The Southwest Airline
Introduction
The Southwest Air was established in 1971 by Harb Keller to fly people safely, cheaply, and conveniently within the state of Texas, first flying between Dallas, Houston, and San Antonio (Wheelen & Hunger, 2009). Southwest airline has grown to be one of the biggest airline companies in the United States of America. The airline serves over fifty cities in twenty- seven states and has some 2500 flights every day (Wheelen & Hunger, 2009). Southwest is America’s leading short distance, point-to-point carrier, and has gained a unique record for any airline worldwide by being consistently profitable for over forty years. The Southwest Air is known to be dynamic and responsive through profit-sharing schemes and employee empowerment which encourages them to work hard and deliver high levels of service consistently. Southwest operates with a low-cost policy to its clients and works with a comprehensive and broad base of clients. Southwest is one of the most attractive airline carriers in the continent as it offers the lowest combination of aircraft fares to its clients (Wheelen & Hunger, 2009). Southwest airline has grown to be very popular and has become an iconic brand in America, flying over one billion passengers without a single fatal accident.
The airline industry is characterized by constant change and has had a dynamic development within the last years. The airline industry development is not only influenced by the industry actors but also by its structures and institutional surroundings. The development of the airline industry shapes the industry actors and competition structures. The ongoing development of the airline industry is of high practical relevance due to the industry’s importance as an enabler for social exchange, transportation, and international trade and a provider for employment. The airline industry is the world’s largest industry employing one in nine workers and is the heart of travel and tourism (Wheelen & Hunger, 2009).
Macro-Environmental Analysis
A macro-environmental analysis is an essential part of systematic strategic planning, and it involves companies analyzing environments that they have no control over. The purpose of the macro-environmental analysis is to identify possible opportunities and threats that have an impact on the company, enabling it to make appropriate decisions concerning the issues identified.
PESTEL Analysis
The PESTEL analysis is a framework used to evaluate the external environment of a company by breaking down the opportunities and threats into Political, Economic, Social, Technological, Environmental, and Legal factors.
Political Analysis
Political factors play a crucial role in determining the factors that can impact the profitability of Southwest airline in a particular country or market. Due to the company’s operations in different countries, Southwest airline is exposed to different types of political environment and political system risks. Southwest airline domestic operations are significantly influenced by the Federal Aviation Administration (FAA) (Pratap, 2019). Airlines have regularly complained of aggressive regulation by the FAA. The tax burden on airlines continue to increase, and the tax rate in the aviation industry are higher than any other industry. Airlines acknowledge that the aviation industry’s political regulation is a significant impediment to growth. Any changes in the U.S government policies on taxes, transportation, fuel, marketing, and production can negatively impact the revenues of Southwest airline (Pratap, 2019).
Economic Analysis
In the Southwest airline, the customer demand for low-fares has remained undeterred and has undergone growth. For the last forty years, the company has maintained a profitable constant (Richards, 1996). Most of the sales and revenue of Southwest airline come from the United States, which has continued to be profitable for the brand. The airline industry is sensitive to changing economic conditions, and economic uncertainty could significantly hurt the profitability of the airline industry in the future. Competition in the airline industry is a significant factor affecting the growth and profitability of Southwest airline (Pratap, 2019). Higher competition in the airline industry has resulted in higher operational and marketing costs.
Socio-Cultural Analysis
The Southwest airline is known for its customer focus and strong commitment towards customer service, which are key sources of competitive advantage for it. Southwest employees not only donate to charities but also volunteer for community projects (Feng, 2006). Southwest airline company hires customer service employees based on their attitude regardless of experience. The social image is an essential factor in terms of customer loyalty, demand, and marketing.
Technological Analysis
The Southwest airline has continued to keep up to date with technological advancements that are being introduced every day. The company has existing systems such as Google Pay Enabled Boarding passes and updated messaging systems that offer high customer convenience (Pratap, 2019).
Environmental Analysis
Southwest airline continues to improve its fuel efficiency and invests in controlling greenhouse emissions and recycling material to reduce its impact on landfill (Pratap, 2019). The company encourages its employees to volunteer for environmental projects, which helps the company project a good image.
Legal Analysis
Southwest airline has been involved in various legal tussles. For example, the 1979 ‘Wright Amendment’ prohibited the airline from flying non-stop from Dallas Love Field to any other than seven permitted cities (Richards, 1996). The Wright Amendment recommendations are still being eliminated in phases limiting the company’s service delivery.
Industry Analysis
Over the past few years, the airline industry has not experienced consistent growth or decline. The industry seems relatively concentrated, and entry is relatively low. This shows that the airline industry is in the maturity stage of the industry life cycle (Richards, 1996).