A.1 What is Southwest’s competitive strategy?

Cost Leadership
• The Only Large Low-Cost Airline
• Creates competitive advantage based on low costs and correspondingly
low prices to minimize operating costs, optimize profit margins, keep low
prices, and offer its airline services to the mass market.
• This strategy helped them overcome the global financial crisis and has
been considered one of the fastest company among its competitors to
recover from the economic recession.
 A.2 How successful is it compared to other US
airlines?
• Southwest is one of the big four airlines in the U.S., along with American
Airlines (AAL), Delta (DAL), and United (UAL).
• Southwest Airlines is more flexible than most other large airlines
• One of the biggest cash reserves, credit, and other assets than smaller
airlines.
• In 2019, the Company returned approximately $2.4 billion to Shareholders
through a combination of $2.0 billion in share repurchases and $372
million in dividends.
 ANNUAL 2019 FINANCIAL AND OPERATING
STATISTICS:

• Net income: $2.3 billion

• Revenue passengers carried: 134.1 million  
• RPMs: 131.3 billion
• Load factor: 83.5%
• Annual record total operating revenues: $22.4 billion
 A.2 How successful is it compared to other US
airlines?
• Southwest is one of the big four airlines in the U.S., along with American
Airlines (AAL), Delta (DAL), and United (UAL).
• Southwest Airlines is more flexible than most other large airlines
• One of the biggest cash reserves, credit, and other assets than smaller
airlines.
• In 2019, the Company returned approximately $2.4 billion to Shareholders
through a combination of $2.0 billion in share repurchases and $372
million in dividends.
B. What are the foundations of Southwest’s competitive
advantage?

• Low fare strategy. Southwest is the pioneer of a so-

called airline-within-an-airline that offers low fares,
few flights, and frequent service. It dramatically
lowered the fares and increased the frequency of
flights.
• Employee-driven. Southwest had always believed
that an important part of its competitive advantage
rested with its people and how they were managed
• Customer service. The company’s service involves
frequent on-time departures. By avoiding a hub and
spoke system, Southwest is able to avoid delays
often associated with connecting flights. This makes
short-haul trips more attractive to travellers who
might otherwise consider driving.

• Use of fuel efficient aircrafts. Southwest began

flying fuel-efficient 737s and now has over 200 of
them. This is the only type of aircraft it flies. By
using a single type aircraft, the company have save
on maintenance and training costs.
• Productive workforce. They typically have fewer
agent and ground crew than other airlines. The pilots
spend more time in the air than other pilots at other
airlines. Flight attendants and pilots help clean the
aircraft and check passengers in at the gate. The
employees also routinely volunteer to help customers
in need.

• Leadership. Herb Kelleher was featured in different

articles regarding his leadership style. A recent
Fortune article, for instance, was titled “Is Herb
Kelleher America’s Best CEO?’ The author quotes
Michael Derchin, a veteran airline analyst, who said,
“He is the sort of manager who will stay out with a
mechanic in some bar until four o’clock in the
What issues should Ann Rhoades raise
in tomorrow’s meeting?

•Southwest Airlines’ current

position in the light of new
competition
What recommendations should she
make?
• It is recommended that Rhoades should focus on
continued enhancement of Southwest’s already
proven strategies, with an eye toward addressing
the new challenge from competitors.
• Rhoades should channel employee anger through
communication, training, and tracking of results
metrics.
What recommendations should she
make?
• Rhoades may suggest a formalized, specialized employee
training program to address the challenges posed by the
new competition and galvanize employees as
“underdogs” forming a united front against the invading
airlines.
• Rhoades can follow the blueprint of Southwest’s culture
committee by creating a competitive committee devoted
to promoting the underdog spirit.