Southwest Airlines will fly any plane, as long as it's a Boeing, and let passengers sit anywhere they like -- as long as they get there first. Sticking with what has worked, Southwest has expanded its low-cost, no-frills, no-reserved-seats approach to air travel throughout the US to serve nearly 100 destinations in more than 40 states. Now the largest carrier of US domestic passengers, Southwest still stands as an inspiration for scrappy low-fare upstarts the world over. The carrier has enjoyed 39 straight profitable years, amid the airline industry's ups and downs. Southwest's fleet numbers about 700 aircraft.
By adding AirTran to its hangar, Southwest now has access to more airports in the Eastern and Southeastern US (including a coveted spot at Delta's home airport in Atlanta), as well as to international destinations in the Caribbean and Mexico. AirTran will soon discontinue its own brand and procedures now that the Federal Aviation Administration has certified that the two airlines may operate as a single entity. AirTran aircraft and facilities will gradually be rebranded as Southwest Airlines.
Simplicity has been key to Southwest's success. Most of the carrier's flights are less than two hours, and it usually lands at small airports to avoid congestion at competitors' larger hubs; in Dallas it's the big dog at little Love Field, its birthplace, and in Chicago it accounts for most of the traffic at Midway Airport. Southwest's (and AirTran's) fleet consists primarily of one type of aircraft -- the Boeing 737 -- to minimize training and maintenance costs.
Southwest Airlines has seen significant growth over the last three years. Its revenues grew 9% from $15.7 billion in 2011 to $17.1 billion, a historic milestone, in 2012. Profits skyrocketed by over 130% from $178 million to $421 million in 2012.
The majority of the growth was due to the fact that 2012 reflected a full year of AirTran revenues (Airtran was acquired by Southwest in 2011). Southwest was also helped by a 9% jump in passenger revenues as the company increased air fares in an attempt to offset higher fuel costs.
Protective of its low-cost image, Southwest has staunchly resisted charging passengers baggage fees. However, it has seen the value of this strategy and has rolled out new fees that have included allowing passengers to bring small dogs or cats into the cabin for a one-way charge of $75 and charging a one-way $50 fee for unaccompanied minors.
A large part of Southwest's growth strategy includes the integration of AirTran Airways, which it acquired in 2011 for about $3.2 billion. These efforts include the implementing of the All-New Rapid Rewards frequent flyer program, and a plan to modify its reservation system to include international destinations and provide enhanced customer service.
Another major strategy to stay profitable includes fleet modernization. Southwest is replacing older Boeing 737 planes with the larger and more fuel-efficient Boeing 737-800 for expansion to locations of greater distance, and it plans to begin using another new fuel-efficient model, the Boeing 737 Max, in 2017.
Not content to grow just in size, the company is expanding in geography. Together with Mexican carrier Volaris, Southwest provides a service that allows passengers to book international flights by connecting with Volaris through more than 60 Southwest-served cities. Volaris flies to such major Mexican destinations as Mexico City, Guadalajara, and Aguascalientes. Expanding its US travel, Southwest added two more states to its coverage in 2011 -- South Carolina and New Jersey. It began flying from Atlanta in 2012.
PRIMECAP Management company owns nearly 12% of Southwest Airlines.