Abstract
This article conducts the Southwest Airlines SWOT analysis by identifying the key business strengths, weaknesses, opportunities and threats. The article provides information about Southwest Airlines’ internal and external business environment. Policy makers and strategists can read the article to gain insights into airline’s business strategies, and overall industry environment. Researchers and students can also read the article to know how internal and external environment influences the business strategies of successful brands like Southwest Airlines in real world.
1. Introduction
Southwest Airline is world’s 2nd biggest airline by market value. With 121 destinations across U.S, Central America, and Mexico, Southwest Airlines is known for its low-cost pricing, extremely efficient operations, and innovative logistics solutions.
This article presents SWOT analysis of Southwest airlines. The SWOT framework provides insights into the key strategic factors that determine Southwest airline’s competitive positioning, and future prospects.
2. Company overview
| Company name | Southwest Airlines Co. |
| Year Founded | 1967 |
| Headquarters | Dallas, Texas, USA |
| Industry | Airline and Aviation |
| CEO | Robert E Jordan |
| Number of countries | 11 countries with 120 airports |
| Number of employees | 78,787 |
| Revenue 2022 | $23.8 billion |
| Net income 2022 | $539 million |
| Market capitalization 2023 | $15.11 billion |
3. Southwest Airlines SWOT Analysis
Southwest Airlines strategies encompass a comprehensive approach to leverage its core strengths, address the weaknesses, capture available opportunities, and mitigate threats, securing competitive positioning in the global airline sector.
3.1. Southwest airlines strengths
Southwest airlines holds second largest market share in U.S airline industry, as shown in following graph:
Source: Zippia.com
3.1.2. High customer satisfaction
Southwest airlines is known for satisfying its customers through superior customer service. Following graph shows how company has maintained high customer satisfaction over time:
Source: Statista
3.1.3. Economical prices
Southwest airlines offers super cheap fares. Customers can get cross-country tickets for as low as $49.
Source: Southwest price comparison
Above chart shows Southwest Airlines charges lower than Hawaiian airlines on all selected routes. However, Southwest’s prices on some routes are higher than Alaska airlines.
3.1.4. Strong financial performance
Southwest Airlines is experiencing strong revenue growth. Although, pandemic hit its revenue hard (2020) alike other airlines, but within two years, South-west has exceeded the pre-pandemic growth pace, as depicted in following graph:
Source: Macrotrends.net
3.1.5. Excellent customer service
For second year in a row, Southwest airlines ranked #1 in customer satisfaction for basic economy and economy.
Based on customer satisfaction index of 827, Southwest airlines is declared North America’s best airline in 2023- CNBC.
3.1.6. Free baggage policy
Southwest airlines offers generous free baggage policy. It accepts first two checked bags for free (provided they do not exceed 62 inches, and 50 lbs).
3.1.7. Best employer 2022
In 2022, Southwest airlines was ranked among the best employers for women in Forbes’ list. It ranked #3 in airline industry, and #23 overall.
3.1.8. Extensive route network
Southwest airlines has an extensive route network with 121 destinations across 11 countries. It is considered among the largest airlines of USA based on its route network.
3.1.9. High customer loyalty
Southwest airlines earns a net promoter score of 62, which is above than the airline industry average of 43 (net promoter score is a measure of customer loyalty).
3.1.10.Innovation performance
In 2023, Fortune ranked Southwest airlines as one of the USA’s most innovative companies- PR Newswire.
3.1.11. Largest fleet
Southwest airlines has the largest fleet of Boeing in the world. The fleet standardization reduces the training and maintenance costs, and drives operational efficiency.
3.2. Southwest airlines weaknesses
Southwest is losing its operational advantages. It may lose its valuation premium to larger peers, deteriorating the stock price even further.
Source: Seeking Alpha
3.2.2. Holiday season meltdown
Southwest airline flight cancellation rate has tripled in last decade. Southwest airlines is struggling to win back the customers’ trust after holiday season meltdown in December 2022, when 16,700 Southwest flights were cancelled, leaving 2 million stranded. The situation got exacerbated when company did not handle its apology well.
Following chart compares the flight cancellations by all major airlines, with Southwest airlines having highest cancellations:
Source: CNN
3.2.3. Poor on-time performance
Southwest airlines has lowest on-time percentage in nearly a decade, as depicted in following graph:
Source: CNN Business
3.2.4. Tech problems
As per The New-York Times, Southwest airlines’ network failure has raised concerns over system’s strength. After the holiday season meltdown (costing $1 billion), Southwest airlines faced hour long outage, raising concerns over resiliency of IT infrastructure.
3.2.5. Employee union problems
Southwest airlines is facing protests from flight attendants and pilots, and company is struggling to reach a contract agreement with both union groups.
In 2022, Southwest airline pilots lost 35,000 off days, as they were forced to work on their off days.
3.2.6. Limited service options
Southwest airlines offers no inflight entertainment, and offers no premium class, which limits its target market to only budget conscious customers.
3.2.7. Over-reliance on US market
Southwest airlines excessively relies on the domestic market, and has limited presence at international stage. According to Statista, Southwest Airlines’ competitors are more profitable as they have more international destinations.
3.3. Southwest airlines opportunities
3.3.1. Growing demand for budget airlines
Due to prevailing economic uncertainty, demand for low-cost airlines is constantly growing:
Source: Research and Markets
The 8.9% CAGR growth rate paint a positive picture for Singapore airlines.
3.3.2. In-flight entertainment
The in-flight entertainment market will grow from $2.6 billion (2022) to $6.13 billion (2032):
Source: Market Research Future
Southwest airlines may consider offering premium class with in-flight entertainment services to capture this opportunity.
