Southwest Airlines Business Model

Southwest Airlines (LUV) has established a reputation as a profitable airline firm over the last two decades, operating at a period when most airlines have struggled.

The competitive advantages that set an airline apart from competitors must be maintained and strengthened. 

Southwest Airlines business model consists of high-efficiency operations, competitive pricing, and innovative logistics solutions. 

Additionally, it emphasizes clients’ experience and foresight in its strategy. The engagement and motivation of the workforce are essential to the success of any of these efforts. 

Southwest acquired many competitive advantages due to this good approach, remaining relevant in a fast-changing market.

What is Southwest Airlines?

Southwest Airlines Co. is a low-cost airline corporation that is a market leader in the airline sector. The corporation faces major difficulties in avoiding competition in the global market. 

Therefore, customer service is its fundamental purpose and should be enhanced with its new inventiveness per its ethos.

Southwest Airlines’ mission statement has been regulated since the firm began operations. The company’s mission statement also emphasized their goal to serve consumers better, and it provides direction when they are required to create some official solutions. 

The company’s mission statement is another way of saying, “We always attempt to do the right thing!” According to the United States Department of Transportation, Southwest Airlines has the best cumulative customer satisfaction record.

Southwest Airlines wants its valued customers to know that they will never purposefully cause them inconvenience. 

Southwest Airlines routinely reminds its staff that they work for a customer service firm. Southwest Airlines considers it a distinct honor to satisfy their clients’ air travel needs.

Company NameSouthwest Airlines Co
Company TypePublic
FoundersHerb Kelleher, Rollin King
ProductLow Cost Airlines
Founded DateMarch 15, 1967
HeadquarterDallas, TX, USA
Websitehttp://www.southwest.com

What is the Mission of Southwest Airlines?

Southwest Airlines’ mission is to serve consumers and corporate customers with economical domestic and short-haul international travel and reliable cargo and shipping services.

Southwest Airlines Business Model

Southwest Airlines’ business model is focused on a low-fare strategy. It can offer low-cost airline tickets by operating at a high level of efficiency.

Multiple businesses are being forced to close their doors due to the Covid-19 outbreak — and this is surely affecting the commercial flight industry as well. 

This American airline has maintained its position as one of the most successful globally, despite these obstacles.

Unlike many other airlines, Southwest Airlines has enjoyed stability over the previous two decades as a result of its unified business strategy – which is precisely why the corporation may weather the coronavirus crisis without additional efforts.

Southwest Airlines is the leading low-cost airline in the United States at the moment. It serves more than 90 domestic locations in addition to the Caribbean, Central America, and Mexico.

According to the company’s website, “Southwest believes in a sustainable future in which our business model balances the interests of Shareholders, Employees, Customers, and other Stakeholders.”

Additionally, to safeguard our world for future generations and to honor our commitments, we will remain focused on maintaining our industry-leading profitability, maximizing natural resource efficiency, cultivating a creative and innovative workforce, and giving back to the communities in which we work and live.

How Does Southwest Airlines Make Money?

Southwest Airlines makes money by providing domestic and international airline services. Its revenue is distributed into the following categories:

  • Passenger Revenue, generated by the selling of domestic and international passenger airline tickets;
  • Transportation Revenue, derived from shipping and freight services;
  • Other revenue includes revenue from the sale and providing other services such as early check-in and in-flight purchases.

The “Other revenue” figure excludes several expenses their competitors charge, including bag fees, simple onboard refreshments (such as peanuts and crackers), seat classes, and premium seating (which the firm does not provide).

Competitive Advantages of Southwest Airlines

Southwest Airlines’ business model is founded on characteristics that set it apart from other airlines. 

Southwest Airlines Business Model

They emphasize affordable fares and on-time flights, innovative logistical procedures and solutions, and a great customer experience. Forbes frequently recognizes the company as a “Best Employer.”

Southwest Airlines’ competitive advantages are as follows:

Ticket Price

Southwest Airlines competes with other U.S. airlines on price, with its lowest fares on the most popular routes, making it the only airline that can match fares seen on other airlines.

Southwest Airlines’ entire business model is based on low operational expenses to achieve this unmatched advantage. 

There are a limited number of aircraft types, services are provided at small and secondary airports (at discounted rates), and the company has a high utilization rate for its short-haul flights.

Rewarded Loyalty

Southwest Airlines offers competitive fares and one of the best rewards programs in the industry: customers earn points that can be used to purchase future flights. 

Additionally, it offers a credit card (in collaboration with Chase Bank) that enables customers to earn points on expenditures other than tickets.

Human Resources

Southwest Airlines is also known for its friendly, helpful, and dedicated employees. A firm’s hiring methods and policies ensure that it hires individuals whose respective philosophy reflects the brand’s and whose passion is genuine for helping others.

Flexible Policy

Southwest Airlines’ clear and adaptable policies and procedures are another way to ensure passenger participation. 

The company allows customers to cancel reservations a day or two before departure and retains the cancellation funds for a future trip.

Developing innovations

Southwest Airlines is committed to a flexible business model that is versatile and agile enough to react to changing conditions. 

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They are constantly looking for lower-cost, disruptive solutions, enabling businesses to grow even during difficult times.

Efficacious Strategy

Southwest Airlines’ website describes this “proven method” in detail, including the following:

  • Carry the greatest number of passengers in the United States
  • The majority of daily departures worldwide.
  • Serve more than half of the top 50 metropolitan regions in the United States.
  • Profitability for 47 consecutive years.
  • A robust balance sheet.
  • Capital allocation strategy that is disciplined.
  • Commitment to shareholder value creation.

Southwest Airlines Business Model Canvas

Southwest Airlines Business Model

Customer Segments

A broad range of consumers, both professional and personal, with a particular emphasis on low-budget users. Additionally, the organization provides shipping services to corporate clients, mostly importers, and exporters.

Value Propositions

There are tickets at reasonable prices, complimentary baggage, a huge network of destinations, helpful customer service, a handy loyalty program, and extra services for a small fee.

Channels

It features a website, mobile app, and affiliate network of Booking Builder, Sabre, and Apollo. The company’s website provides detailed information about its locations, rates, and schedules, as well as a booking portal for clients to make and maintain reservations. The corporation also operates direct sales offices.

Customer Relationships

Southwest Airlines sells mostly through self-service. Customers may buy flights and manage their reservations entirely online without ever speaking to a human being. 

The airline’s personalized service is provided in-flight and at its airports, where staff members aid and provide information. 

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As well as offering customer service by phone, e-mail, postings, and FAQs, As well as through social media, you’ll also have access to customer service during and after booking.

Key Activities

The company offers low-cost airline services throughout the United States and adjacent regions, corporate and group travel services, and cargo and shipping solutions.

Key Resources

Maintaining fleets, building physical and technology infrastructure, supporting customers, developing sales channels, developing strategic relationships, and managing human resources.

Key Partners

Partner websites and travel agencies are affiliate partners; rewards partners provide customer products and services through a rewards program; car rental agencies and hotels are service partners.

Cost Structures

Operation and maintenance of fleets, physical and information technology infrastructures, fuel, people, marketing and sales, and general and administrative expenses.

Revenue Streams

They have been discussed previously, but it is worth noting that domestic flights account for 98 percent of Southwest Airlines’ income streams.

Key Takeaways From Southwest Airlines Business Model

Southwest Carriers offers greater flexibility than the majority of other large airlines. Southwest is the only major airline in the United States that is also a low-cost carrier.

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Southwest Airlines business model places a premium on recruiting and maintaining highly engaged personnel. Southwest is constantly refining its business model and operating procedures.

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