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Southwest Airlines Co, -2004 Presented by: Megan Dow, Kristin Belanger, and Angèle Bourgoi

Southwest Airlines[1]

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Page 1: Southwest Airlines[1]

Southwest Airlines Co, -2004

Presented by: Megan Dow, Kristin Belanger, and Angèle Bourgoin

Page 2: Southwest Airlines[1]

Overview Stocks Stock Information Industry vs. LUV Goals and Strategies History Existing Condition Their Mission and Vision Statement New Mission and Vision Statement External Opportunities and Threats

CPM EFE

Internal Strengths and Weaknesses IFE

Analysis SWOT Matrix SPACE IE Matrix Grand Strategy Matrix QSPM

Different Strategies Decisions Implementation Evaluation Update! References

Page 3: Southwest Airlines[1]

Stocks

Page 4: Southwest Airlines[1]

More Stock Information

Traded on the NYSE under LUV Last traded at 17.97 Current volume is 4,585,000 EPS: .67 Dividend yield: 10%

Page 5: Southwest Airlines[1]

Industry Vs. LUV

LUV = represents home at Dallas Love field, and theme for Employee and Customer Relations

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Goals and Objectives

Ensure highest quality Customer Service in the air or on the ground.

Ready to help customers under any circumstances.

Are there to ensure you make it from point A to point B safely

To stay the most successful with low-fare, high frequency point-to-point carrier.

Page 7: Southwest Airlines[1]

History of Southwest Airlines

On February 20, 1968 the Texan Aeronautical Commissions approved plans to fly in 3 states, the c5eators are Rollin King and Herb Kelleher

Expanded through 1980’s to 1990’s by 1993 Southwest Airlines could fly in 34 states in 15 states

They also expanded into new destinations California, Northwest, Florida, East Coast The competitors could not keep up, “500 pound cockroach that was too big to stamp out: While the airfare was dropping the traffic went up tremendously, in 1994 United started

a shuttle service, the large air carriers were feeding traffic into transpacific and transcontinental routes, they could not keep up

In 2004 Southwest Airlines is fourth largest domestic carrier, customer boarded In 2002 they traveled in 58 cities and 30 states, it has been 13 years in a row that they are

profitable, even after September 11, 2001, net income fell 52.9 percent, Southwest was the only airline company that had a profit all the other companies were in the red

Was the first airline to achieve the Triple Crown, they had five difference Triple Crown dedicated to the Employees of Southwest Airlines for their excellent achievements.

Page 8: Southwest Airlines[1]

Their Mission and Vision Statement

Mission The mission of Southwest Airlines is dedication to the highest quality of Customer

Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit. To give ordinary people the opportunity to fly.

To the employees We are committed to provide our Employees a stable work environment with

equal opportunity for learning and personal growth. Creativity and innovation are encouraged for improving the effectiveness of Southwest Airlines. Above all, Employees will be provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Southwest Customer.

Vision To have a conservative increase growth, capitalize and cutback schedules of other

airlines. To continue expanding conservatively in long-haul success.

Page 9: Southwest Airlines[1]

New Mission Statement

Southwest Airlines is a company that is for anyone and every that wants to get from point A to point B by flying. Our service and philosophy is to fly safe, with high frequency, low-cost flights that can get passengers to their destinations on time and often closer to their destination. We fly in 58 cities and 30 states and are the world’s largest short-haul carrier and we make sure that it is run efficiently and in a economical way. Our technology is current such as our check-ins process is faster. Striving to expand and grow in a conservative manner is key, and being financially stable by keeping quality high and cost low. Our excellence is managing cost by our rapid twenty-minute gate turnaround, a non-stop flight with our airplanes, and a more productive workforce which keeps above our competitors. We treat our employees like customers, family and motivate and compensate them for doing a job well done. We continue to be in the Fortune Magazine’s most admired companies (2nd in 2002) 100 best companies to work for. Since 1972 we have ranked first in Money Magazines featured in “The 30 Best Stocks.” In our communities we make donations to charities to organizations and people in time of need.

Page 10: Southwest Airlines[1]

New Vision Statement

Our vision is to expand our locations both domestic and overseas by being the largest and most profitable airline company to achieve both short and long-haul carriers efficiently and with low cost. Also to be an airline carrier that has the most productive workforce to guarantee the best flight possible for each and every passenger.

Page 11: Southwest Airlines[1]

External Opportunities and Threats Opportunities

– First airline on the web– Only in 58 cities –

expansion to other cities– Lowest cost-preavailable-

seat out of all airlines– Booked online 13.6% more

than American Airlines– Top-ranked website in

customer satisfaction among travel sites

Threats– JetBlue

– Global tensions post 9/11

– Competitors caught SW strategy

– New Tax System

– New Security measures

– Aviation insurance costs

– Terrorists Attacks

– Severe decrease in customer air travel

Page 12: Southwest Airlines[1]

EFE

Page 13: Southwest Airlines[1]

CPM

Page 14: Southwest Airlines[1]

Internal Strengths and Weaknesses

Strengths– Best low-fare carrier– Triple Crown for annual

performance– Quickly seize a strategic

opportunity when arises– “Team Spirit” Employees

come 1st not customers– Made 20% of flights to one

stop– Even though Unionized still

negotiate flexible work hours

– Marketing on the web, 50% revenue from online booking

Weaknesses– Conservative Growth

Tactics– Cuts cost in customer

service areas– Not subscribed to

centralized reservation service

– Other Co.’s now using same management strategies since found out about SW Airlines

– Provides service in only 58 cities

Page 15: Southwest Airlines[1]

IFE

Page 16: Southwest Airlines[1]

Key Ratios Profit Margin: 7.23% Return on Assets: 4.01% Return on Equity: 8.98% Revenue: 7.58B Gross Profit: 2.49B Operating Cash Flow: 2.23B Market Capital: 14.41B Current: .941 Debt to Equity: .299 Total Debt: 2.00B

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SWOT Matrix

Page 18: Southwest Airlines[1]

SPACE Matrix

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IE Matrix

Page 20: Southwest Airlines[1]

GSM

Market DevelopmentMarket penetrationProduct DevelopmentForward IntegrationBackward IntegrationHorizontal Integration

Page 21: Southwest Airlines[1]

Possible Strategies

Expand into more cities– Increase amount of shorter destination flights

into the larger airports

Increase direct flights– Purchase bigger planes– Get agreements with Airports for flights

Eventually look to acquire American Airlines

Page 22: Southwest Airlines[1]

QSPM

Page 23: Southwest Airlines[1]

Decisions

Based on QSPM, the best looking strategy would be to expand into more cities

The longer non-stop flights have more of a competitive market and would be hard to keep low cost flights

Page 24: Southwest Airlines[1]

Implementation

Increase– The number of flights per day by 5%– Increase revenue by 15%

• Helps to cover new increasing cost

– Flights into larger airports

Decrease– Operating costs by 10%– Flights to cities with more than 4 flights a day

Page 25: Southwest Airlines[1]

Evaluations

Quarterly reports Average daily flights Average passenger per flight Quarterly meetings to evaluate current plan

and make necessary changes as needed

Page 26: Southwest Airlines[1]

UPDATE!!

Expanded into 63 cities as of 2006 Operates over 2,800 flights per day

Page 27: Southwest Airlines[1]

References

www.southwest.com www.finance.yahoo.com Strategic Management Concepts and Cases

10th Edition