Presented By: Kelly BossoltMarta KovorotnaSarah Smith

Executive Summary Financial Analysis External Analysis

Entry & Rivals Industry Customers Substitutes, Complements, Acquisitions

Internal Analysis Philosophy Competitive advantage & capabilities Resources

Recommendations

Financial analysis

Financial analysis

Financial analysis

Financial analysis

External Analysis: Entry

Deregulation Act Enabled new entrants

150 went bankrupt 8/11 developed merging agreements

Created competition Creating lower prices

Creating more travelers

Rivals Delta, United, American

80% Domestic Market, 67% Trans-Atlantic Market

External Analysis: Industry

2nd Tier Providers Took on the abandoned

and ignored markets

Hub – and – Spoke 80% costs were fixed Control Mechanism

Sublease for premium (18% higher for Southwest)

Efficient

External Analysis: Customers

“The ones that could afford to fly, and the ones that couldn’t”

Two types of travelers Convenience, time oriented Price sensitive, leisure

Two tiered Pricing structure to accommodate both

External Analysis: Substitutes, Complements & Acquisition

Substitutes Train, Bus, Boat, Car, Horse

Complements Meals, Comfortable seating,

Television

Imitator JetBlue

Southwest acquired and integrated into its own

Diversified locations Slightly more sophisticated

Leather Seats, Televisions

Internal Analysis: Philosophy & Culture

Manage in good times Secure jobs for the people

Challenged accepted norms Set competitive thresholds for other airlines to emulate

1972: Chivas Regal

Culture Southwest Spirit

Positively Outrageous Service Extroverted personalities Red hearts and “Luv”

Internal Analysis: Competitive advantage & Capabilities

Consistently profitable Bucked the industry trend by earning profits for 36

consecutive years

Turnaround time Southwest: 15 min Industry Average: 45 min First come first served seating

First to: Sell seats over the Internet Ticketless travel Frequent flyer program based on flights, not miles Employee profit sharing (owned 10% of company’s stock)

Internal Analysis: Competitive advantage & Capabilities

Debt-to Equity ratio much lower than competitors

Ranked first in fewest customer complaints

Recognized as the 5th most admired company in 2007 by Fortune Magazine

Top Performing Airline behind Singapore Airlines

Lowest cost per available seat in the industry

Internal Analysis: Operations

Short-haul Less than 500 miles Point-to-point flights

Maximum convenience for passengers flying between two cities

Frowned upon hub-and-spoke Too time consuming

Well trained employees University of People Each Department had own training division that

focused on technical aspects of the work

Resources

Herb Kelleher “A visionary who leads by example- you have to work harder

than anyone else to show them you are devoted to the business”

Staff Fun, outgoing, enthusiastic Well trained

Consistent revenue Young aircraft (9 years)

3,300 flights a day 64 cities

Recommendations Move to international markets

Not limited to Trans-Atlantic, integrate into new markets

Remain fun and efficient This is one of their strongest competitive

advantages