Strengths
Southwest Airlines has many strengths and competitive advantages. Those that deserve the most mention are high operational efficiency and high-quality customer service. Despite the smaller amount of monetary, material, and financial resources compared to American Airlines, the analyzed organization carries out many processes, such as those associated with boarding passengers, faster and smoother (Torres, 2023). A recent case where the company’s flight attendant, in a “civil and assertive” manner, did not allow a supposedly drunk woman to board an aircraft proves the professionalism of its employees (Massie, 2023, para. 15). These strengths give the company a strong positive reputation and stable and solid income.
Weaknesses
Like any other business, Southwest Airlines is not a company without weaknesses. One of these is the organization’s strong dependence on Boeing technology and products, as the CEO himself notes (Shepardson & Insinna, 2023). Another one is management union issues, which come from poor human resources (HR) managerial practices, specifically payroll (Kline, 2023). These weaknesses were highlighted because they can slow down an firm’s growth and rob it of its strengths.
Opportunities
The business environment always provides opportunities; these only require searching for them. For example, Southwest Airlines is not the only flight entity with management union issues; industry giants are also experiencing these (Kline, 2023). In the current situation, the company can try to develop a new payroll policy and improve its HR management to attract the best talent. Sustainability is an often discussed trend in civil aviation, and efforts in this direction can also improve the organization’s position.
Threats
Although Southwest Airlines is a large entity domestically, there are still threats in the business environment that can significantly damage it. Rising fuel prices are one of those, as they happen inevitably and sometimes unexpectedly, dramatically damaging all industry actors’ profitability and finances (Bouwer et al., 2022). The risk of environmental laws becoming stricter and raising operational prices even higher is especially dangerous for the discussed firm.
Financial Manager’s Evaluation
From a financial manager’s perspective, Southwest Airlines performed not very well in the past fiscal year of 2022. Their total current assets decreased by $3,228 million during the last annual timeframe, and their Current Ratio is 1.4, which is good, but it is closer to 1.2 than 2 (see Appendix A) (Southwest Airlines Co., 2023, p. 95). These data show that the flight entity urgently needs to look for new sources of financing. Moreover, they must optimize current processes and practices related to monetary and operational issues.
Debtholder’s Evaluation
For debtholders, today’s financial picture for Southwest Airlines is not very optimistic. Its accounts payable grew by $0.401 million, which means it is risky for interested persons to become future lenders for this entity (see Appendix B) (Southwest Airlines Co., 2023, p. 95). These figures show that its higher-level specialists are possibly not very competent in financial planning. They also theoretically have problems paying off debts to their lenders.
Stockholder’s Evaluation
Before buying stocks of Southwest Airlines, potential investors should look at the firm’s total stockholders’ equities in 2021 and 2022. To paraphrase, these figures in the annual report decreased by $0.951 million over the year (See Appendix B) (Southwest Airlines Co., 2023, p. 95). It demonstrates that they have begun to stagnate a little. This negative trend is not critical but symptomatic, and future stockowners should be concerned about it.
References
Bouwer J., Dichter, A., Fuchs, G., Hartung, K., Krishnan, V., Rivas, D., & Saxon, S. (2022). Why rising fuel prices might not be as bad for the airline sector as it seems. McKinsey & Company. Web.
Kline, D. (2023). Southwest, United, Alaska and American Airlines face strikes. TheStreet. Web.
Massie, G. (2023). Flight attendant celebrated for barring apparently drunk passenger she spotted doing cartwheels in airport. Independent. Web.
Torres, L. (2023). I’m a loyal Southwest flier but decided to try American to see if I’d like it better. I didn’t for 6 big reasons. Insider. Web.
Shepardson, D., & Insinna, V. (2023). Southwest CEO says airline not counting on deploying Boeing MAX 7 jets in 2023. Reuters. Web.
Southwest Airlines Co. 2022 annual report to shareholders. (2023). Investor Relations. Web.
Appendix A
Total current assets for 2021 – $18.036 million
Total current assets for 2022 – $14,808 million
18.036-14,808=3,228
Total current liabilities for 2022 – $10,378 million
14,808/10,378=1.4268645211
The Current Ratio of Southwest Airlines for 2022 is 1.4
Appendix B
Accounts payable for 2021 – $1,282 million
Accounts payable for 2022 – $2,004 million
2,004-1,282=0.401
Appendix C
Total stockholder’s equity for 2021 – $36,320 million
Total stockholder’s equity for 2022 – $35,369 million
36,320-35,369=0.951