10 K Integration Paper- Southwest

10 K Integration Paper- Southwest
Pursuant to the Aviation and Transportation Security Act (“ATSA”), the Transportation Security Administration (the “TSA”), a division of the U.S. Department of Homeland Security, is responsible for certain civil aviation security matters. Actual or threatened war, terrorist attacks, and political instability. Pg. 32
Southwest like most airline companies are pitted against worldwide oil consumptions. The political ties against this include numerous factors such as foreign imports, growing worldwide demand, government regulations and taxes, and refining capacity, which can be tied into fare costs. Political instability in areas of the world such as the Middle East can have the affect of driving up oil prices and increase the expense of already 38% of southwest balance sheet for oil costs. While also facing worldwide increase in demand for natural resources such as China.
2. Economic (macro-level)
The airline industry is particularly sensitive to changes in economic conditions; an increase in unfavorable economic conditions or continued economic uncertainty could negatively affect the Company’s results of operations. Pg. 28
The airline industry, which is subject to relatively high fixed costs and highly variable and unpredictable demand, is particularly sensitive to changes in economic conditions. Unfavorable U.S. economic conditions have historically driven changes in travel patterns and have resulted in reduced spending for both leisure and business travel. The Company’s low-cost structure has historically been one of its primary competitive advantages, as it has enabled Southwest to offer low fares, drive traffic volume, and grow market share. The Company’s low-cost structure has become increasingly important as a result of the Company’s decision to control capacity growth in response to high fuel prices and uncertain economic conditions. The Company has limited control over fuel and labor costs, as well as other costs such as regulatory compliance costs and aircraft airframe and engine repairs expense.
3. Socio-cultural
The airline industry is affected by many conditions that are beyond its control, which can impact the Company’s business strategies. Pg. 29
Changes in consumer preferences, perceptions, spending patterns, or demographic trends; Southwest and AirTran also compete with other airlines in areas of Customer Service such as on time performance, passenger amenities, equipment type, and comfort. According to statistics published by the DOT, Southwest consistently ranks at or near the top for Customer Satisfaction for having the lowest Customer complaint ratio. Some airlines, including AirTran, have more seating options and associated passenger amenities than does Southwest, including first-class, business class, and other premium seating and the amenities associated therewith.

4. Technological
The Company is increasingly dependent on technology to operate its business and continues to implement substantial changes to its information systems; any failure or disruption in the Company’s information systems could materially adversely affect Pg28
The Company is increasingly dependent on the use of complex technology and systems to run its ongoing operations, as well as to support its initiatives, including its integration of AirTran’s operations and initiatives. In the ordinary course of business, the Company’s systems will continue to require modification and refinements to address growth and changing business requirements, including requirements related to international operations.
The Company may occasionally experience system interruptions and delays that make its websites and services unavailable or slow to respond, which could prevent the Company from efficiently processing
5. Legal
Any failure of the Company to maintain the security of certain Customer-related information could result in damage to the Company’s reputation and could be costly to remediate. Pg. 27. The Company’s operations may be adversely affected by its expansion into non-U.S. jurisdictions and the related increase in laws to which it is subject. Pg. 31

