA Pre Check benefits. The
expedited screening process allows Customers to leave on shoes, light outerwear, and belts as
well as keep laptops and 3-1-1 compliant liquids in their bags. (Major Initiatives. (n.d.).)
Southwest announced that 73 nonprofit hospitals and medical organizations from across
the nation have been selected for the Southwest Airlines 2014 Medical Transportation Grant
Program, with the total impact touching 99 facilities. Through the program, participating
nonprofit hospitals and medical programs can provide complimentary, roundtrip airline tickets to
families who are facing serious illness and need to travel for specialized medical care. Being able
to fly for free to receive the best medical treatment available eases the financial burden on
families, giving those who are already facing so much one less thing to worry about. In 2014,
Southwest provided more than $2.8 million in free transportation to caregivers and patients
I picked these 5 milestones because they explain some of their services and products they
are starting to offer. It also shows how much their company has grown over the year with making
improvements to help families in need, especially ill patients. Also, as I have clarified in the
mission statement components above, earlier in the paper, these milestones show the
accomplishments that Southwest Airlines have made and shows significant improvement in their
company.
2. Advertising
3. Low costs
4. Expanding internationally
These factors carry a weight of .09 or higher and are important opportunities for
Southwest. Having a good safety record attracts customers and makes it easier to market your
company. With Southwest being the largest airline, they keep prices lower, so they do not lose
customers. Southwest makes sure that all customers needs are met and that their top priority to
keep the company running. Expanding this airline internationally will increase their profit
significantly and is a wonderful opportunity for the company to invest in to increase their profits.
The threats that Southwest must cross are their competitors. While they have multiple
competitors, they must stay ahead and make the first move on discounts and deals because there
are several companies to compete with. With their opportunities they are facing, they do not have
too many high priority threats. Fuel prices are a medium threat because when fuel prices go up,
the ticket prices could possibly go up. This affects customers from using your online and profit
to decrease.
Senior Project – Southwest Airlines 8
Southwest Airlines has grown their company out by advertising their products and
services, announced throughout the world. Advertising has a high rating as it is important for a
company to gain customers and target their potential customers. Having a good safety record is
another excellent strength for the company to have because it keeps your customers comfortable
and satisfied. With Southwest using their only model of plane, it becomes a strength by the
SWOT Analysis
Throughout this case study on Southwest Airlines, it shows that their dedicated to giving
their customers the upmost service as well as their employees. This company has become
profitable, facing many of their threats and weaknesses by expanding their company into a
bigger one, making shorter trips, no baggage fees, and low costs. This study shows that
Southwest is the largest airline and has continued to upgrade their company. Although they have
upgraded, ticket prices have been able to stay at a lower price due to the continuous customers
Industry Analysis
Porter’s Five Forces Model contains key forces that affect the company within an
industry. The five forces that we will be analyzing against the competition with Southwest
Airlines are:
Rivalry among
the
competition
Possible Bargaining
substitute power of
services suppliers
The rivalry in the airline industry is very high. Southwest’s competitors are low-cost
carriers offering similar services which has made the industry very competitive among other
Senior Project – Southwest Airlines 10
companies. Southwest has managed to increase their market share and has potential to open to
the international market for transportation. To stay competitive, Southwest needs to actively seek
for upgraded services and provide low-cost transportation. Also, Southwest is starting to offer
wider seats for their Boeing, which has helped them in the industry, competition wise. (Josephs,
Potential for new competitors in the airline industry for Southwest seems to be low.
Southwest Airlines has established their brand through their low-cost services. They have many
investments and have made growth over the past years. With these factors coming into play and
their friendly services, it will make things difficult for any new companies coming into the
airline industry.
The suppliers have low bargaining power due to them needing to accept the terms of
airline companies for which all airlines have a manufacturer supplying their products that are
needed. Southwest cannot bargain with suppliers because it risks their business from growing.
The threat of substitute transportation is very low because Southwest Airlines would be
irreplaceable due to their low-cost prices and their new upgraded amenities. The only way this
airline could be taken out is by another company that has been around for several years. Most
airline companies have been in service for over 10 years and that would be hard to compete with,
The two types of buyers this airline has are individual and group travelers. When using
the travel agents, they have a higher bargaining power than individuals because the cost of
switching to another competitor is highly unlikely due to the cost savings Southwest provides.
