Southwest Airlines is the largest carrier of US domestic passengers and has enjoyed almost half a century of straight profitable years amid the airline industry's ups and downs. The airline employs a single aircraft type—the Boeing 737—and offers first-come, first-served seating. Sticking with what has worked, the company has expanded its low-cost, no-frills, and no-reserved-seats approach to air travel throughout North America, Mexico, and the Caribbean to serve more than 100 destinations. Southwest's fleet numbers around 750 Boeing 737s.
Southwest offers point-to-point service (rather than a hub-and-spoke system, which concentrates on a limited number of central hub cities), allowing the airline to offer more direct, nonstop flights. More than three-quarters of the company's customers fly nonstop between about 700 city pairs. Schedules include 20 weekday flights between Dallas and Houston and 10-15 weekday flights between cities such as Burbank and Oakland, CA; San Diego and San Jose, CA; and Los Angeles, CA and Las Vegas, NE. It also offers near-international service to about 15 destinations as well as freight services. In 2019, the company hopes to begin service to Hawaii.
The company has three major categories of fares: Wanna Get Away, Anytime, and Business Select. Fare prices vary depending on the refund policy and reward points earned on its Rapid Rewards loyalty program. All flights include two free checked bags, complimentary soft drinks and snacks, and free movies and TV on WiFi-enabled aircraft. And unlike most of its competitors, Southwest does not charge fees for changes to flight reservations.
The company's fleet of aircraft consists of about 750 Boeing 737 aircraft—over 500 737-700s, more than 200 737-800s, and some 30 737 MAX 8s. It continues to add the Boeing 737 MAX 8 and 737-800 aircraft to its fleet, offering more seating capacity and improved fuel economy.
Headquartered in Dallas, TX, Southwest serves more than 100 destinations in some 40 US states, Washington D.C., Puerto Rico, and several near-international tropical and resort destinations in Mexico, the Caribbean, and Central America. In late 2016, Havana, Cuba became the 100th city on its route map.
Southwest leases or pays usage fees for terminal passenger services at each of the airports it serves. It leases land and structures for its aircraft maintenance centers located at Dallas Love Field, Houston Hobby, Phoenix Sky Harbor, Chicago Midway, Hartsfield-Jackson Atlanta International, and Orlando International airports. It is also committed to paying for various airport improvement projects for new facilities and the rebuilding or modernization of existing facilities.
The company owns a main headquarters building in Dallas as well as two additional headquarters buildings—an energy-efficient, modern building called TOPS, which houses operational and training functions; and the Wings Complex, which consists of a Leadership Education and Aircrew Development (LEAD) Center as well as simulator, classrooms, and office facilities.
Sales and Marketing
Southwest Airlines’ Rapid Rewards loyalty program is designed to retain, engage, and acquire customers. Rapid Rewards enables program members to earn points for every dollar spent on Southwest fares.
Expenses for advertising and promotions have decreased recently with $215 million spent for marketing in fiscal 2018 versus $224 million in 2017 and $232 million in 2016.
Southwest has grown steadily over the last several years. Its revenue grew nearly 4% from $21.1 billion in 2017 to $21.9 billion in 2018. The growth in 2018 was driven by a 3% bump in passenger revenue fueled by increased capacity and strong demand. Freight revenue inched up 1% also due to capacity increases.
Net income dropped 26% to $2.5 billion in 2018 compared with $3.4 billion in 2017 but was in line with previous levels. The decrease was primarily due to a $1.3 billion adjustment in 2017 (due to the Tax Cuts and Jobs Act), which reduced its income tax provision for that year.
Cash at the end of fiscal 2018 was $1.9 billion, an increase of $359 million from the prior year. Cash from operations contributed $4.9 billion to the coffers, while investing activities used $2.0 billion, mainly for capital expenditures related to aircraft equipment, technology projects, and airport construction projects. Financing activities used another $2.5 billion for dividends to stockholders and the company's stock repurchase program.
A key point in Southwest's business strategy is its focus on charging competitively low fares while staying profitable. To keep costs down, it uses a single type of aircraft, the Boeing 737, which allows for streamlined scheduling, maintenance, flight operations, and training. However, in early 2019, airlines around the world grounded their Boeing 737 Max 8s (Southwest owns several) after two such aircraft crashed shortly after takeoff—one in Ethiopia and one over the Java Sea— in less than six months. In the US, the FAA is conducting an investigation on the safety of the aircraft and has it grounded the 737 Max 8s until Boeing finds and correct any issues. Also plaguing Southwest are ongoing maintenance issues causing a high number of canceled flights; absentee mechanics may be the cause, as the company has been in contract talks with mechanics since 2012.
Southwest is also focused on increasing its business in California with new destination options and flights for California customers. Southwest is planning to offer new service to Hawaii in 2019.
The company operates an efficient point-to-point route structure (versus hub and spoke) with service between more convenient, secondary—and typically less congested— airports. This minimizes aircraft turnaround time, reducing the number of aircraft and gate facilities needed to run its business.
A large part of the carrier's strategy to stay profitable includes reducing fuel consumption and increasing fuel efficiency. It retired its older Boeing 737-300 planes from its fleet and is replacing them with more fuel-efficient Boeing 737-800 and 737 MAX 8 aircraft. It added 19 737 MAX 8 aircraft in 2018 and is adding 37 more in 2019.
Another prong of the carrier's growth strategy involves technology. Southwest has made major updates to its messaging platforms and added more personalized e-mail communications. It completed a multi-year initiative to transition its reservation system to the Amadeus Altea Passenger Service System and is now investing in technology to improve its maintenance record keeping, flight planning and scheduling, crew scheduling, and technology infrastructure.
Texas businessman Rollin King and lawyer Herb Kelleher founded Air Southwest in 1967 as an intrastate airline linking Dallas, Houston, and San Antonio. In 1971, the company, renamed Southwest Airlines, made its first scheduled flight. By 1979, Southwest was flying between eleven Texas cities; it added its first out-of-state destination from Houston to New Orleans that year. It later expanded to Oklahoma, Kansas, Arizona, Nevada, and California in 1980.
In 2014, Southwest first started offering international service outside the US, beginning with Aruba, Jamaica, and the Bahamas. Its route map now includes over one hundred cities and destinations.
9955 AIRTRAN BLVD
Orlando, FL 32827-5330
Phone: 1 (407) 318-5600
Employer Type: Publicly Owned
Pres: Robert E Jordan
Employees (This Location): 44
Employees (All Locations): 8,330