3.3.3. Sustainable aviation
Due to consumers’ growing environmental consciousness, there is constant growth in the sustainable aviation fuel market size:
Source: Precedence Research
Southwest airlines may invest more on the sustainable technologies to position itself as an environment friendly airline.
3.3.4. Expansion of cargo division
The rapid expansion of the global e-commerce industry offers growth prospects for the global air cargo market, as depicted in following graph:
Source: Yahoo Finance
Southwest airlines may expand its cargo division to capture this lucrative opportunity.
3.3.5. Health and wellness initiatives
As customers have become more conscious of their health, wellness and hygiene, Southwest airlines may introduce healthier in-flight meal options and fitness facilities to set differentiation basis.
3.3.6. Revenue diversification
Southwest airlines may diversify the revenue by exploring non-traditional options, like- engaging in travel related partnerships, and offering in-flight advertising etc.
3.3.7. Mobile marketing
Many global airlines have started investing on the mobile marketing to connect with customers through smartphones.
Following graph shows the rising number of active airline mobile app users:
Source: Sensor Tower
Southwest airlines may increase investment on the mobile app marketing to drive the customer engagement.
3.3.8. Personalized experience
Airline consumers’ preferences for a personalized experience have grown with time. Southwest airlines may invest more on the data analytics and other technologies to better understand the consumers’ expectations, and tailor their marketing strategies accordingly.
3.4. Southwest airlines Threats
3.4.1. Rising fuel prices
Rising fuel prices have become a serious cause of concern for airlines. Following graph shows the fuel costs as a percentage of expenditure from 2011 to 2021:
Source: Statista
Southwest airlines may consider optimizing routes and investing more on the fuel efficient aircrafts to reduce the influence of rising fuel prices.
3.4.2. Intensifying competition
The competition in the global airline industry is getting intense, shrinking the profit margins of existing players, as they fight for the bigger share in a saturated marketplace. Southwest Airlines competitors mainly include- major carriers like American, Delta, and United Airlines, as well as other low-cost airlines like JetBlue Airways and Spirit Airlines.
3.4.3. Boeing 737 issues
Southwest airlines has the largest fleet of Boeing 737. However, company’s operations have badly affected with grounding of Boeing 737 max. As per Reuters, the manufacturing problems in the Boeing 737 max has become a headache for Southwest airlines.
Click here to know more about Boeing 737 safety issues
3.4.4. Growing video conferencing
Video conferencing trend has hit 21 times higher than pre-pandemic level, as depicted in following graph:
Source: AV Magazine
Growing video conferencing trend is directly threatening the airline industry by reducing the need for business travel. Southwest airlines must timely respond to this threat by diversifying its services, and offering more integrated travel solutions.
4. Recommendations
- Southwest airlines may invest on eco-friendly technologies and sustainable aviation to position itself as an eco-conscious carrier.
- Explore non-traditional revenue diversification opportunities (like in-flight advertising etc.) to reduce the dependence on only ticket sales.
- Expand the cargo division to leverage the expansion of global e-commerce industry.
- Introduce inflight meals and offer wellness amenities in response to growing health and wellness trends.
- Offer premium, and in-flight entertainment opportunities to expand the market reach.
- Invest more on the mobile marketing to drive the customer engagement.
- Use data analytics to better understand customers, and offer personalized experience.
- Optimize the routes and invest on fuel-efficient aircrafts to handle the rising fuel costs.
- Expand the international presence to reduce the dependence on the domestic market.
5. Conclusion
In conclusion, Southwest Airlines has several key strengths that it can leverage to exploit the available opportunities. Its core strengths include a high market share, economical prices, customer satisfaction, and strong financial performance. Its key weaknesses include- tech problems, limited service options, and over-dependence on the U.S market. Southwest airlines needs to address the challenges posed by rising fuel pricing, and intensifying competition to ensure its survival in the global airline market.
Click here to read ‘Boeing SWOT Analysis 2023’
6. References
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McMahon, C. (2023, May 12). 20 Southwest Airlines Statistics [2023]: Passengers, revenue, and facts. Zippia.
ACSI: Southwest Airlines U.S. 2023 | Statista. (2023, November 17). Statista.
Price Comparison: Southwest Airlines Hawai‘i Ticket Prices vs. Competitors | Maui Now. (2019, March 4). | Price Comparison: Southwest Airlines Hawai‘I Ticket Prices Vs. Competitors.
Fernandez, C. (2023, May 16). The best North American airlines in 2023 for every budget—from first class to economy. CNBC.
Field, J. (2023, March 17). Best Employer in America by Forbes: Southwest Airlines. Aviation Source News.
Company Overview. (n.d.).
Company Overview. (n.d.-b).
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Southwest Airlines explains its Christmas holiday meltdown to congress. (2023, February 9). ABC7 Los Angeles.
Chokshi, N. (2023, January 26). Southwest lost $220 million because of holiday meltdown. The New York Times
Southwest Airlines passengers by airport 2022 | Statista. (2023, August 31). Statista.
Ltd, R. a. M. (n.d.). Low Cost Airlines Market: Global industry Trends, share, size, growth, opportunity and Forecast 2023-2028. Research and Markets Ltd 2023.
Market Research Future. (n.d.). In-Flight Entertainment Market By Size, Trends | Share Report 2032.
Sustainable Aviation Fuel Market Size, Share, Report 2023-2032. (n.d.).
Yahoo is part of the Yahoo family of brands. (n.d.).
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Aviation industry – fuel cost 2023 | Statista. (2023, July 17). Statista.
Singh, R., & Insinna, V. (2023, April 17). Boeing’s latest production problem compounds operational headache for US carriers. Reuters.
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