Southwest Airlines – External Environment Analysis External Environment There are a number of factors which may affect Southwest Airlines in their external environment. The external environment comprises of three major segments: remote, industry and operational…
Though the local political affairs are usually kept under control, there are numerous other issues that do not lie within the company’s hands. The perpetual rise in the fuel prices has always remained a major issue for Southwest. The unpredictable nature of the fuel prices is hugely attributed to several external factors which are usually not within the control of the company. The fuel prices are hugely driven by political agendas of the oil supplying nations and it may have varying results for the airline industry since oil is the major expenditure that an airline company has to endure in order to operate effectively and efficiently. Economic Factors The aviation industry within the United States of America has been a major contributor towards improving its country’s economy. According to a study issued by the International Air Transport Association (IATA) in May 2012, the airline industry has almost contributed $669.5 billion (4.9%) to the U.S. economy. Of this amount, almost 31% was contributed by airlines, airports and airline concerned services. The current era in which Southwest operates, fuel is presumably the main issue for not only Southwest airline but the entire aviation industry. According to the financial statements of Southwest Airlines, oil and jet fuel prices have remained at around 37% of total operating expenses both in the year 2011 and 2012 (Investor Relations, 2012). Social Factors Travelling has remained an important aspect of people normal living and with the dynamism in the economy, commuting has increased rapidly during the last four to five decades. People who usually travel from one place to another would always want to travel with low cost, high quality service. Hence it may be argued that such services are, based on their cheapness, are usually available via rail or road transport but this issue may be reduced to a greater extent since Southwest operates a low cost airline service and people would prefer it considering the low cost which it offers. Ecological Factors Environment friendliness has always remained an important feature for Southwest Airlines. The company has always focused on purchasing fleets that are both cost efficient as well as environment friendly. In a bid to prove it environment friendly nature, the company ordered the purchase of almost 150 Boeing 737 MAX aircraft which it considers to be more environment friendly than its present aircrafts (Annual Report, 2011). Southwest also uses environmentally responsible products within its aircraft fleet in order to help providing better atmosphere for its customers. In order to display its commitment towards improving the environment, the company issued its “Southwest One Report”. The report addresses several ecological issues and also provides strategies which would be adopted by the company to help reduce environmental hazards (Annual Report, 2011). Technological Factors The aviation service industry is technology intensive with an upward shift required at frequent intervals in order to remain competitive. Southwest Airlines has continuously kept up its foot on the accelerator with respect to technologically upgrading its services. The company has improved its website and its frequent flyer program in order to attract more customers. The company has also improved its fleets by providing Wi-Fi services to its ...
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