A compromise of the Company’s security systems could adversely affect the Company’s reputation and disrupt its operations and could also result in litigation against the Company or the imposition of penalties. In addition, it could be costly to remediate. Operations in non-U.S. jurisdictions are in many cases subject to the laws of those jurisdictions rather than U.S. laws. Laws in some jurisdictions differ in significant respects from those in the United States, and these differences can affect the Company’s ability to react to changes in its business and its rights or ability to enforce rights may be different than would be expected under U.S. law. Further, enforcement of laws in some jurisdictions can be inconsistent and unpredictable, which can affect both the Company’s ability to enforce its rights and to undertake activities that it believes are beneficial to its business.
6. Environmental
The Company is subject to various federal laws and regulations relating to the protection of the environment, including the Clean Air Act, the Resource Conservation and Recovery. PG21
The Company is subject to various federal laws and regulations including the Clean Air Act, the Resource Conservation and Recovery Act, the Clean Water Act, the Safe Drinking Water Act, and the Comprehensive Environmental Response, Compensation and Liability Act, as well as state and local laws and regulations. These laws and regulations govern aircraft drinking water and the discharge or disposal of materials such as chemicals, hazardous waste, and aircraft deicing fluid. The federal government, as well as several state and local governments, are considering legislative and regulatory proposals to address climate change by reducing green house gas emissions.
PESTLE Forces Analysis
The biggest factor affect the change over in competitive strategy for Southwest would be economic conditions. The airline industry, which is subject to relatively high fixed costs and highly variable and unpredictable demand, is particularly sensitive to changes in economic conditions. This makes it a high variable of threat to southwest. Technology plays a major role in southwest competitive strategy, being able to streamline guest and bookings keeps turnaround times on flights to a minim. A low factor would be the environmental conditions, sense all airlines are affected by EPA standards its something to watch but, shouldn’t be a major issue.
Porter’s Five Forces
7. Current Competitors/Intensity of Rivalry
The Company’s low-cost structure is one of its primary competitive advantages, and many factors could affect the Company’s ability to control its costs. Pg. 21
The Company’s low-cost structure has historically been one of its primary competitive advantages, as it has enabled Southwest to offer low fares, drive traffic volume, and grow market share. The Company’s low-cost structure has become increasingly important as a result of the Company’s decision to control capacity growth in response to high fuel prices and uncertain economic conditions.
Some of the Company’s competitors have taken additional efficiency and cost reduction measures, such as capacity cuts and headcount reductions, which have reduced the Company’s cost advantage. In addition, some competitors have announced plans to add a significant number of new aircraft to their fleets, which could potentially decrease their operating costs through fleet simplification, better fuel efficiencies, and lower maintenance costs.
8. Threat of new entrants
Competition within the airline industry is intense and highly unpredictable, and Southwest and AirTran currently compete with other airlines on a majority of their routes. In addition, the airline industry generally has low barriers to entry.
While low barriers of entry exist from other players to improve routes and pricings Some major airlines have more extensive route structures than Southwest and AirTran, including significantly more extensive international routes. In addition, many competitors have entered into significant commercial relationships with other airlines, such as global alliances, code sharing, and capacity purchase agreements, which increase the airlines’ opportunities to expand the routes they can offer.

9. Power of Suppliers
The Company is currently dependent on single aircraft and engine suppliers, as well as single suppliers of certain other parts; therefore, the Company would be materially adversely affected if it were unable to obtain additional equipment or support from any of these suppliers or in the event of a mechanical or regulatory issue associated with their equipment. Pg. 26
The Company is dependent on Boeing as its sole supplier for aircraft and many of its aircraft parts and is dependent on other suppliers for certain other aircraft parts. In 2011, the Company announced its commitment to purchase a significant number of additional Boeing aircraft. Although the Company is able to purchase some aircraft from parties other than Boeing, most of its purchases are directly from Boeing. Therefore, if the Company were unable to acquire additional aircraft from Boeing, or Boeing were unable or unwilling to make timely deliveries of aircraft or to provide adequate support for its products, the Company’s operations would be materially adversely affected.
10. Power of Buyers
Southwest and AirTran also compete with other airlines in areas of Customer Service such as on time performance, passenger amenities, equipment type, and comfort. According to statistics published by the DOT, Southwest consistently ranks at or near the top for Customer Satisfaction for having the lowest Customer complaint ratio. Pg. 19
Customer Services will be key seeing as buyers have the selection to move from airline to airline. Some airlines, including AirTran, have more seating options and associated passenger amenities than does Southwest, including first-class, business class, and other premium seating and the amenities associated therewith. Additionally, some major U.S. airlines have announced plans to add a significant number of new aircraft to their fleets. Such efforts could provide cost benefits to these airlines through fleet simplification, better fuel efficiencies, and lower maintenance cost. Which would give buyers more of a selection in choosing another airline over southwest.

