The company sells seats on a one-way basis. Fares are set on the basis of demand for particular flights and by reference to the period remaining to the date of departure of the flights. Higher fares are charged on flights with higher levels of demand made nearer to the date of departure.
The company provides various ancillary services and engages in other activities connected with its core air passenger service. These include non-flight scheduled services, the in-flight sale of beverages, food and merchandise and Internet-related services. As part of its non-flight scheduled and Internet-related services, the company distributes accommodation services and travel insurance through both its website and its telephone reservation offices. Southwest also sells bus and rail tickets onboard its aircraft and through its website.
Southwest Airlines was established in 1971 in Texas with three Boeing 737 planes and routes between Dallas, Houston and San Antonio. The company’s business model was simply: "If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline." (Southwest Airlines Co., 2010)
Rollin King and Herb Kelleher decided to start an airline that is distinct and unique in terms of services and fare. They envision an airline that caters to the travelling businessmen and other passengers who requires frequent point to point flights. With President Lamar Muse at the helm, Southwest Airlines took off on its maiden voyage in 1971 and began service between Dallas, Houston, and San Antonio. In 1979, innovative self-service ticketing machines were introduced and utilized in ten cities to make the ticketing faster and more convenient for customers. (Southwest Airlines Co., 2010)
By 1980s, Herbert D. Kelleher comes aboard as permanent President, CEO, and Chairman of the Board for Southwest Airlines, and Southwest spreads its wings to San Francisco, Los Angeles, San Diego, Las Vegas, Kansas City, and Phoenix. Three additional Boeing 737-200s are purchased, and Southwest flies over 9,500,000 satisfied Customers. And in 1989, it reaches its billion dollar revenue mark and become a major player in the airline industry. (Southwest Airlines Co., 2010)
By 1994, the company introduced Ticketless Travel in four cities and became available system wide by January 1995. And in 2004, the company began offering online boarding passes via southwest.com. Today Southwest Airlines is the largest airline in the United States, based on domestic passengers servicing 68 cities with a fleet of 537 planes and is on its 37th straight year of profitability. Southwest became a major airline in 1989 when it exceeded the billion-dollar revenue mark. Southwest is the United States’ most successful low-fare, high frequency, point-to-point carrier. (Southwest Airlines Co., 2010)
B. Business Vision and Mission Statements
Figure . Southwest’s vision and mission statements ( (Southwest Airlines Co., 1988)
C. External Opportunities and Threats
Fuel Price Impact
Fuel prices can have a significant impact on Southwest’s profitability. Volatile fuel costs, coupled with a continued domestic economic downturn, had a significant effect on Southwest and the airline industry, in general. In 2008, the higher fuel prices during most of the year led to industry-wide capacity