SOUTHWEST AIRLINE

Southwest Airline

Southwest Airline

Introduction

The airline industry is highly sensitive to economic cycles, and throughout its history there have been many economic difficulties. Through inflation, skyrocketing fuel prices, terrorist activity and much more the Airline Industry has taken several set backs and still managed to survive. While their financial performance has fluctuated somewhat, the U.S. Airline Industry can claim a steady growth, competitive prices and overall stability. Airlines have also contributed a great deal to the country's economic system. Much like any other business, the success and failure of the industry is dependant largely on the economy in which operates (DiSabatino, 2007). Southwest Airline has a mission to provide safe, efficient, low-cost consumer air travel service. Its service emphasizes safety as its highest priority.

How Southwest has Effected Our Nation Airlines

Southwest Airlines is the only major carrier that has shown a profit over the past several years. In that same timeframe, the other major carriers show a combined total loss in excess of 25 billion dollars. Efficient management and forward thinking has helped Southwest stay successful while other airlines are struggling. With rampaging fuel costs now representing around 40% of an airline's costs, Southwest Airlines has been able to stay ahead of the curve. Since 1999, the airline's aggressive fuel-hedging program has saved it an estimated $3.5 billion. In the first quarter, for example, it paid $1.98 a gallon for fuel, approximately a dollar less than its network competitors did. In addition, Southwest's future position is looking good due to the fact that it is 70% hedged at $51 a barrel through the end of the year and 55% hedged at the same price next year. In a world of $140-a-barrel oil, one thing can be said: Southwest Airlines is sitting on a pile of cash and fuel hedges, and has a proven to be an easily adaptable service model. History shows that Southwest Airlines has comfortably survived every airline-industry downturn, and then grown rapidly when the business cycle turns (DiSabatino, 2007).

Southwest has effected our national airlines in a number of ways. First of all it is a passenger airline that provides scheduled air transportation in the US. The company is a domestic US airline that provides point-to-point, low-fare services rather than hub-and-spoke service. Point-to-point service enables the company to provide its markets with frequent, conveniently timed flights and low fares. The routes served by Southwest are predominately short-haul routes with high frequencies (DiSabatino, 2007). It complements this service with more medium to long-haul routes, including transcontinental service. The company's average aircraft trip stage length in 2007 was 629 miles with an average duration of approximately 1.8 hours. According to the most recent data available from the US Department of Transportation (DOT), Southwest is the largest air carrier in the US, as measured by the number of originating passengers boarded and the number of scheduled domestic departures. The company operates through three business divisions, including passenger flights, freight and other.

As of December 31, 2007, Southwest operated 520 Boeing ...