Southwest Airlines Executive Summary

Southwest Airlines ranked #2 by the American Customer Satisfaction Index (ASCI) for 2017 (Vasel, 2017) and #1 in its segment according to the J.D. Power 2017 North American Airline Satisfaction Study (J.D. Power, 2017). In 2015, Southwest Airlines finished the year with a net income of $2.2 billion (Southwest Airlines, 2016). By analyzing the market and business data, we will explain the impact microeconomic principles have on the company’s sustainability. We will review the supply and demand for airline services examine price elasticity and production costs, and explore the overall market of the airline industry. Upon completing this review, we will make recommendations for Southwest Airlines to implement to continue its success and maintain,

taking its first flight on June 18, 1971. The company originally serviced only three Texas cities – Houston, Dallas, and San Antonio. By the end of 1971, Southwest had flown 6,051 trips carrying 108,554 passengers on its four aircraft. (Southwest, 2017a). The company made their first quarterly profit in the history of the company in 1973 (Southwest, 2017b). By 1989 they were considered a major airline after surpassing the billion-dollar mark in revenue. Southwest has continued to be a pioneer of innovations in the airline industry. In 1972, Lamar Muse, President of Southwest, introduced a two-tier fare structure creating the “Pleasure Class,” which is one of the most important innovations in airline history (Southwest, 2017b). Southwest became the first major airline to offer Ticketless Travel in 1995 and to launch a website in 1996 (Southwest, 2017c). In 2009, Southwest became the first airline to utilize sky to satellite wi-fi connections. Beginning in 2013, passengers aboard Southwest flights can view on demand movies and tv shows as well as select live television channels. They were the first carrier to offer gate-to-gate connectivity. Southwest started service to a destination outside of the 48 contiguous U.S. states by providing service to Puerto Rico in 2013. Flights to the Bahamas, Jamaica, and Aruba in 2014 allowed Southwest to become an international airline. They recently launched a new airplane as well, the Boeing 737 MAX 8 (Southwest,