11. Threat of substitutes
Southwest and AirTran also compete for customers with other forms of transportation, as well as alternatives to travel. Pg18
The airline industry is subject to varying degrees of competition from surface transportation by automobiles, buses, and trains. Inconveniences and delays associated with air travel security measures can increase surface competition. In addition, surface competition can be significant during economic downturns when consumers cut back on discretionary spending. Because of the relatively high percentage of short haul travel provided by Southwest, it is particularly exposed to competition from such surface transportation in these instances. The airline industry is also subject to competition from alternatives to travel such as videoconferencing and the Internet, which can increase in the event of travel inconveniences and economic downturns.
Porter’s Five Forces Analysis
Southwest faces similar problems to that of all regional airlines. The difference in southwest is the ability to move low cost fares to provide their customers with the best price. They offer a service based around high customer satisfaction with no room for error. This type of automation gives southwest a completive edge in the market but puts a strain on its bottom-line to perform. Also since most of their supplies come from one supplier they at a high risk over suppliers for any airplane cost. Because of its short trip services they are affected by substitutions methods such as internet conferencing.
SWOT
12. Strengths
Southwest principally provides point-to-point service, rather than the “hub-and-spoke” service provided by most major U.S. airlines (often referred to as “legacy” or “network” airlines). Pg. 2
The hub-and-spoke system concentrates most of an airline’s operations at a limited number of central hub cities and serves most other destinations in the system by providing one-stop or connecting service through a hub. Any issue at a hub, such as bad weather or a security problem, can create delays throughout the system. By not concentrating operations through one or more central transfer points, Southwest’s point-to-point route structure has allowed for more direct non-stop routing than hub-and-spoke service. This in turn has historically enabled Southwest to control delays and total trip time.
13. Weaknesses
The Company’s business has been significantly impacted by high and/or volatile fuel prices; therefore, the Company’s strategic plans and future profitability are likely to be impacted by the Company’s ability to effectively address fuel prices.
Fuel prices continue to present one of the Company’s most significant challenges, as (i) the cost of fuel has been at historically high levels over the last few years and has been unpredictable, and (ii) airlines are inherently dependent upon energy to operate; therefore, even a small change in market fuel prices can significantly affect profitability. Fuel prices are unpredictable, in part, because of many external factors that are beyond the Company’s control.
14. Opportunities
AirTran Acquisition and Related Matters AirTran Holdings, Inc. pg. 12
Approximately half of AirTran Airways’ flights originate or terminate at its largest hub in Atlanta, Georgia. AirTran Airways also serves a number of markets with non-stop service from smaller bases of operation in Baltimore, Maryland; Milwaukee, Wisconsin; and Orlando, Florida. Southwest believes the acquisition of AirTran positions it to respond better to the economic and competitive challenges of the industry
15. Threats
The airline industry has faced on-going security concerns and related cost burdens; further threatened or actual terrorist attacks, or other hostilities, could significantly harm the airline industry and the Company’s operations. Pg. 28
Terrorist attacks and threatened attacks have from time to time materially adversely affected the demand for air travel and have also resulted in increased safety and security costs for the Company and the airline industry generally. Safety measures create delays and inconveniences and can, in particular, reduce the Company’s competitiveness against surface transportation for short-haul routes. Additional terrorist attacks, even if not made directly on the airline industry, or the fear of such attacks or other hostilities
SWOT Analysis
Southwest holds its own against the competition in the regional airline industry. With the ability to streamline flights from point to point services they offer customers a hassle free style to flying which is a huge strength in the market. One crucial issue, which is the case with most airliners in the derivatives market on fuel. Southwest enters into a variety of derivatives contracts to secure fuel and set ticket prices, which makes it completely dependent on the market as a whole. Although recently the alliance with AirTran has given southwest the opportunity to enter into newer markets unseen before. The addition of AirTran gives southwest a opportunity for rapid growth in these new markets. Of course a threat to southwest would be factors outside the company’s own control such as terrorist attacks and the implication of safety matter attached to these attacks. While safety measurers do give customers reassurances it also slows down timely turnover, which is a key role in southwest revenue stream.
16. Competitive Strategy
Aggressive Promotion of the Company’s Low-Fare Brand and Points of Differentiation from its Competitors Southwest is also the only major U.S. airline that does not impose a fee for a Customer’s change in flight plans. In January 2011, the Company introduced a marketing campaign to promote this point of differentiation between Southwest and its competitors. During 2011, the Company began integrating AirTran into its operations. Pg. 21
Southwest competitive strategy revolves around the idea of providing low cost hassle free and convinces of short flights to its customers. For years southwest has been rated in the top marks for customer services for keeping in touch with the needs of its customers. By not charging fees on top of fees it has differentiated itself from the competition. Now by combining itself with AirTran they now have access to new terminals and can offer flights at lower rates than before boarding its power in the regional airline market.
16b
Southwest Airlines competitive strategy revolves around the idea of providing low cost hassle free and convinces of short flights to its customers. By setting itself around low cost structure and its alliances with air Tran they are corning new areas along with adding more hubs to their area of flight. The view is that by offering the lowest fare with less hassle on fees the company can increase revenue and customer satisfaction. This has been the case for many years as southwest has been an industry leader in customer satisfaction. Southwest prides itself on its loyalty to its employees and happy employees lead to returning customers. With frequent flyer promotions to continue to have returning customers southwest sets an industry standard that other regional airlines follow.

10 K Integration Paper- Southwest 9.6 of 10 on the basis of 2526 Review.