Southwest Airlines Case Study

Political factors of Southwest Airlines

The major impact of the political factors are on the Political stability and importance of Regional Airlines sector in the country's economy.

In addition, the Risk of military invasion, Level of corruption - especially levels of regulation in Services sector, Bureaucracy and interference in Regional Airlines industry by government. In addition, the Taxation - tax rates, incentives, Wage legislation, Work week regulations in Regional Airlines and Mandatory employee benefits also have impact on the airline business. Even after deregulation, the aviation industry has remained most regulated, where the overall taxes are higher than other industries. According to Airlines for America, the level of taxes grew by more than 400 percent between 1990 and 2016.  In 1990 while the industry paid only $3.7 billion in taxes, in 2016, the level of taxes grew to $23 billion. The main regulatory bodies overlooking the regulation of the US aviation industry are the DOT affects the operations of Southwest Airlines.

Economical factors of Southwest Airlines

The economic system in countries affects the operations of the airline companies, where the Government intervention in the free market and related Services directly hinder the profits of the company. In addition, the Exchange rates & stability of host country currency and the efficiency of financial markets have negative impact on the overall conditions of the organisation. Moreover, most of the sales and revenue of Southwest Airlines come from the US which has proved profitable for the brand. The major limitation of the economic conditions for the airline industries are as follows the Skill level of workforce in Regional Airlines industry, Education level in the economy, Labour costs, productivity in the economy, Business cycle stage, Economic growth rate, Discretionary income, Unemployment rate, Inflation rate and Interest rates. In 2018, its operating revenues grew to around $22 billion from $21.15 billion in 2017. Higher competition in the airline industry has led to higher operational and marketing costs. The battle for market share continues to intensify, threatening the market share of Southwest Airlines.

Social factors of Southwest Airlines

The socio factors affecting the operation of the organisation are demographics and skill level of the population, Class structure, hierarchy and power structure in the society. In addition, the organisation also allows Education level as well as education standard in the Southwest Airlines Co. industry. The management focuses on impacting the Culture, Entrepreneurial spirit, broader nature of the society. Social factors affect the airline industry in other ways as well. The level of technological and economic awareness in society can affect demand for air travel. he importance of sociocultural factors in the context of business has also kept growing. Demographic factors are affecting businesses in various areas including marketing and domestic and international operations. The social image of airlines is also an important factor in terms of demand, customer loyalty, and marketing. In order to maintain a strong social image, airline companies including Southwest are investing heavily in social responsibility and the environment.

Technological factors of Southwest Airlines

In addition, the technological impact on the recent technological developments by Southwest Airlines Co. competitors. Moreover, the company provide Technology's impact on product offering, where the impact is on cost structure in Regional Airlines industry. Moreover, the impact on value chain structure in Services sector and Rate of technological diffusion is seen. Apart from fuel-efficient aircraft, increased digitalization and safer flight technology are important for airline businesses like Southwest Airline to succeed in a highly competitive environment. Since its foundation, Southwest Airlines has relied mainly on Boeing 737 aircraft because of its high fuel efficiency.

Environmental factors of Southwest Airlines

The environment factors affecting te operations of the organisation are Weather, Climate change, Laws regulating environment pollution, Air and water pollution regulations in Regional Airlines industry, Recycling, Waste management in Services sector, Attitudes toward “green” or ecological products, Endangered species and Attitudes toward renewable energy. These laws cover emissions from aircraft as well as disposal of jet fuel, chemicals, hazardous waste, and aircraft deicing fluid. Some of the key focus areas in the context of environmental responsibility are climate change and aircraft noise. While new laws are also being considered by governing authorities, Southwest voluntarily investigates areas where its operations could have an adverse impact on the environment. In 2018, it continued to improve its  CO2e intensity ratios for the seventh consecutive year. From 2020, it has committed to purchase sustainable aviation biofuel from Red Rock Biofuels. The company also recycled 3,757 tons of material in 2018 which will reduce its impact on landfills.

Legal factors of Southwest Airlines

The overall legal factors affecting the operations of the organisation are anti-trust law in Regional Airlines industry and overall in the country, Discrimination law, Copyright, patents / Intellectual property law, Consumer protection and e-commerce, Employment law, Health and safety law and Data Protection law. At the time the order was passed, there were 31 planes of the Max 8 model in its fleet which were grounded. In 2019, the FAA also carried out an investigation against Southwest for baggage related discrepancies. Legally speaking, it is still among the most compliant airline businesses. The number of laws governing the airline industry has still kept growing and therefore focusing on compliance has obviously good results in both the short and the long term. There is a large and complex web of laws that affects the airline industry in the US. Even after the deregulation in 1978, there are so many laws that affect the US airline industry and carriers.

Strengths of  Southwest Airlines

LUV Culture states about Making every customer feel like a part of the family is an effective way to enhance customer loyalty. Lower Cost is one of the reasons behind Southwest Airlines’ large number of loyal customers is its low-cost flights, where flight tickets start as low as $45. Southwest Airlines has consistently been ranked as one of the best employers in America. In addition, the Southwest Airlines in 2019 was ranked #11 Fortune’s most admired company in the world. Until 2020 the organisation attained high profits consistently going into business. Capital for expansion and R&D in 2019, Southwest Airlines led to the profits of 47 years consecutively. Southwest Airlines is the 4th most valuable airlines brand in the world, with a brand value of $6.6 Billion. Southwest Airlines provide direct non-stop flights under its point-to-point service, which reduces time-wastage.

Weaknesses of  Southwest Airlines

Over dependence on a single revenue source exposes a company to catastrophic loss in case of uncertainty or economic turmoil within that sector, which leads to Lack of Diversification. Southwest Airlines does not offer international flights and depends on the domestic US market completely (with the exception of few tropical vacation islands. Southwest Airlines has depended solely on Boeing 737s, where the grounding of Boeing 737 MAX resulted in a loss of revenue due to fewer planes.

Opportunities available to  Southwest Airlines

Southwest Airlines recently expanded its local flights to Hawaii and can expand further to cater to the increasing air travel in emerging economies due to globalization and improved financial situation. In 2019, Southwest added PayPal and Apple Pay to its website, mobile app, and in-flight WiFi purchase page. Southwest airlines can expand its freight business to tap into the ever-growing global logistics market with a market size of $6 Trillion in 2019.

Threats  Southwest Airlines have to face

From South East Asia to Europe, Africa, America, and Australia, economies across the world are nose-diving into economic turmoil due to uncertain times. Boeing’s Max aircraft are crucial for Southwest Airlines’ growth plans and modernization initiatives. With the grounding of Boeing 737 Max. From Jet Blue to Delta, American, Spirit, United, and Alaska, Southwest Airlines faces intense competition from other players in the US Airline industry.