Senior Project – Southwest Airlines 11
Strengths Weaknesses
1. Low Costs 1. Limited A.M Flights
2. Good Employees 2. One Class Seating
3. High Capacity of Passengers 3. Limited Cargo Space
4. Advertising 4. Fuel Prices
5. Largest Airline 5. One model of plane
6. Good Safety Record 6. Only Domestic Flights
After identifying and matching the opportunities, threats, strengths and weaknesses to
create potential strategies, the strategies need to be explained in detail. I have found eight
SO Strategies
Southwest Airlines offers discounts to seniors and active military along with veterans.
They have had success in continuing their discounts, so creating more would help. Creating
Senior Project – Southwest Airlines 12
discounts for multi-family member could gain revenue and new customers because some
families tend to drive due to their cost per ticket. Giving discounts on tickets for students having
As the employees tend to leave a great impression on the customers, they should be
rewarded. Giving the employees incentives for getting compliments from their customers will
greatly increase their motivation to remain good employees. Not only does it increase their
motivation, it boosts their morale to be a better person, to also feel like the company cares about
their employees.
WO Strategies
Southwest Airlines operates with only one model of plane. A possible upgrade to gain
more customers would be to upgrade to a newer model airplane and add Wi-Fi. This opportunity
would increase sales due to targeting more potential customers with the innovative ideas. To
increase cash flow, expanding their services to all 50 states would also increase the market value
and strengthens them amongst the competitors. Customers would be more likely to use
Southwest for their travels due to the expansion among the states.
Offering first class or business seating would be beneficial to the company because many
business/professional workers fly state to state for work related reasons. Having this amenity
would increase their potential for growth in customers and an increase in sales. Upgrading this
specific idea would need lots of discussion because more employees would need to be added for
the extra positions and for that to happen, the budget would need to be analyzed.
Senior Project – Southwest Airlines 13
ST Strategies
their customers feel secure and so that the workers each get their vacation times and days off.
Also, terrorism has been known in the airline industry so it’s always good to thoroughly check
bags and customers. When doing so, this has created Southwest Airlines to have a good safety
WT Strategies
Offering first class or business seating would be beneficial to the company because many
business/professional workers fly state to state for work related reasons. Having this amenity
would increase their potential for growth in customers and an increase in sales. Upgrading this
specific idea would need lots of discussion because more employees would need to be added for
the extra positions and for that to happen, the budget would need to be analyzed.
Financial Analysis
An analysis of Southwest Airline’s income statement shows that the company’s annual
revenue has grown substantially in the past few years. The annual revenue for Southwest
Airlines has increased by $3 billion in the last 4 years and is expected to keep growing. Another
strength for Southwest is their Net Income. Their Net Income has reached approximately $3.5
billion which shows that their doing well with they’re company. The financial ratios given below
were retrieved from Southwest Airline’s updated income statement and balance sheet. With the
provided ratios below, it shows that the company has been growing steadily each year in their
financial department.
Senior Project – Southwest Airlines 14
Table 4: Ratios
Industry
Ratio 2014 2015 2016 2017 Average
Current Ratio 0.66 0.54 0.66 0.70 0.51
Quick Ratio 0.74 0.54 0.65 0.69 0.36
Fixed Asset Turnover 2.43 2.29 1.93 1.88 N/A
Total Asset Turnover 0.92 0.92 0.87 0.84 N/A
Debt to Equity Ratio 0.44 0.45 0.46 0.49 1.09
Return on Sales 2.06 1.90 1.67 1.00 N/A
Return on Assets 5.8% 10.2% 9.6% 13.9% 6.9%
Return on Equity 16.8% 29.6% 26.6% 36.2% 32.5%
EPS 1.55 1.43 1.54 1.87 6.04
P/E Ratio 25.14 12.95 13.9 11.28 10.49
The ratios above show that Southwest Airlines financials improved in the end of 2017.
The company has been in a good standing point financially. Comparing the average for 2017 to
the industry average, it shows that Southwest Airline’s stayed well above the industry average
for most ratios that are shown above. A weakness in the ration is EPS. EPS is a part of the
company's profit allocated to each outstanding share of common stock, which also serves as an
indicator of the company’s profitability. Even though the EPS is not as high as industry average,
their profitability has been steadily increasing since 2011. Southwest Airlines established 45
The return on assets compared to the industry is doubled at 13.89%. Southwest Airlines
makes more profit than the industry average meaning the business is doing extremely well. This
increase with profit means that Southwest has gained more customers due to sales increasing.
