The Future of Southwest Airlines

Introduction

Did you know, at any given second, there can be as many as 5,000 commercial airplanes in the sky flying people around (Eveleth, 2012). The number of flights leaving the runway in the airline industry is constantly growing. Southwest Airlines, an airline industry headquartered in Dallas, Texas, is one of the most popular airline industries in the world. They were founded in 1971 by Herbert Kelleher and Rollin King. They serve 120 million customers yearly, and have 99 different airline locations in the U.S (Smith , 2018).

With the airline industry growing, Southwest plans to stay competing to be named the top competitor.

Successfulness of Southwest Airlines

Southwest Airlines is currently at the top of the industry in airlines. According to Investopedia (2015) Southwest Airlines is successful for many reasons:

Southwest Airlines' business model leverages extremely efficient operations, deep focus on the customer experience, low-cost pricing and logistics solutions, active forward thinking, and a motivated team of employees and associates. Through this sound strategy, Southwest has achieved multiple competitive advantages that have allowed it to stay relevant in the face of an evolving landscape.

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(para. 1)

Being successful starts with hiring the right recruits. Southwest focuses deeply on hiring the right people and treasure the fact that their employees are friendly, approachable, and team players (Investopedia, 2015). To go along with hiring the right employees, Southwest ensures flexible policies to all of its customers to make sure that flying with the airline is a breeze. They promote a cancellation policy that lets customers cancel their flight up to 30 minutes before departure.

This policy maintains customer satisfaction and good brand loyalty (Investopedia, 2015). Similarly, Southwest offers one of the better rewards programs in the entire industry. Every flight gains customers points towards earning discounts on future flights. They also have cut some minor cost to ensure lower prices compared to other airlines such as Delta and American Airlines (Investopedia, 2015). Lastly, Southwest continues to look for improvement and innovation. They recently acquired Airtran, which has helped to expand services and gain market share. They are also always looking for lower cost solutions to increase capacity which would increase revenue (Investopedia, 2015). In this competitive market, Southwest Airlines are putting in great effort to succeed.

Economic Conditions in the Airline Industry

Conditions in the airline industry are growing as a whole for the better. Laborers, consumers, and even the government will receive the benefits the economy is providing. Research by Pearce (2017) shows that total employment in the industry is likely to reach 2.78 million with the average employee generating just under 500,000 airplanes a year. Pearce (2017) also states, “The direct GVA for national economies, generated by the average airline employee, will rise 2.2% next year to almost $100,000 a year, which is well above the economy-wide average” (p. 5). Along with workers, customers will also see value added by having a reduction in what they pay to use airlines. Due to this, Pearce (2017) estimates that 1% of the worlds GPD to be spent on airfare, which is equal to $776 billion, and will boost the economy even more. Even the government is receiving benefits from the growing economy in the airline industry. Airlines along with their customers are estimated to generate $124 billion in tax revenues in 2017. This is a 6.6% increase from the previous year (Pearce, 2017). It is easy to see that the airline industry is helping the economy in a positive way.

As for Southwest Airlines, all of these factors will play into their favor. Increasing jobs will lead to more employment for the business. This will lead to more revenue and potential profit for their industry.

Challenges Southwest Airlines Face

Southwest’s main challenge is to contain operating cost (Freedman, 2018). A way for them to do this according to Freedman (2018), is to continue cutting unnecessary cost like meals to customers, and by running streamline flights straight to their destinations. Other challenges include mandatory liability insurance that has rose to $100 million per year for the airlines 364-plane fleet (Freedman, 2018). Research by Freedman (2018) shows that the biggest challenge Southwest might face is that “4,100 pilots want to negotiate a 10-year contract, due to expire in 2004, this summer, to close a 35 percent pay gap over the next five years” (p. 1). Most veteran pilots at Southwest make $145 per hour or $135,000 per year, which is less pay than at other airlines. Profit sharing and stock options can add up to an extra $80,000 per year for pilots, but with stock prices down 27% from its high, most pilots are unlikely to take this offer as compensation (Freedman, 2018). The challenge is getting the employees to stay, and the CEO of Southwest has offered a 20% pay raise over three years to get the great laborers to continue making the airline thrive (Freedman, 2018).

The Future of Southwest Airlines

Southwest is known for being one of the cheaper airlines when booking any type of flight for any occasion. According to Goldberg & Weiss (2018), “Southwest Airlines pioneered a new model for the low-cost airline carrier space (para. 1). They are known for there unique marketing position of low-cost, no-frills, and on-time travel. Due to no-frills, Southwest tends to fall short when it comes to customer revenue during flights. Examples of losing revenue include no bag fees and only including free and simple snacks like peanuts and crackers (Goldberg & Weiss, 2018). Even though the consumer saves money, the airline is losing money when the customer is more likely to pay for those types of things regardless. In the future, Southwest needs to look at bringing in more revenue and potential profit from consumers after they have booked a flight and are committed to traveling with Southwest. The customers and airline both benefit from this future endeavor.

Conclusion

Southwest Airlines is a prosperous company that is growing in every aspect daily. Things like there success are thriving because of policies that they established in the beginning of their business. Also, the economy is growing because of Southwest and there future will only lead to things like the economy increasing as a whole. Everyone should fly with Southwest Airlines!