Strategic Audit Report Template

SOUTHWEST AIRLINES 5

Strategic Posture and Good Governance: Southwest Airlines

James Goggans

Embry Riddle Aeronautical University

MGMT 436, Strategic Management

Prof. Robert E. Rue

18 July 2021

Question 1: Performance of the Company over the past year

Investment

The 2020 financial year witnessed a significant recession in the airline industry that affected investment decisions. The customer service remained outstanding, and the company adapted quickly to the new mode of operations. The company restructured the route network and launched the Southwest Promise that added cleaning practices throughout the company's process. The company invested in the leisure sector with several leisure destinations increasing the company's market share (Vinod, 2021). The company recorded short-term investments of $ 14.5 billion by the end of the second quarter. The company focused on minimizing cash burn and recorded notable positive results.

Market shares

The company maintains a strong presence across significant markets. It serves America's top cities and has expanded to leisure destinations such as Colorado, Hawaii, Florida, and California. Since March 1, 2020, the company announced and introduced services to other Leisure destinations hence increasing the customer base (Shaneyfelt, 2021). Statistics reveal that Southwest Airlines is ranked second in the domestic market share led by American Airlines (American Airlines 19.3%, Southwest Airlines 17.4%). Today, the company serves more than 100 destinations by flying 4,000 flights a day across the US. Today, the company serves 14 near-international destinations in 10 countries.

Profitability

After 47 consecutive years of profitability, 2020 was a bit different for Southwest Airlines. During a virtual interview where the company's CEO was hosted by Texas Tribune, Gary Kelly revealed that traveling is modest, and the revenues have dropped. During the interview, the CEO highlighted that it would be unrealistic to think that they would recover to a point where they will be profitable like it was in 2019. The company's second-quarter earnings were the worst as the company lost $1.5 billion. During the first quarter, the company had lost $77 million (Dube et al., 2021). The airline industry is one of the most hit industries by covid-19. However, the CEO revealed that as they adjust to the new normal, they hope that operations will resume normally.

Question 2: Mission and Vision Statements

Southwest Airline's vision is statement is "to become the world's most loved, most flown, and most profitable airline." (Dias, 2020). Southwest Airlines has strategic plans that help to achieve the vision. The vision is reflected in the company's performance over the past years in terms of gaining a competitive advantage and profitability. The use of the word world's depicts the company's vision to tap the global market. It is also clear that it aims at achieving an outstanding brand image. Talking of the most flown and loved, it seeks to be highly popular among passengers and the only way to gain the popularity is to offer the best services to customers. The company also aims to attain the industry's highest profitability, which is attributed to the efforts to gain a competitive advantage. The strategic vision of the company requires strategic initiatives such as seizing growth opportunities.

Southwest Airlines' mission statement is, "The Company is dedicated to the highest quality of customer service that is delivered with a sense of warmth, individual pride, friendliness, ad company spirit." It has made outstanding efforts in customer service that makes it different from other companies in the airline industry. Several points emerge from the company's mission statement. First, the company seeks to offer the best aviation customer service. Second, employees must serve customers with warmth, corporate spirit, and friendliness. Therefore, it emphasizes excellent customer service that is aligned to employee culture and organizational image (Kim et al., 2021). The mission statement depicts that customer service is a significant determinant of company performance. It explains the company's strategic efforts in offering high standards operations in customer service. The mission statement points out employee behavior as a determinant of performance.

Question 3: Board of Directors

Name	Internal/ External	Year of election	Level of management	Role
Gary Kelly	Internal	2004	Top	Chair of the board and CEO of the company.Chair of the executive committee (Martinez, 2021).
Ron Ricks	Internal.	2015	Top	Vice-chair of the board. Member of executive and safety/compliance committees.
David Biegler	External	20o6	Top	Chairman of compensation and safety/compliance committees. Financial expert of the audit committee.
Veronica Biggins	External	2011	Top	Member of the compensation and nominating/ corporate governance committees (Company website, 2021).
Douglas Brooks	External	2010	Top	Member of nominating and corporate governance committee and the safety and compliance oversight committee (Company website, 2021).
William Cunningham	Internal	2000	Top	Chair of nominating and corporate governance, member of executive committee, and financial expert/member of audit committee.
John Denison	Internal	2008	Top	Denison is a member and financial expert of audit committee. He is also a member of the executive committee, and chair of safety and compliance oversight committee (Company website, 2021).
Thomas Gilligan	External	2015	Top	He is a Member and financial expert of audit committee. Thomas is a member of safety and compliance oversight committee too (Company website, 2021).
Grace Lieblein	External	2016	Top	She is a member of compensation committee and safety/compliance oversight committee.
Nancy Loeffler	External	2003	Top	Nancy is a member of compensation and nominating corporate governance committees (Company website, 2021).
John Montford	External	2002	Top	John Chairs the audit committee where he is also the financial expert. He is a member of compensation/ nominating and corporate governance committees (Company website, 2021).

References

Dube, K., Nhamo, G., & Chikodzi, D. (2021). COVID-19 pandemic and prospects for recovery of the global aviation industry. Journal of Air Transport Management, 92, 102022.

Dias, R. S. (2020). Southwest airlines Co.: consistency for the future (Doctoral dissertation).

Kim, S., Murray, K. B., & Moore, S. G. (2021). The Importance of Warmth in Brand Design. In The Value of Design in Retail and Branding. Emerald Publishing Limited.

Martinez Garbuno, D. (2021). Southwest’s Plan To Attract More Business Travelers.

Shaneyfelt, H. J. (2021). Flying Under the Radar: Multimarket Contact and Tacit Collusion in the US Airline Industry (Doctoral dissertation, Miami University).

Vinod, B. (2021). Airline revenue planning and the COVID-19 pandemic. Journal of Tourism Futures.

Southwest Airline official website (2021)https://www.southwestairlinesinvestorrelations.com/corporate-governance/board-of-directors