Analysis Of American Southwest Airlines' Low-Cost Strategy

This paper is the analysis of American Southwest Airlines Low-Cost Carrier (LCC) operation. By analyzing the financial performance, the success of low-cost strategy is shown to give an example of Chinese future LCC operation. The paper is focused on the LLC operation features which differentiated them from the traditional carriers and lowered down the operation cost. And the unique culture which emphasized on the optimism, devotion and participation was the basis of the company's success. The paper is composed of four parts:Part one is the analysis of Southwest Airlines financial performance by employing the DuBang financial model after the brief introduction of industry development and company history. The rate of net income divided by equity is broken down into rate of asset, financial leverage, rate of sale margin rate and asset turnover. By comparing these data of Southwest Airlines with the rivals, the reason of success is disclosed.Part two is the comparison of route system, airport, aircraft and self-service with the traditional airlines to analyze the contribution of these operation decisions. Part three is discussion the unique company culture of Southwest Airlines including the great leadership and devoted employees which played important role in maintaining the low cost operation. The leader's operation philosophy and personality drove the culture to come into being and the employees motivated by this culture guaranteed the long success of LCC operation strategy.Part four is the future competition and challenge faced by Southwest Airlines, especially the new entrant's creation being a great challenge to the company's classical operation concept. Southwest Airlines should not only resolve the management problems also keep its creation in operation.By means of studing Southwest Airlines successful operation it is hoped to give example to Chinese future LLCoperation.