Weaknesses of Southwest Airlines

Paper Summary:

In this article the writer notes that Southwest Airlines is the premiere low cost airline. The writer points out that Southwest operates only in the US market and this restraint that kept it from making unregulated expansion a primary forward strategy is also the strategy that kept it from facing the severe financial difficulties all of the major airlines suffered following 9/11. The writer maintains that in spite of its low cost operating strategy and business model, Southwest has been also negatively impacted by cyclical forces in the airline industry. The writer notes that although Southwest's more recent problems include satisfying employee contract demands and in integrating new executive leadership while trying to manage growth from 500 employees to 35,000, it becomes clear the corporate culture was one more of a cult of personality than any documented and canonized set of operational policies. The writer concludes that operationally, a corporate culture based on the personality of a single charismatic leader, while laudable in many respects, is also difficult if not impossible to reproduce and often leads to human resource concerns as far as impropriety, discrimination and harassment issues.

Outline:
Industry Environment
Financing Sources
Sarbanes Oxley Compliance
Competitive Advantages as Weaknesses
Partnering Exposure
Conclusion

From the Paper:

"Most major corporations, Southwest included, have at their disposal various financing strategies to fund ongoing operations and extraordinary expenses. In Southwest's case, its various financing strategies are mentioned periodically throughout its Form 10-K most notably in the Management Discussion & Analysis section. These financing options include: cash on hand, short term investments that total more than $2b, a $600m bank revolving line of credit, public debt securities, and various derivative strategies. This degree of leverage, in spite of the cash on hand is still significant and, if Southwest suffers any significant strategic missteps, this leverage can quickly become a negative."

Sample of Sources Used:

• Gibson, Jane Whitney, and Charles W. Blackwell. "Flying High with Herb Kelleher: A Profile in Charismatic Leadership." Journal of Leadership Studies (1999): 120.
• Rivken, J. & Therivel, L. (2005). Delta Air Lines (A): The Low- Cost carrier threat. Harvard Business School, 9-704-403.
• "Southwest Airlines Form 10-K." Investor Relations (2007). Mar.24, 2007< http://www.southwest.com/investor_relations /fs_sec_filings.html>.
• "Southwest Airlines SWOT Analysis." Datamonitor, Oct(2006).
• Trottman, Melanie. "New Atmosphere: Inside Southwest Airlines, Storied Culture Feels Strains; Spirit of Fun and Hard Work is Clouded by Picketing and Employee Complaints." Wall Street Journal (Eastern Edition), July 11(2003): A1.

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