Rachel Marr

Andrew Mullis

Brett Sledge

Ethan Witty

Southwest Airlines Major U.S. airline

Founded in 1967

Headquarters in Dallas, TX

Officially Southwest Airlines in 1971

Current CEO Gary Kelly

Cont. Ticker symbol is LUV

Current share price $40.50 (12/2/14)

Industry: Regional Airlines

Competitors include: American Airlines, Delta, JetBlue,

Regional Airlines

Financial Performance

Possible issues Government regulations on plane maintenance

(currently happening)

Competition with other airlines on prices

Fuel pricing in the future (had a future with fuel price’s

set)

Porter’s Five Forces

Rivalry High rivalry

Many competitors in the industry

Direct competitors include: Delta, United Continental,

American Airlines, US Airways, JetBlue, Allegiant,

AirTran

Threats to Entry Moderate

Costs to enter can be high

Relatively easy for companies to emerge with similar

business model

Low price and customer service strategy

Supplier Power High

Minimal airplane suppliers (Airbus and Boeing)

Cost of fuel fluctuates (can change at any given time)

Buyer Power High

Since the recession & terrorist attacks, consumers

have power

Majority of airline consumers are price sensitive

Various airlines to choose from

Threat of Substitutes Low

Car, Train, Boat are the only close substitutes

None of these are quite as fast as an airplane

Currently, no real substitutes

Changes in Airline Industry 3 major trends affecting airline industry

Oil prices

Airbus vs. Boeing

Increase in international flights

Oil Prices OPEC’s not cutting production

Jet fuel price down 18%

Fuel 1/3 of airline costs

Drop in fuel prices + increase air travel = strong pricing

power

Airbus vs. Boeing High cost, high service (Delta, United, American

Airlines) switching to Airbus

Low cost, low service (Alaska Airlines, JetBlue, Southwest) remaining Boeing customers

Boeing losing interest to Airbus; shares fell 3.5% this year

Airbus edged out Boeing in 2013 market share

“In each category, the customer tends to select the slightly bigger aircraft.” – Fabrice Bregier

International Flights Airlines adding international flights

American Air & Delta: Philadelphia to London (2014)

Delta & Virgin expanding partnership between US & UK

(2015)

United: New York to Italy, Chicago to Dublin, 2nd

Washington to Paris (Summer 2015)

Southwest focusing on Latin America (July 2014-?)

United expanding in Pacific Market (2014-?)

Asia-Pacific expected to be growth engine in next 2

decades

Impacts on Southwest Oil Prices: variable, unpredictable, equal effect for

industry

Airbus vs. Boeing: no change, separated by strategic

groups

International flights: loss, future in Asia-Pacific,

Southwest expanding in Latin America

Rewards programs: gain, customers switching to

Southwest

Major Threats? Threats effect Southwest similarly to other airlines in

same strategic group/industry

Similar adaptations to threats, no major loser or

benefactor

No major threats

Recommendations Southwest is dominating in industry

To remain having a competitive advantage, they will

need to change as the market changes

Partnering with international carriers to enhance global

reach (For example: LaGuardia and LAX)

Southwest should also consider acquisition of rival

firms to capture market share

Questions?