VIEWS: 16 PAGES: 23 POSTED ON: 12/23/2011
Southwest Airlines Emily Farr Tyler Green Nicole Veth Business 499 – Capstone Keigha St Clare May 8, 2007 Table of Contents • Tyler • Facts & Flight Method • Porters 5 Forces • Looking Into The Future • Nicole • Mission Statement & Timeline • Industry Life Cycle • Financial Stability • Emily • In The Beginning • Value Chain • RBV – • Resources & capabilities • Competitive advantage • VRIO • Keigha • Leadership & SW cities • P.E.S.T.E.L In The Beginning… “As company legend goes, the very first route map was drawn on a cocktail napkin during a meeting between Herb Kelleher and Rollin King.” http://www.southwest.com/programs_services/adopt/about_southwest.html http://www.southwest.com/about_swa/customer_service_commitment/customer_service_commitment.pdf Timeline… June 18, 1971 Began airline service Flights to Houston, Dallas, and San Antonio 1977 SW stock listed on NYSE as "LUV" 1982 Appointed Herbert D. Kelleher President, CEO, & Chairman of the Board 1984 #1 in customer satisfaction (4 th year in a row) 1990 announce billion dollar revenue mark Officially declared a "Major" airline! May 2003 Top ranked domestic passenger airliner 2006 Southwest’s 34th consecutive year of profitability http://www.southwest.com/about_swa/airborne.html Facts / Milestones… Low-fare, high frequency Point-to-point carrier Largest domestic U.S. carrier 4th largest major airline in America More than 34,000 Employees Fly more than 64 mil. passengers a year 58 destination cities (59 airports) More than 3,200 flights a day Top competitors: AMR Corp. Continental Airlines JetBlue http://www.swabiz.com/about_swa/press/factsheet.html#Leadership Flight Method Few amenities / no “frills”… No assigned seats "point to point" (city to city) No meals NOT hub-and-spoke model Only snacks: peanuts Domestic flights only No electronic entertainment Quantity focused No fees to change same-fare Flies only Boeing-737 aircrafts tickets http://ostpxweb.ost.dot.gov/aviation/airlinebusinessmodel.htm Leadership / Structure: Herbert D. Kelleher Executive Chairman of the Board Vice Chairman of the Board Gary Kelly and Chief Executive Officer President, Secretary, Colleen Barrett and Director http://gallery.swamedia.com/photos/value=open/type=jpg Map: SW Cities / Destinations POLITICAL ECONOMIC - Deregulation in 1978 When economic conditions are unfavorable: - 1st big political win for airlines - Airliners very susceptible / vulnerable - Post 9/11: - Discount airlines see profits - Gov. helped 2 major airlines - People look for cheaper travel options get out of financial trouble P.E.S.T.E.L SOCIAL Flying on planes to get to where you need to be has been the norm for the TECHNOLOGICAL last 30 years and will Some airlines have continue to be the norm converted to e-tickets, in to the foreseeable and have a self future. checking machine. As more and more Many people use the Spanish speakers come to internet to compare live and travel in the US prices to find the best there is more need for option for their trip. airlines to be bi-lingual. P.E.S.T.E.L ENVIRONMENTAL: LEGAL: Airlines have cut Legal issues have hindered prices and offered airlines from making a full expensive frequent “9/11 recovery.” flyer programs just to grab customers away According to the Air from other airlines. Transportation Association: The regular airlines “Airlines constitute about 2/3 of are starting to get away FAA-controlled flights but pay from the hub system more than 90% of the bill. In return, the airlines are stuck using and switch to the point a 1950s ground-based, radar- to point system that SW dependent navigation system with uses. legacy facilities and processes.” Porter’s 5 Forces • High cost of entry Entry • High competition • Many other forms of Industry transportation Buyers Rivalry Focal • Many other airlines Firm • Suppliers Threat • Food and drink Suppliers Substitutes • Coke products • Fuel Sources Industry Life Cycle Customer Knowledge Increasingly sophisticated Over 50% ticket price in 25 years Expenses Drastic compression of airline yield premium Exploring new ways to revenue Labor and fuel (largest costs) The first mover effect Security Carrier’s assets, personnel assets and customers interest Regulations enforced by government Anticipating, managing, paying Innovation will be key! Resources & Capabilities TANGIBLE: Financial Physical Technological Organizational INTANGIBLE: Human Innovation Reputation http://www.mdcegypt.com/Pages/Management%20Approaches/Strategy,%20Business%20Plan/Develop%20or%20validate%20the%20St rategic%20Plan.asp#ii._ Value_Chain _Analysis_ Value Chain Model www.web.hec.gov.pk/.../0/chp_value_chain.jpg V.R.I.O. Resources Costly Exploited and Valuable? Rare? to by Capabilities Imitate? Organization? Financial Yes Yes Yes Yes Physical Yes Yes Yes Yes Technological Yes Yes Yes Yes Organizational Yes No Yes Yes Human No Yes Yes No Innovation No Yes Yes Yes Reputation No No Yes Yes Financial Ratios Short Term Liquidity Financial Ratio Numerator Denominator Current Ratio Current Assets Current Liabilities Quick Ratio Cash + Cash Equivalents + Current Liabilities Accounts Receivable Average collection period Average Accounts Receivable x Sales in days 365 Long Term Solvency Financial Ratio Numerator Denominator Debt-to-Total Assets Total Liabilities Total Assets Debt-to-Equity Total Liabilities Total Shareholder’s Equity Long-Term-Debt-to- Total Long-Term Debt Total Shareholder’s Total-Capital Equity + Total Long- Term Debt Financial Ratios Cont. Profitability Financial Ratio Numerator Denominator Return on Sales Net Income Sales Revenue Return on Stockholder’s Net Income Average Stockholder’s Equity Equity Asset Turnover Sales Average Total Assets Available Pretax Return on Operating Income Average Total Assets Available Operating Assets Earnings Per Share Net Income – Dividends on Average Common Shares preferred stock, if any Outstanding Dividend & Market Price Financial Ratios Numerator Denominator Price-Earnings Market price of common Earnings per Share share Dividend-Yield Dividends per common share Market price of common share Dividend-Payout Dividends per common share Earnings per share Financial Stability Short Term Liquidity Ratios Current ratio 0.90 Quick ratio 0.56 Average collection period in days 10.05 Long Term Solvency Ratios Debt-to-total assets 21% Debt-to-equity 45% Long-term-debt-to-total-capital 20% (EVA) Economic Value Added (in millions) Profitability Ratios Return on sales 5.5% NOPAT 857 Return on stockholder's equity 7.7% Operating Income 725 Asset turnover 0.65 WACC 8.6% Pretax return on operating assets 6.9% EVA 53,306 Earnings per share (1.28) Air Transport Industry Average EVA 15,032 Market Price and Dividend Ratios Price earnings 163.9 Southwest above average by 38,275 Dividend yield 0.02% Dividend payout 3.0% In The News… “Airlines are constantly in search of new revenue sources. Travelers have gotten used to paying for food on board. But it's going to be harder to adjust to fees for services that used to be free.” ~ Chris McGinnis The Ticket editor (travel newsletter) http://biz.yahoo.com/hmoney/070430/043007_airline_fees_moneymag.html?.v=4 Future Plan… Follow-up system Entire meal served Seat classes Differentiate strategies Other services (shuttle) Consider amenity change Expand internationally? Penetrate more domestically GO GREEN!
Pages to are hidden for
"Southwest Airlines_1_"Please download to view full document