Southwest Airlines - Competitive and Environmental Analysis

[Name of the Professor]

Dated: February 5, 2013

Table of Contents

Introduction1

Environmental Scan1

Political factors1

Economic Factors2

Social Factors3

Technological Factors3

How Southwest should deal with these threats4

Southwest's Strengths5

Main competitor5

Southwest's competitive strategy6

Modifications in Southwest's strategy6

Impact of Global Competition on Southwest's Strategy & Southwest's Response7

References8

Southwest Airlines - Competitive and Environmental Analysis

Introduction

Southwest Airlines Co. began its operations in 1971 (Southwest, 2012) and has been serving the industry for the past 41 years now. It is the major domestic airline, and ranked number 1 in 2011 by the Bureau of Transportation Statistics (Rita.dot.gov, 2011). Back in 1971 the airline began its services in Texas in the cities of Houston, San Antonio, and Dallas. The company has been ranked as the nation's largest low cost carrier (Mergent, 2012). It offers the lowest fares, and has the lowest cost structure in the industry.

Southwest Airlines Co. also acquired AirTran Holdings Inc. in 2011 and now owns AirTran Airways. The company has been ranked 10th amongst the 50 most admired companies according to a survey by Fortune magazine (Money.cnn, 2012). Southwest uses the exchange symbol LUV on the New York Stock Exchange (NYSE).

Environmental Scan

An environmental scan includes an analysis of the external environment in which Southwest operates and the political, economic, social, and technological factors that affect its performance.

Political factors

The Airline and Aviation industry underwent Governmental Regulations by the passage of the Civil Aeronautics Act of 1938 and the simultaneous creation of the Civil Aeronautics Board (CAB). This Act enabled the CAB to control the service fares, the entry of new airlines from the market and the exit of existing airlines from the same, and the assigning of air routes to different airlines. Then the Federal Aviation Act got passed in 1958 and led to the formation of the Federal Aviation Administration in August 1958. The rule making was shifted to the FAA and it had control of the air routes, the airline safety and air traffic controls.

The Airline Deregulation Act was passed in 1978 and falls in the category of Federal Law. It eliminated the governmental authority over determination of service fares and control of routes and new airlines entry into/exist from the airline industry. As a result of the act, the CAB was dissolved in 1984. The FAA was not eliminated and it remained in control of airline safety and air traffic control (GAO, 2006).

This Amendment came into force in 1979 and comes within the category of federal law. It manages the air traffic at Dallas Airfield in Texas. Initially, this amendment posed such restrictions on nonstop flights that their routes got limited to Texas and its neighboring states only. However, the restrictions were taken off in 1997 and 2005. The Amendment was revoked in 2006 but some restrictions will expire in 2014.

Soon after the passage of the Airline Deregulation Act of 1978, Southwest was about to begin interstate flights. But restrictions were imposed by the Congress and the airline was disqualified to ticket/operate flights beyond Texas and the states touching its borders.

Economic Factors

A number of economic ...