SOUTHWEST AIRLINES

Southwest Airlines

Southwest Airlines

Introduction

Southwest Airlines is a passenger airline which offers planned air transport in the United States. Southwest Airlines mainly offers point-to-point, low-fare services in 37 states and in the 72 cities all over the United States. Its headquarter is in Dallas, Texas and it has 34,901 employ. The company recorded revenues of $12,104 million during the fiscal year ended December 2010 (FY2010), an increase of 16.9% over FY2009. The operating profit of the company was $988 million during FY2010 compared to $262 million in FY2009. The net profit was $459 million in FY2010 compared to $99 million in FY2009. This paper provides a research on if one would invest in SWA and why?

Discussion

The US regional airline industry has witnessed fluctuating growth rates in 2009 and 2010 and is expected to grow consistently in the coming years. According to Federal Aviation Administration (FAA), number of airline passengers flying in the US will increase 3.5% in 2012, and the trend is expected to continue with over one billion passengers traveling on US airliners by 2021. FAA also expects that there will be 5% increase in both passenger and freight traffic in the next 20 years. In addition, FAA also anticipates that international travel will expand more quickly than domestic travel, as the US airlines will carry 7.8% more of the international passenger traffic through 2031. Southwest Airlines offers passenger transportation services at low fares, primarily on point-to-point routes. Therefore, the company is well positioned to benefit from the growing US airline industry and generate additional revenues. (Allen, 2011)

The company is involved in class action lawsuits. In 2010, various class action lawsuits were been filed by stockholders of AirTran Holdings that challenge the proposed acquisition of AirTran Holdings by Southwest Airlines. In September 2010, Frederick Leonelli filed a purported class action lawsuit on behalf of him and similarly situated AirTran Holdings stockholders against certain senior management members of AirTran Holdings and the company. (Kelly, 2009)

The plaintiffs alleged that the consideration to be received by AirTran Holdings' stockholders in the merger was unfair and inadequate and that the AirTran Holdings officers and directors named as defendants breached their fiduciary duties by approving the merger agreement through an unfair and flawed process and by approving certain deal protection mechanisms contained in the merger agreement. The complaint further alleged that AirTran Holdings and Southwest Airlines aided and abetted the individual AirTran Holdings defendants in the breach of their fiduciary duties to AirTran Holdings' stockholders. The plaintiffs sought costs and disbursements of the action, including reasonable attorneys' and experts' fees. In addition to this, several other similar lawsuits were filed against the company. Any negative outcome of these lawsuits will have a material adverse effect on the Southwest Airlines' financial condition, results of operations, or cash flow. (Brown, 2010)

Business Description

Southwest Airlines is a passenger airline which offers planned air transport in the United States. Southwest Airlines mainly offers point-to-point, low-fare services in 37 states and in the 72 cities all over the ...