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Southwest Airlines Reinventing the Wheel

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Air Tran Airways are a discount airline serving the eastern and central United States. ... Reports of: Southwest Airlines, JetBlue Airways, Air Tran Airways. ... – PowerPoint PPT presentation

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Title: Southwest Airlines Reinventing the Wheel


1
Southwest Airlines Reinventing the Wheel
  • Presentation Team
  • Phil Sturgeon Teresa Hagan
  • Ni-Hao Neil McGinn
  • Adrian Christie Gillian Fraser

2
Southwest Airlines
  • Provide short-haul, high-frequency,
    point-to-point, low-fare air transport.
  • Southwest Airlines was established in 1971 and
    dedicated to the highest quality of customer
    service.
  • Established a business model that revolutionized
    the industry and has been copied by many.
  • Have recorded their 33rd executive year of
    profitability.

Southwest Airlines
Source Southwest Airlines website.
3
Industry PEST Analysis
  • Political
  • Chapter 11 put on hold.
  • US travel now a strategic imperative.
  • Airline recession Sept 11th.
  • Economic
  • Oil The fifth horseman of the apocalypse.
  • Social
  • Auto-travel substituted for air.
  • Technological
  • Boeing building smaller 100-200 seater aircraft.
  • Airlines supply chain weakness.

Southwest Airlines
Source Mintel.
4
General Industry Trends
  • Industry
  • Infrastructure
  • Rise of Low Cost Airlines
  • The low cost phenomenon continues to break all
    records
  • European LCC market growing at 24, American at
    12.
  • LCC share of total ticket sales grown from 6 in
    2001 to 15 in 2004.
  • Legacy Carriers adopting the low fare concept.

Southwest Airlines
Sources - OAG Data Mintel, UNISYS Hub Spoke
business model.
5
Airline Segment Trends
  • Cargo
  • Stand-alone profit centre rather than passenger
    by-product.
  • Industry growing at 6.5.
  • Industry Travel Agents
  • Travel accounts for one third of all e-commerce
    purchases.
  • Shift from direct suppliers to online agents.
  • Legacies formed Orbitz.
  • Grown from 4.2 billion in 1999 to 63 billion in
    2005.
  • Driven by online managed business travel.

Southwest Airlines
Sources - Hospitality Net, The international Air
Cargo Association.
6
Airline Segment Trends
  • Travel Distances
  • Greatest demand from short/medium haul flights.
  • Short/medium ticket prices continue to fall.
  • Pause in growth of long haul flights.
  • Return of long-haul markets essential for US
    aviation recovery.

Southwest Airlines
Source Mintel.
7
SWA Segment Trends
  • SWA Vacations
  • 3rd largest online agent.
  • Bucked industry trend of selling tickets via
    online agents.
  • Internet bookings increased from 39 in 2001 to
    65 for 2005.
  • SWA Cargo
  • SWA Cargo group continue to be profitable.
  • Quick turn-around times impact on load capacity
  • Freight accounts for 1.75 of SWAs total
    revenue, industry average is 15.

Southwest Airlines
Source Southwest Airlines Annual Report 2005.
8
SWA Segment Trends
  • Travel Distances
  • Economy short-haul fares fallen by 4.54.
  • Average hop distance increased.
  • Number of trips flown increased
  • - 947,331 in 2002.
  • - 1,028,639 in 2005.

Southwest Airlines
Sources Business Travel News, Southwest
Airlines Annual Report 2005.
9
SWA Niche Analysis
Southwest Airlines
Source Southwest Airlines website.
10
Target Segments
Southwest Airlines
11
Southwest Airlines Competitors
  • American Airlines are legacy carrier that
    operates international flights as well as
    domestic services in the United States.
  • Air Tran Airways are a discount airline serving
    the eastern and central United States.
  • JetBlue Airlines are a low cost airline major
    hubs in New York-JFK, Boston, Washing DC-Dulles,
    Fort Lauderdale, Long Beach, and Oakland.

Southwest Airlines
Sources Websites of American Airlines, Air
Tran, and Jet Blue.
12
Southwest Airlines Technologies
  • Southwest use the Boeing 737 series exclusively.
  • More viable for Southwest to service and maintain
    fleet.
  • First to introduce innovative internet check-in
    service wi-fi check-in technology.

Southwest Airlines
Source www.phillyburbs.com
13
SWA Route Map
Southwest Airlines
  • Point-to-point routes.
  • Close, convenient, local airports.
  • Aircraft scheduled to local needs.

14
Compass Strategy
Southwest Airlines
15
S.W.O.T Analysis
Southwest Airlines
16
Sales and Services
Southwest Airlines
Sources - 2004 Annual Reports of Southwest
Airlines, JetBlue Airways, Air Tran Airways,
American Airlines.
17
SWA Product Market Portfolio
20
S/M
Southwest Airlines
C
Market Growth Rate
15
L
VP
10
0.1
1.0
10
Relative Market Share
18
Porters Five Forces
Southwest Airlines
19
Financial Performance
Operating Revenue
Southwest Airlines
Millions
Sources - 2004 Annual Reports of Southwest
Airlines, JetBlue Airways, Air Tran Airways.
20
Financial Performance
Southwest Airlines
Sources - 2004 Annual Reports of Southwest
Airlines, JetBlue Airways, Air Tran Airways.
21
Ratio Analysis
  • Current Ratio 2004 5.29
  • 2003 5.73
  • Operating profit 2004 8.5 2003 8.1
  • Total Debt/Equity (mrq)0.299
  • Quarterly revenue growth over 05/06 at an average
    of 20.10

Southwest Airlines
Source - Southwest Airlines Annual Report 2004,
Yahoo! Finance.
22
Future Performance Projections
  • Quarterly revenue growth - Jun 06 15.6
  • - Dec 07 10.1
  • Court case costing 27.5 million
  • - Racial Profiling case
  • - Damage to image?
  • Crude oil price hits record amount of 72 per
    barrel - earlier than expected.

Southwest Airlines
Source - Yahoo! Finance Analyst Estimates, ABC
News, TheStreet.com.
23
Key Statistics
  • Number of Employees 2005 31,729
  • Market share of 66 based on passengers carried
    to top 100 city-pair markets.
  • Named Best Low Cost Carrier at the annual Best
    in Business Travel Awards 2004.

Southwest Airlines
Source - Southwest Airlines Annual Report
2004/2005.
24
Key Statistics
  • Global industry leader in low-fares airline.
  • 77.6 million passengers carried in 2005.
  • Serve 62 US destinations.

Southwest Airlines
Source - Southwest Airlines Annual Report
2004/2005.
25
Recent profits Dec 2005
Profit Margins
Southwest Airlines
Source Yahoo! Finance
26
SWA Benchmarks for Success
  • Competing on price Lowest cost.
  • Customer friendly. - Law suit implications.
  • Excellent employee relations.
  • Culture low unit costs higher profits
    defines the best.

Southwest Airlines
Source www.unisys.com
27
The Future
  • Southwest has a long future.
  • Short to medium and medium haul travel will
    dominate.
  • Buy more slots in other airports throughout the
    US to increase their presence and expand the
    variety of destinations for customers.

Southwest Airlines
28
  • Thank you for your time
  • Please feel free to direct any questions
  • to the presenters.

Southwest Airlines
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