South West Airlines Company, commonly known as Southwest, is an airline company that mainly provides single-class air transportation for leisure and business passengers. Established in 1971 as a small company in Texas the passenger airline has grown to become a large force in the American market. It was the great ideas of Herb Kelleher and Rollin King that saw the birth of Southwest Airlines.
Starting with only three Boeing 737 aircraft and flying in only three cities (Houston, San Antonio, and Dallas), today Southwest serves more than 104 million customers in a year and flies in 64 major cities across America, for “more than 3,400 times a day” (Southwest, 2008). The airline company is characterized by the use of innovative ways to meet customer satisfaction with a distinct business model that emphasizes “point-to-point” service as opposed to “hub-to-spoke service” (Reuters, 2008).
The administration and management functions of the Company are headed by the Chief Operating Officer and the President respectively. What’s more, with the success of this airline company, the business model and the corporate governance of Southwest Airlines are worth emulating by other players in the airline industry.
The services and nature of business
The nature of the Southwest Airlines Company is unique considering the general airline industry. The company offers scheduled air transportation for passengers but within the United States. It emphasizes mainly point-to-point flights as opposed to common hub-and-spoke flying. Moreover, the Company offers single-class air transportation to both leisure and business travelers. It is worth noting that Southwest Airlines Company boasts of low operation costs as compared to other players in the domestic airline industry. The focus for Southwest is to maintain quality customer service and low costs.
The Company offers, on top of its core business, cargo services and programs that supplement its mission and vision. The cargo services entail mainly transportation of goods within the United State. Additionally, the programs include Kids Korner and Adopt a Pilot program, which is designed mainly for young kids. These programs are aimed at training young children on various life skills, while at the same time having fun.
For instance, the adopt-a-pilot program trains young people on aviation-related disciplines like career planning, language arts, presentation skills, science, and math. Moreover, the airline provides for passengers to travel in groups through the Group travel program. With this program, groups of ten passengers receive discounts if, of course, they are on a similar itinerary. Additionally, the Company recognizes and targets the gay and lesbian group by flying to travel destinations that encourage this group of people to travel. Freedom Shops and Skymall are Southwest Airline’s innovative concepts that broaden their services. The Freedom Shops and Skymall allow Southwest’s customers to shop and buy various merchandise.
Investing and Finances
The Southwest Airline company, being a public company, is owned publicly. That is to say, corporates and individuals own a part of the company, but of course, have to meet certain requirements of American law. Therefore, the shareholders are the main financier of this Company, and therefore Southwest shares are available through a stock exchange platform. Thus, its shares are traded under the New York Stock Exchange (NYSE) under the ticker “LUV” ticker. The ticker is a representation of the home feel at Dallas Love Field as well as the unique warm relationships among customers, shareholders, and employees.
The Company provides financial statements for its external users. The four main financial statements include a balance sheet, cash flow statements, income statements, and Non-GAAP reconciliation statements. The balance sheet, also known as the Statement of Financial Position, indicates the assets, owner’s equity, and liabilities at a particular time. On the other hand, an income statement spells out the revenues, expenses, and net income as well as loss for a given period. The Cash Flow Statement gives a summary of the cash payments and receipts.
As of December 31, 2007, Southwest was in good economic standing in terms of its assets and liabilities. The Company had total assets of $16,772 million of which $4,443 million were the current assets. This was a marked improvement against the previous year’s total assets of $13,460 million. However, the Company did not show improvements in liabilities which were at $16,772 million at the end of 2007 as compared to the previous liabilities of $13,460.
In terms of revenues, the Company showed an improvement of almost $800 million to record at $9,861 million. All in all the company recorded profitability. Thus the net income for the year-end in 2007 was $645 compared to the previous year’s $499. This translates to about $0,84 per basic share and $0.85 per diluted share for the year ended December 31, 2007.
According to these statements, it is evident that Southwest’s business performance is impressive given the fact that the business was faced with several challenges. The profitability indicates that the company is viable for investors to invest their money. Moreover, with commitments by the management, the Company has the potential to grow further.
Although the main business activity of Southwest Airlines includes flying passengers, business operations are diverse. These operations include activities such as administration, marketing, aircraft maintenance, and outsourcing that fall under the following management categories:
Top Management
The operation of the company is made possible by a well-structured executive team that oversees the operations and administration of the airline company. The company is headed by a President and Chief Executive Officer, a position which is currently occupied by Gary C. Kelly, who is also the Chairman of the Board. Moreover, the company functions under the support of Vice Presidents who oversee various sections of the company. They include the following:
- Kevin M. Krone, Vice President of Marketing, Sales and Distribution;
- Robert E. Jordan, Executive Vice President of Strategy and Planning;
- Teresa Laraba, Vice President Ground Operations;
- Ron Ricks, Executive Vice President Corporate Services and Corporate Secretary;
- Chuck Magill, Vice President Flight Operations;
- Michael G. Van De Ven, Executive Vice President and Chief Operating Officer;
- Jan Marshall, Vice President Technology and Chief Information Officer;
- Ginger C. Hardage, Senior Vice President Culture and Communications;
- Pete McGlade, Vice President Schedule Planning;
- Daryl Krause;Senior Vice President Customer Services;
- Bob Montgomery,Vice President Properties;
- Jeff Lamb, Senior Vice President Administration and Chief People Officer;
- Rob Myrben, Vice President Fuel Management;
- Dave Ridley, Senior Vice President of Marketing and Revenue Management;
- Lori Rainwater, Vice President Internal Audit;
- Greg Wells, Senior Vice President Operations;
- Tammy Romo, Vice President Financial Planning;
- Laura H. Wright, Senior Vice President Finance and Chief Financial Officer;
- James A. Ruppel, Vice President Customer Relations and Rapid Rewards;
- Barry Brown, Vice President Safety and Security;
- Linda B. Rutherford, Vice President Public Relations and Community Affairs;
- Gregory N. Crum, Vice President Director Operations;
- Mike Ryan, Vice President Labor Relations;
- Darren Dayley, Vice President Technology Customer Experience Portfolio;
- Ray Sears, Vice President Purchasing;
- Matt Hafner, Vice President Ground Operations;
- Jim Sokol, Vice President Maintenance and Engineering;
- Mike Hafner, Vice President Inflight Services;
- Scott E. Topping, Vice President Treasurer;
- Scott Halfmann, Vice President Provisioning;
- Ellen Torbert, Vice President Reservations;
- Joe Harris, Vice President Labor and Employee Relations;
- Chris Wahlenmaier, Vice President Ground Operations;
- Laurie Hulin, Vice President Technology Aircraft Operations & Enterprise Management Portfolios
- Kathleen Wayton, Vice President Strategy and Change Leadership;
- Madeleine Johnson, Vice President General Counsel;
- Kay Weatherford, Vice President Revenue Management and Pricing;
- Leah Koontz, Vice President Controller;
- Bob Young, Vice President and Chief Technology Officer.
Conclusion
In this discussion, the analysis of Southwest Airline Company is intended to evaluate its financial standing. The discussion starts with a preview of the company’s nature of business, and explores the financial, investments elements as well as the corporate governance to conclude that the Company is viable for investing in.
References
Reuters. Southwest Airlines Co (New York Stock Exchange). 2008. Web.