Southwest Airlines: Is "LUV" at the limit?

Author: Naga Damaraju, Ph.D.

Publication: Strategic Management: Text and Cases. (2021) Dess, G.G., McNamara, G., Eisner, A.B., and Lee, S.H. (10th edition), McGraw Hill.

Publication Date: January 2021

Abstract:
At the beginning of 2019, Southwest Airlines fared third in the rankings of the best U.S. airlines released by The Wall Street Journal. Delta Airlines ranked first and Alaska Airlines ranked second. These rankings were based on a composite set of parameters forming a scorecard. Southwest did best on two-hour tarmac delays and worst on mishandled baggage. Southwest was beginning to face other challenges: safety violations, fines for flying planes that needed repairs, incidents where the roofs of Southwest planes opened up inflight, killing a passenger in 2018. Although this was the first plane-related death in the airline’s 48-year history, the signs were there of trust eroding from both employees and the public.

Was Southwest growing too big and ignoring the focus that had made the airline so successful for so long? Would the success saga continue under Kelly when the core elements of the company’s original strategy—low-cost, organic, and domestic point-topoint short-haul growth and customer-centric culture—were all simultaneously changing? Was this low-cost business model, which put its planes through frequent takeoffs and landings, putting passengers at risk? Would Southwest be able to remain profitable in 2019 and beyond?