Corporate Culture of Southwest Airlines
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This paper discusses the defining elements of Southwest's corporate culture that include its underdog persona and its focus on a supportive, active and fun culture, and then looks at Southwest's financial strength. The paper presents this author's belief that the company's corporate culture helps the firm's performance and then looks at how Southwest's management can focus on internal promotion of the corporate culture and on improving the company's profitability.
From the Paper:"Southwest has decent financials for an airline. Its liquidity ratios are in line with the industry average with a current ratio of 1.2 and a quick ratio of 1.2. Interest coverage is 2.4 times, about half the industry average. Southwest's margins are tighter than the industry average as well, with a gross margin of 19.1% and a net margin of 1.9%. ROE is 3.8%, ROA is 1.4% and ROI is 1.8%, all below the industry average. Southwest's debt ratio is just 0.61, which is relatively low in an industry where most aircraft are leased, representing fixed obligations. Long term debt is just 23% of assets. Accounts receivable turnover is 54 times, a strong figure.
"The return on equity is relatively low for an airline, with the industry average sitting at 16.2%. This in part reflects that Southwest has a much lower debt ratio than other airlines, and therefore has more equity compared to its size than does many of its competitors. The five-year return on equity is just 6.2%, compared with an industry average of 14.8%, which supports this theory of long-run higher equity levels lowering the ROE.
"The airline's financial strength comes from its consistent profitability. The company has seen this profitability slip in recent years, but retains the industry's only long-term track record of consistent profitability. The relative weakness of the company's financials in the past couple of years reflects a difficult operating environment rather than poor performance on the part of the company."
Sample of Sources Used:
- Donlon, J. (1999). Air Herb's secret weapon - Chief Executive of the Year - interview with Southwest Chief Executive Officer Herb Kelleher. The Chief Executive. Retrieved May 31, 2010 from http://findarticles.com/p/articles/mi_m4070/is_146/ai_55427052/
- Oswald, D. (2009). Corporate culture done right: Southwest Airlines. The Employment Law Post. Retrieved May 31, 2010 from http://employmentlawpost.com/oswaldletters/2009/11/29/corporate-culture-done-right-southwest-airlines/
- MSN Moneycentral: Southwest Airlines. (2010). Retrieved May 31, 2010 from http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=LUV&lstStatement=Balance&stmtView=Ann
- Bailey, J. (2008). Southwest. Way Southwest. New York Times. Retrieved May 31, 2010 from http://www.nytimes.com/2008/02/13/business/13southwest.html?pagewanted=1&_r=1
Cite this Case Study:
Corporate Culture of Southwest Airlines (2013, February 19) Retrieved September 28, 2023, from https://www.academon.com/case-study/corporate-culture-of-southwest-airlines-152472/
"Corporate Culture of Southwest Airlines" 19 February 2013. Web. 28 September. 2023. <https://www.academon.com/case-study/corporate-culture-of-southwest-airlines-152472/>