Senior Project – Southwest Airlines 15
With the return on assets showing a significant increase, this has affected the company in a
positive way.
When looking at the Debt to Equity ratio, Southwest Airlines is at a great number.
Having too high of this ratio means that you don’t have enough cash generating to meet the
obligations and having too low means that you’re not risking the potential for financial leverage
from the profits. While the Debt to Equity ratio is .49 for Southwest Airlines, the industry
average is twice that number at 1.09. Southwest Airlines isn’t pushing their boundaries and
Southwest Airlines can raise short-term capital when needed. Due to their financial
performance improving, Southwest Airlines can raise capital through their debt as they are
When looking at the debt to equity ratio, it is significantly lower than the industry
average. With the ratio of .49, Southwest Airlines will have no issues raising long-term capital
Working Capital
Southwest Airlines has working capital of $798 million, meaning the company can run
After analyzing the financial statement and ratios, Southwest Airlines seems to have
excellent capital budgeting procedures. With the debt to equity ratio improving yearly, this
shows us that Southwest has stable procedures compared to others in the Airline industry.
Dividend-Payout Policy
Southwest Airlines dividend payouts have increased yearly, showing that this company is
successful and shows loyalty to all investors involved within their business.
Southwest has good relations with their stockholders and investors. Their investors and
stockholders are updated on a necessary basis and all financial information is there when needed.
While looking on Southwest Airlines webpage, it shows an investor relations tab and an option
The financial managers of Southwest have done a great job keeping all the financial
issues under control and managing the company’s potential threats within the finances. As their
financial managers improve their ability to successfully keep the company on good standards,
they have also created it to be more profitable than the industry average.
Senior Project – Southwest Airlines 17
Government
0.02 1 0.02 1 0.02 1 0.02
3 Regulations
4 Terrorism 0.01 2 0.02 2 0.02 1 0.01
5 One Class Seating 0.02 2 0.04 1 0.02 4 0.08
6 One Model of Aircraft 0.04 4 0.16 3 0.12 3 0.12
7 Low Economy 0.01 2 0.02 1 0.01 1 0.01
8 Limited Security 0.01 2 0.02 2 0.02 1 0.01
Limited International
0.05 3 0.15 4 0.20 2 0.10
9 Flights
10 Cargo Space 0.01 2 0.02 1 0.01 1 0.01
STAS 4.34 5.80 3.44
Strategies
Among all the possibilities of different strategies to help Southwest perform better
financially and to keep their company in the top competitive list, I picked three strategies that
could potentially help boost these issues. The first strategy that I have chosen was to add more
airplanes to Southwest. By adding more airplanes, this gives them the possibility of upgrading to
a different model that could have additional seating for first class/business. This could add profit
by gaining customers that are interested in the higher-class seating, such as people that travel for
business leisure. Expanding international/domestic flights is the second strategy that I would
suggest for Southwest as its rating is 5.80. This strategy also fits in with the first strategy.
Expanding the flight route would gain more customer’s and you would be profiting from this
strategy. With adding new planes/upgrading, this would give them a better chance to expand
their flights as they would have extra planes to use. The last strategy is offering first
class/business seating. As explained in my first strategy, upgrading or getting new planes would
make it more efficient to have this option but isn’t always suggested.
With all three of these strategies flowing together, I based my solution from the QSPM
Matrix that had the highest total. Expanding international/domestic flights had the highest total
Senior Project – Southwest Airlines 19
out of these strategies. With this solution being put into place, they could potentially gain several
new customers as they’re ranked number 1 on the list of top competitors for the airline industry.
Implementation Plan
changes to make this strategy happen. For changes to happen and to create this expansion, they
will need to add more airplanes to their company to create more flights. The CEO, Gary Kelly
and executive vice president, Tom Nealon are excellent innovators and fit right for this plan.
Tom Nealon will oversee accurately performing this strategy and make sure things go as
planned.
Marketing
The marketing for Southwest Airlines is ran by Ryan Green. He is the chief producer of
marketing the expansion internationally for Southwest. With the way the marketing team is ran,
there will be two teams; one team for marketing the change to all their customers and another
team for marketing the prices and letting their customers know and potential customers that their
Operations
The operations team will seek out the best locations for airports with the greatest amount
of people and or traffic. During the process of expanding internationally, not only will land be
bought for adding new airports, but they will be adding on new airplanes to the existing
branches. With that into consideration, the operating cost needs to be kept low due to Southwest
being an affordable and loyal company. The people who oversee the operations are Alfred Smith,
Senior Project – Southwest Airlines 20
Steven Goldberg and Craig Drew. The ground operations are handled by Steven Goldberg.
