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SOUTHWEST AIRLINES CASE STUDY May 2002 note we want to consider whats going on now Feb 2003 Wow An excited Colleen Barrett new president of Southwest shouted in the meeting with her management team We have bucked the money-losing trend that other US carriers are in and have reported a profit of 214 million in the first quarter of 2002 Now the management team is reflecting on second quarter 2002 results At the same time that Southwest Airlines reported this quarter the nations six largest airlines posted hefty losses We need to find latest financials Airline1st Quarter 20021st Quarter 20011st Quarter 2000 American Airlines43 million132 million United Airlines313 million99 million Delta Air Lines133 million172 million US Airways178 million115 million Northwest Airlines171 million3 million America West128 million146 million Southwest Airlines profit margin was 92 compared to industry 23 We need to find out what it is now What accounts for this enormous difference between SWA and the other carriers What management policies and operating procedures does SWA follow that the other carriers do not Ms Colleen Barrett is looking to the future Whats next with all this uncertainty in the airline industry Ms Barrett noted an article she was reading about another low-fare carrier JetBlue Airways entering the market The new company is modeled after Southwest One thing that has helped SWA outperform its competitors is a hedging program it implemented to control rising fuel costs In 2000 SWA hedged 80 of their fuel needs at a price based on crude oil at 22 per barrel When the price of crude oil rose and continued to rise SWA was unaffected As a result of their hedging SWA paid an average of 78 cents per gallon compared to 82 cents per gallon paid by the competition Airline passenger traffic was down 15 nationwide in the first quarter of 2002 While other airlines have
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