Southwest Airlines’ External Environment Study


The macro-environment is a dynamic field where changes in other external factors affect the industry. Most organizations conduct a PESTEL analysis during a market research phase to understand the forces that act on that particular industry. Such a comprehensive analysis is conducted by studying the Political, Economic, Social, Technological, Environmental, and Legal factors affecting the industry. Since so many factors affect the industry and the companies working in that industry, that organizations need to understand and plan to mitigate any negative changes that might turn up. More importantly, these days opportunities for new companies and old companies alike come fast but rarely. For this reason, organizations also conduct a SWOT (strengths, weakness, opportunities, and threats) analysis to find how well the organization can compete within the industry (Kotler & Armstrong, 2008). This framework aims to identify what areas the organization is good at and what areas the organization needs to improve. Based on the results of this identification new business strategy is molded that would include plans about which opportunities to take on and which threats to ward off.

Main Body

S.W.O.T. Analysis on Southwest Airlines

The SWOT analysis of the company is given below: (Southwest Airlines, 2009)


  • Low costs thus lowest fares offered
  • Fast turnaround times and high capacity usage
  • Debt/Leverage low
  • Complaint rate lowest amongst the airlines
  • A company everyone seems to like in America (Pounds & Weil, 2001)
  • No lay off policy at the organization
  • One of the few profit-making entities in the financial crunch


  • Non-availability of international flights
  • Oversold flights
  • No segmentation and class types (First Class etc. or Business Class)
  • Dependent on Boeing for its planes
  • Small level of cargo and freight services


  • Start operating international flights
  • Increase flight locations and schedules in the US
  • Merger with other low-cost airlines
  • Fly even more destinations (Sloan, 1999)


  • Other low-cost airlines
  • Rise in fuel prices
  • Political instability in some areas
  • Terrorist incidents
  • Decline of leisure travel due to economy
  • Competing online ticket reservation systems.
  • Government regulations
  • Drop in demand for air travel after 9/11 incident

Southwest has been able to understand the business environment better than any other organization has been able to. By coming up with a low-cost no-frills solution, Southwest fulfilled the customer’s need of traveling from one point to another as quickly and as cheaply as possible. Even though at the time when customers wanted a luxury travel facility that had been followed seamlessly for several years, Southwest came and completely changed the philosophy. It capitalized on the budget travelers need for an economic flight and made the low-cost industry their own. (Brancatelli, 2008)

Now the question only remains that will Southwest be able to survive its current success and market share or will it enter a maturity phase where other companies already are dwindling?


My opinion is that Southwest and a few other airlines in the industry will not only survive but also continue to plow their success for many years to come (U.S. Air Carriers, 2009). I come to this conclusion by studying this trend becoming popular in the whole world. Amongst other top airlines, I believe that Southwest Airlines will merge with an international airline and start its low-cost services outside the US. This way it would become a major competitor and an airline to watch for the future.


Brancatelli, J. (2008). Southwest Airlines Seven Secrets for Success. Web.

Kotler, P. & Armstrong, G. (2008). Principles of Marketing. India: Prentice Hall.

Pounds, S. and Weil, D. (2001). The airline everyone seems to like. Palm Beach Post.

Sloan, B. (1999). Spirit of Generations. The Senior News Source.

Southwest Airlines (2009). Home. Web.

U.S. Air Carriers (2009). Web.

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