SWOT Analysis of Airline Industry

From Leonardo da Vinci’s design ideas for a flying machine in the 1490s to the Wright Brothers’ first fully practical plane, and finally being commercialized in 1914 when Tony Jannus traveled from Tampa to St. Petersburg with the first plane passenger, the aviation industry has only been growing in both history and systems.

Today, aviation includes everything that has to do with air travel - the airline industry, research and development, and aircraft manufacturing, among others.

If you find yourself needing to make an essay or a research paper about SWOT and the airline industry, look no further. In this article, we’ll talk about the airline industry and how it functions in society.

What Is the Airline Industry and Why Does It Need SWOT?

The airline industry is composed of different local and international airline companies around the world that both serve the domestic and international markets. Airlines are the companies that offer services of transporting passengers or goods by air, either through helicopters or jets.

With thousands of local and international airline companies offering commercial, charter, private, or even government use for passengers, the opportunity for air travel just keeps on increasing.

SWOT Analysis is a practical way to understand a company’s position in the industry. It shows the areas where the organization is great at (Strengths), what it lacks (Weaknesses), how it can improve (Opportunities), and what’s holding it back (Threats).

An Example of SWOT Analysis of Airline Industry

Here is an example of a SWOT analysis template for an airline, Southwest Airlines Co., or simply Southwest. It’s one of the major airlines in the United States, with its corporate office located in Dallas, Texas.

Strengths

1. Employee Loyalty

Southwest Airlines cultivated a LUV culture of making their employees feel like they are a part of a family. The airline even dedicated a department called “Culture Services Department” to make sure their company’s culture is well-practiced.

It keeps its internal team bonded through awards, programs, and events in recognition of its employees’ efforts. The company also makes sure that its employees are financially secured and content. As a result, Forbes named Southwest Number 2 in America's Best Employers of 2019.

2. Customer Loyalty

Southwest's excellent customer service also made them win the loyalty of most of their customers. A recent Temkin Experience Ratings report put Southwest as one of the highest-ranked airlines with regards to customer experience, leading in functionality and accessibility. This can be considered one of the airline's major strengths that greatly affect its domestic market share.

3. Affordable Flights

Southwest continues to find ways to adjust its business model to keep its current clientele while attracting new customers. The company's marketing strategies ensure profitability for its stakeholders while also maintaining its title as the best low-cost airline.

Southwest offers the Low Fare Calendar for passengers looking to fly with the cheapest fare possible. This pricing strategy also earns the company its loyal customers.

4. Low Operating Cost

With its exclusive use of Boeing 737s in its flights, Southwest Airlines manages to keep its operating costs at a minimum. Especially with fuel prices increasing, the use of only one type of aircraft means more efficient personnel training and aircraft maintenance.

Weaknesses

1. Unavailable International Travel

Some airlines can operate locally and internationally, but there are also low-cost carriers that don't. Some of the known low-cost carriers are RyanAir, JetBlue Airways, and Southwest Airlines. This can be a problem, especially when the US Market faces a decline as Southwest's operations are focused on domestic travels.

2. Failed Diversification of Revenue Sources

Southwest's revenue is divided among the following:

• Air ticket revenue (~93%)
• Loyalty points revenue (~6%)
• Cargo and mail revenue (~1%)

The company's mostly reliant on its passengers and air travel, making it vulnerable to sudden economic changes such as COVID-19.

Like other travel and tourism sectors, airline travel suffered a major loss when the pandemic hit. This failure to diversify revenue sources made Southwest incur its biggest loss.

3. Dependence on One Aircraft

Much like primarily depending on one revenue source, Southwest's choice of only using one type of aircraft is a double-edged sword.

Its reliance on Boeing 737s resulted in a loss of revenue in 2019 when the Federal Aviation Administration (FAA) had an emergency order to stop all MAX aircraft operations after the crash of Lion Air Flight 610 and Ethiopian Airlines Flight 302, pending further investigation.

Opportunities

1. Expanding Globally

Southwest stretching its routes to Mexico, the Caribbean, Central America, and most recently, Hawaii is a great step in reaching for nationwide travel. This expansion of travel destinations helps in discovering untapped markets that can potentially increase the airline's revenue and profit margin.

2. Improving Technology

There are now technologies for cost savings on fuels, maintenance, and modern tools to improve efficiency and increase profitability.

Southwest adding more e-payment choices to their website, mobile application, and in-flight purchase page in 2019 made traveling easier for their customers. Exploring more payment options for their passengers is a good move to upgrade their customer's experience and the airline's revenue.

The endless possibilities presented by the internet should also be taken advantage of. Proper marketing strategy and staying on trend with innovation can drastically help in the operations of the airline. This can include virtual reality (VR) and inflight connectivity that can entertain passengers from waiting in the airport to when they're seated in the plane.

Biometrics is also a popular addition to any business strategy. Using biometric screening or facial scanning will make traveling safer and easier.

3. Targeting Other Revenue Sources

Considering more revenue options will be a smart move for Southwest Airlines as doing so will help them be more stable and sustainable. In a case where airline travel becomes unprofitable or takes a huge blow, like what the pandemic did, Southwest can turn its attention to the other revenue sources and be able to support and keep its operations.

Southwest can give more attention to its cargo and mail revenue while creating processes to avoid mishandling, such as spoilage and missing items.

Threats

1. Economic Downturn

The economic downturn caused by the virus is a general slowdown in economic activity over a sustained period of time. One of the threats facing the airline industry is external factors or those that the business cannot control. All of these factors, including what it affects, such as political tensions, legal changes, and climate factors, greatly affect passenger volumes.

2. Terrorist Attack

A terrorist attack or even just the threat of it, anywhere in the world can affect air transport as it concerns the life of everyone inside the airplane. People rethink their travel plans and may even cancel, affecting the airline industry. This was proven when the 9/11 attack happened, affecting the travel industry and the economy as a whole.

3. Several Competitors

In business, you should know your market and your competitors as part of your strategic planning. For a company to be successful, it needs to have a competitive advantage or produce services that are better or cheaper than its competitors. This allows the generation of more sales and profit margins to improve and keep the business.

Southwest faces many participants in the industry. One of the industry's known major competitors is American Airlines - the largest airline by its fleet size and the number of passengers. There are also United Airlines, Delta Airlines, Southwest Airlines, Ryanair, JetBlue Airways, and many more. The many airline carriers passengers can choose from makes it hard to compete. Aside from the airlines, passengers can also choose alternative ways to travel, such as through trains and buses.

4. Increased Fuel Prices

Any increase in fuel price will greatly affect airline companies as their profitability and sustainability heavily relies on it. A high increase in fuel means more operating costs, and having more costs means higher ticket prices. As Southwest's best known for its cheap flights, it may result in fewer passengers choosing their air travel services.

5. Negative Publicity

A company's reputation is one of its best assets as the airlines' business heavily relies on people's trust in their services. The recent US Government report on Southwest flying 17 million passengers on jets that are not properly checked and maintained was a heavy blow on the airlines' name and will definitely affect how their customers view them.

6. Strict Regulations

Any change in airline travel regulation means the company processes and operations adjusting. It will also affect people's perception of the company. This is apparent such as in the case of FAA inspecting Southwest's legal compliance on its jets.

Conclusion

Each business always has its own strengths, weaknesses, opportunities, and threats that need to be analyzed to fully understand a company's position in the industry. In this article, we learned about the airline industry and provided a sample SWOT analysis on Southwest airlines.

If you need more help finishing your paper, you can always ask for help from online paper writing services or follow the template we have provided.