Company Analysis Project – Final Paper – Southwest Airlines
Charles M Mohr
MBA 6008 – Global Economic Environment
February 19, 2016
The aircraft carrier business contends in an oligopoly showcase. This implies just a few of airline companies control the significant bit of the business. Southwest Airlines is one of these organizations. They make up 16.6% of the business sector, second only to Delta. The motivation behind this paper is to talk about the microeconomic and macroeconomic situations that Southwest Airlines faces every day. The Airline Deregulation Act that was passed in 1978 was a huge impact on the aviation industry. There are ...view middle of the document...
In its 45th year of existent, the Dallas-based compnay keeps on separating itself from other airlines in the business with commendable client administration conveyed by more than 48,000 representatives to more than 100 million clients every year. Southwest gladly works a system of 97 destinations over the United States and seven extra nations with more than 3,900 takeoffs a day amid peak travel season. Southwest's fleet numbers around 700 aircraft, including 665 Boeing 737s (Southwest Corporate Fact Sheet, n.d.).
Total operating expenses for 2015 were $15.7 billion, including special charges (before profit sharing and taxes) of $39 million associated with the acquisition and integration of AirTran and $334 million associated with union contract bonuses. Operating income for 2015 was a record $4.1 billion, and $4.0 billion, excluding special items, compared with $2.2 billion and $2.4 billion, respectively, in 2014. Annual net income for 2015 was $2.2 billion, or $3.27 per diluted share, compared with $1.1 billion, or $1.64 per diluted share, for the same period in 2013. Excluding special items, annual 2015 net income was $2.4 billion, or $3.52 per diluted share, compared with $1.4 billion, or $2.01 per diluted share, for the same period in 2014 (Southwest Airlines Reports Record Fourth Quarter And Annual Profit; 43rd Consecutive Year
Of Profitability, 2016).
Southwest Airlines is one of the five biggest airline carriers in the U.S. Delta, United, American, and U.S. Airways make up the other four. Delta leads with 16.7% of the business sector followed closely by Southwest with 16.6%. United has 15.3% followed by American Airlines with 12.5%. U.S. Airways is the littlest of the significant players with 8.4% of the business sector. Beginning 2014, the five critical airline companies secured 70% of industry salaries, and block entry for new associations is liberal (Investopedia, 2015). This infers the United States aircraft industry is an oligopoly. An oligopoly exists when a business area is controlled by a touch of social occasion of firms, as often as possible in light of the way that the limit to entry is adequately immense to unsettle potential contenders from entering it.
The Airline Deregulation Act was exhibited in 1978. Its effect was to extend competition, with section costs lessening in the quarter century taking after its presentation. Meanwhile, the amount of admissions extended from 207.5 million in 1974 to 721.1 million in 2010 (Investopedia, 2015). Regardless, after wide union in the business and the mistake of various smaller transporters, costs have begun to rise firmly as the business part has transformed into an oligopoly. In 2013, the Department of Justice (DOJ) moved to discourage a merger amidst American and U.S. Airways routes, which would have made the best carrier in the country. The DOJ felt that further cementing would hurt contention. Additional mergers among genuine players could...