Swot Analysis Of Southwest Airlines

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Southwest is a passenger airline that provides scheduled air transportation in the United States and near-international markets. The Company serves approximately 100 destinations in over 40 states. On May 2, 2011, LUV acquired AirTran Holdings, the parent company of AirTran Airways (AAI), an increase of $ 3.75 per AAI cash, plus an additional $ 0.321 per AAI stock LUV. The deal is worth $ 1 billion, or $ 32 billion, including debt and operating leases.
Market overview. U.S. airlines in 2013 data show that the U.S. aviation industry is a $200 billion market. 2013 revenues of $17 billion 700 million (an increase of 5.1%, reaching $18 billion 600 million in 2014), LUV accounted for 8.9% of total industry revenue. Southwest Airlines market share
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The industry includes about 50 major commercial passenger carriers, some of which are major airlines, defined as the annual income of more than $1 billion in Airlines, Inc. The main competitors include Delta Airlines (as of June 2013, according to RPM calculation of the market share of 16%), AMR, American Airlines (21%, including the recent acquisition of American Airlines), United Continental Airlines (16%) and JetBlue (5%). The United States aviation industry has strong competitiveness. Barriers to entry are high, and there are strong, entrenched competitors. Very competitive pricing. Fuel costs are the second largest cost category in the southwest, which has risen sharply over the past five years. After years of having the best fuel hedging positions in the industry, LUV was close to a record high in 2008 and locked in several unfavorable prices. These hedges work in …show more content…
The company want to decrease its financial leverage in recent years. In 2011, the company has a Debt to Equity ratio of 0.46, which means debts are almost nearly half of the total liabilities. In that moment, company should to pay more interest to make loans with new creditors, because the company is very risky in terms of financial structure. And the interest coverage ratio has a low amount, which means the fact of operate with high leverage will harm the company to attract other investors. In 2015, we see an effort of the risk management in Southwest airline, their team optimize the structure by reimbursing debts, in the same time, they improve company’s interest coverage ratio.
Operating cash flows have always been close to $ 3500m, except in 2015 due to weak earnings and an increase in NWC. We expect the OCF to reach a trough in the next years as a result of the healthy operating profit and the slow-growth of the crude oil