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 41 straight profitable years, amid the airline industry's ups and downs. Southwest's fleet numbers about 700 aircraft, including 614 Boeing 737s and 66 Boeing 717s.
By adding AirTran to its hangar (AirTran was purchased in 2011), 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.
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 has seen significant growth over the last four years. Its revenues grew 4% from $17.1 billion in 2012 to $17.7 billion in 2013, a historic milestone. Profits also skyrocketed 79% from $421 million in 2012 to $754 million in 2013 due to the higher revenue coupled with a steep decline in fuel and oil prices.
The historic growth for 2013 was driven by a bump in passenger revenues fueled increases by passenger yield, increased fares, and a 2% spike in capacity. Freight revenues for 2013 also increased primarily due to higher average rates charged as a result of fuel surcharges and an increase in other revenues.
Southwest's operating cash flow increased by $413 million to $2.5 billion in 2013 due to the higher profits in addition to cash generated from accounts payable and accrued liabilities and air traffic liability.
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 has included the integration of AirTran Airways, which it acquired in 2011 for about $3.2 billion. (It officially retired the AirTran brand in late 2014.)
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.