Southwest Airlines Case

Introduction

Since the invention of the aircraft during the period before and after the infamous world war, air travel has tremendously changed the way people live and carry out their business across the globe. Over time, the various inventions that have been witnessed in the airteravel industry have had a great impact in improving the industry’s performance to deliver better and safer travel services to the entire world. However, the air travel industry has experienced several challenges through the ever changing climatic and financial factors. The air travel has become such a common place that it has changed the concept of distance worldwide, despite the challenges , air travel has made it possible to visit and do business in place which were once considered remote(Rigas, 2006).

External factors

Global recession

In modern air travel industry the most significant factor that has greatly influenced trends in air travel, is the global recession. Most airlines have inevitably cut on their numbers of available flights purposely to avoid a situation of making flights with empty seats, to save money on fuel and related labor costs. Pricing of air travel packages has gone down due to relative competition in the industry. A significant decline in first class and business class has been recorded over the previous year which has resulted in decreased profits for airline companies. A majority of US airlines have shown an indicator of declining profits. In a financial health analysis of the industry an airline’s success is measured by its ability in generating adequate revenues to cover costs both before and after the non-profit generating items which include sales from sales of assets, interest charges and other adjustments or provisions. In fact airlines can not make sufficient income without positive operating and net results to meet financial commitments and cut on the high borrowing that has become the only solution over the previous years (Bijan, Ken & Tom, 2008).

Political situation

The political situation has a number of factors which has affected southwest airline drastically. The government regulations on the way airlines operate have been rather very strict on the issue of passengers’ security and fuel. This has put an additional task to the airline due to these factors. The first problem was government regulation regarding old airplanes. The fuel cost was seriously erratic over the years which had lead to difficulties on fuel cost estimation to being a difficult task (Rigas, 2006).

US economic situation

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