Goldberg oversees the airports, making sure safety requirements are all met. Craig Drew
oversees the air operations and Alfred Smith is the senior vice president of the operations.
MIS
goals as they compete against several airline companies. Randy Sloan, who is senior vice
president and CIO, will be making sure that MIS is functioning properly, and no issues are a
concern. The biggest issue that is faced technologically is making sure the system works
Financing
To obtain the funds needed Southwest Airlines can use debt, stock, or a combination of
both. Below is an EPS/EBIT analysis to show which option would be the best for raising the
Interest rate: 5%
When evaluating the analysis above, Southwest Airlines should use debt to finance the
strategy of expanding its market internationally. If using debt to finance this strategy, it will be
useful and help in the long run to gain knowledge of known expenses and a better profit at the
References
Bhasin, H., BhasinI, H., & Facebook. (2018, February 17). SWOT Analysis of Southwest
https://www.marketing91.com/swot-analysis-southwest-airlines/
southwest/index.html?clk=GFOOTER-ABOUT-ABOUT
intelligence-success.com/southwest-airlines-swot-analysis.html
Jansen, B. (2016, October 26). Southwest: Competition from 'ultra-low-cost carriers' is soaring.
Retrieved from
https://www.usatoday.com/story/travel/flights/todayinthesky/2016/10/26/southwest-low-
cost-carrier-competition/92782630/
Southwest Airlines: Deregulations Biggest Success Story. (n.d.). Deregulation and Competition:
airlines-strategically-positioned-long-term-success
LUV Financials | Southwest Airlines Company Stock. (2018, July 12). Retrieved from
https://finance.yahoo.com/quote/LUV/financials?p=LUV
us/money/stockdetails/financials/fi-126.1.LUV.NYS
Senior Project – Southwest Airlines 23
https://seekingalpha.com/article/4126469-southwest-airlines-consistently-profitable-long-term-
price-dividend-growth-potential
Josephs, L. (2018, January 04). Southwest Airlines to Boeing: We'll take the large.
max-8s-soon.html
Levine-Weinberg, A. (2018, May 22). Southwest Airlines Will Return More Cash to
will-return-more-cash-to-shareh.aspx
https://www.streetinsider.com/dividend_history.php?q=luv
http://www.southwestairlinesinvestorrelations.com/?clk=GFOOTER-ABOUT-INVESTOR
Southwest Airlines prepares for more growth with new international concourse. (2017,
airlines/2017/06/02/southwest-airlines-prepares-growth-opening-new-international-concourse
expansion-be-a-big-part-of-southwests-future-growth-strategy-cm686269
Gallo, C. (2018, March 28). How Southwest Airlines Uses Emotional Storytelling to
https://www.forbes.com/sites/carminegallo/2018/03/28/how-southwest-airlines-uses-emotional-
storytelling-to-connect-with-its-customers/#6e9be40556ea
Team, T. (2018, February 26). Breaking Down Southwest Airlines' Flight Operating
down-southwest-airlines-flight-operating-costs/#63dcbd901432
Senior Project – Southwest Airlines 25
Liabilities
Accounts Payable 1,520,000 1,620,000 1,720,000
Other Current Liabilities 3,660,000 3,860,000 4,060,000
Total Current Liabilities 5,180,000 5,480,000 5,780,000
Long-Term Debt 3,340,000 3,339,000 3,338,000
Other Long-Term Liabilities 5,434,000 6,134,000 6,634,000
Total Liabilities 13,954,000 14,953,000 15,752,000
Equity
Common Stock 808,000 808,000 808,000
Retained Earnings 15,973,647 17,441,442 19,043,196
Treasury Stock (6,850,000) (7,350,000) (7,850,000)
Paid in Capital & Other 1,471,000 1,491,000 1,511,000
Total Equity 11,402,647 12,390,442 13,512,196
Operating Expenses
Research Development - - - -
Selling General and
224,000 232,000 218,000 207,000
Administrative
Non-Recurring - - - -
Others 2,368,000 2,239,000 2,061,000 1,998,000
Total Operating
17,716,000 16,468,000 15,691,000 16,217,000
Expenses
Operating Income or
3,455,000 3,957,000 3,957,000 2,388,000
Loss