Although Southwest has an impressive strategy that has resulted in a positive competitive advantage, there are still potential weaknesses and deficiencies that exist.  Southwest Airlines only offers domestic flights so when it comes to international flights, dedicated Southwest customers are obligated to choose another airline.  Furthermore, in the airline industry strategic development is difficult because the market is so highly competitive.   Some major airlines have larger fleets and a better established name.  Also, they mainly transport passengers from major hubs, thus having a better, more long-term relationship or alliance with larger hubs and in order for Southwest to combat those markets their strategy must be adjusted accordingly.  Lastly, the cost trends associated with Southwest have been troublesome in recent years.  Rival airlines have been cutting costs in order to stay afloat; all the while labor costs for Southwest have been rising.  Southwest’s strengths far outweigh their weaknesses which is a main reason why they have been profitable for so long.  For a complete SWOT Analysis refer to Appendix 1.

Following the recession, Southwest’s profit recovered sharply, it rose from $99 million in 2009 to $459 million in 2010.  (Southwest’s income statements from 2008-2011 can be found in Appendix 3.)  Southwest is currently the most valuable airline domestically and the largest carrier by passenger count.  In 2011, J.D. Power gave Southwest its highest score in five years which was a result of Southwest’s lean operation.

The main issue that Southwest Airlines face is to ensure they can continue maintaining growth while offering a low-price service while utilizing their current operational strategy, or whether the strategy should be tweaked or changed entirely.  While the current strategy has been successful since 1973, Southwest must ensure that this strategy will continue to work despite technology advancements, economic downturns, government regulations, new laws, or other external factors.

In order to continue the low-cost/low-price/no-fills strategy, Southwest must be able to find a balance between the perpetual changes that are inherent to the industry and their current strategy to ensure continued success while promoting both growth and cost advantages. 

In order to remain a low-cost airline provider, Southwest’s cost structure must be analyzed for the future.  The main costs associated with the airline industry are fuel, labor, and maintenance.  Since there really is no way to decrease fuel costs, Southwest must focus on reducing labor and maintenance costs.  While fuel costs are uncontrollable, Southwest can focus on promoting fuel efficiency and decreasing waste to cut costs.  Furthermore, Southwest should increase the usage of Blended Winglets which is a type of winglet design that reduces drag and takes advantage of the energy from wingtip vortices.  According to Mike Stowell, executive vice president and chief technical officer of Aviation Partners Boeing, “Fuel is a huge direct operating cost for airlines,” he explains. “Environmental factors are also becoming significant.  If you burn less fuel, your emissions will go down as well” (NASA).  Two methods that would also assist in the reduction of costs would be to drop onerous pension plans and to bargain with the unions to potentially cut employee pay.  Southwest must be extremely careful when bargaining for pay cuts (if they chose to do so) to ensure they do not damage the current positive relationship with employees.
