Southwest Airlines Co, -2004

Presented by:
Megan Dow, Kristin Belanger, and Angèle Bourgoin
 Overview
 Stocks
 Stock Information
 Different Strategies
 Industry vs. LUV  Decisions
 Goals and Strategies  Implementation
 History Existing Condition
 Their Mission and Vision Statement  Evaluation
 New Mission and Vision Statement  Update!
 External Opportunities and Threats  References
 CPM
 EFE
 Internal Strengths and Weaknesses
 IFE
 Analysis
 SWOT Matrix
 SPACE
 IE Matrix
 Grand Strategy Matrix
 QSPM
Stocks
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%
 Industry Vs. LUV

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

Employee and Customer Relations
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.
 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.
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.
 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 (2 nd 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.
 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.
External Opportunities and Threats
 Opportunities  Threats
– First airline on the web
– Only in 58 cities – – JetBlue
expansion to other cities – Global tensions post 9/11
– Lowest cost-preavailable- – Competitors caught SW
seat out of all airlines strategy
– Booked online 13.6% more
than American Airlines – New Tax System
– Top-ranked website in – New Security measures
customer satisfaction – Aviation insurance costs
among travel sites
– Terrorists Attacks
– Severe decrease in
customer air travel
EFE
CPM
Internal Strengths and Weaknesses
 Strengths  Weaknesses
– Best low-fare carrier – Conservative Growth
– Triple Crown for annual Tactics
performance – Cuts cost in customer
– Quickly seize a strategic service areas
opportunity when arises – Not subscribed to
– “Team Spirit” Employees centralized reservation
come 1st not customers service
– Made 20% of flights to one – Other Co.’s now using
stop same management
– Even though Unionized still strategies since found out
negotiate flexible work about SW Airlines
hours – Provides service in only 58
– Marketing on the web, 50% cities
revenue from online
booking
IFE
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
SWOT Matrix
SPACE Matrix
IE Matrix
GSM

Market Development
Market penetration
Product Development
Forward Integration
Backward Integration
Horizontal Integration
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
QSPM
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
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
Evaluations
 Quarterly reports
 Average daily flights
 Average passenger per flight
 Quarterly meetings to evaluate current plan
and make necessary changes as needed
UPDATE!!
 Expanded into 63 cities as of 2006
 Operates over 2,800 flights per day
References
 www.southwest.com
 www.finance.yahoo.com
 Strategic Management Concepts and Cases
10th Edition