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Southwest Airlines was founded in 1967 by Rollin King and Herb Kelleher. It began as a small regional carrier with a single aircraft. However, the airline grew rapidly and eventually became the largest domestic airline in the United States. In 2001, Southwest merged with AirTran Airways, which gave it a more significant presence in the East Coast and Midwest. Today, Southwest is the third-largest airline globally and serves more than 100 million passengers each year.
Southwest’s main competitors are-American Airlines, Delta Air Lines, United Airlines, JetBlue Airways, and Air France KLM. They each offer their perks to business travelers and vacationers alike, so you’ll want to research before booking your trip!
Southwest Airlines has a competitive advantage over all domestic airlines in the United States for having the largest market share. In addition, they had annual revenue of over $19 billion. This places them among some of the most successful and popular airlines in North America. It has a market share of around 38%.
Financial data
Southwest Airlines (LUV) is one of the most popular airlines in North America. It has a market capitalization of $32.9 billion and earns annual revenue of $19.5 billion. The company’s earnings per share (EPS) is $3.89, and its price-to-earnings (P/E) ratio is 22.68.
SWOT Analysis
Strengths:
- Most affordable airlines in North America
- A strong loyalty program that rewards frequent flyers
- Customer-focused
Weaknesses:
- Southwest has had some safety issues in the past, although they have since rectified these issues
- Not as large as some of their competitors and may not have as many flights
Opportunities:
- Southwest could grow even more in the North American market
- They could focus on expanding their international presence
Threats:
- The airline industry is very competitive
- Terrorist threats could affect airline travel
Southwest Airlines’s Top Competitors
1. American Airlines Group
American Airlines (AA) is a major American airline headquartered in Fort Worth, Texas. The airline was founded in 1930 as a mail carrier with its first flight between Dallas and St. Louis. American Airlines is the world’s largest airline by fleet size and revenue. American Airlines has been a member of the Oneworld alliance since 1999.
Market share and annual revenue
It’s one of the major airlines in North America and has maintained a substantial market share. In addition, the airline has also generated annual revenue of more than $40 billion. The airline has expanded its business model by catering to business travelers and vacationers.
Financial data
American Airlines offers its own set of unique benefits that can be hard to resist for business travelers and vacationers. For example, AA’s earnings per share were $5.09 in 2017, significantly higher than Southwest’s ($3.28). However, in terms of the P/E ratio, American Airlines is also more expensive at 25.14x earnings than Southwest’s 15.81x earnings.
2. Delta Airlines
Delta Air Lines was founded on May 30, 1924, when the world was in the grips of a global pandemic, the Spanish Flu. The airline’s first flight took off from Dallas, Texas, to Jackson, Mississippi. Delta has grown into one of the world’s largest airlines from its modest beginnings, serving more than 160 million passengers each year. The company is headquartered in Atlanta, Georgia.
Market share and annual revenue
The company has a market share of about 18%, and it generated more than $41 billion in revenue in 2017. In addition, Delta airline gained multiple competitive advantages through establishing a domestic and international presence.
The company has a market capitalization of $37.16 billion as of September 7, 2018. Delta Airlines reported a net income of $5.1 billion on operating revenues of $44.6 billion for 2017.
Financial data
The airline earned $2.19 per diluted share, including a $0.04 per diluted share impact of Hurricane Irma and higher fuel costs during the quarter while it had adjusted earnings before interest tax depreciation and amortization (EBITDA) margin of 23.0% compared to 20.0% in 2016 when excluding special items, mainly due to the integration efficiencies that have been realized from the merger. The company has a price-to-earnings (P/E) ratio of 14.14 as of September 07, 2018.
3. United Airlines
United Airlines was founded in 1927 as Varney Air Lines. The airline changed its name to United Airlines in 1934. United Airlines is headquartered in Chicago, Illinois. United Airlines is one of the two largest airlines in the United States, along with American Airlines.
Market share and annual revenue
United Airlines has a market share that’s almost twice as large as its closest competitor. The airline also generates billions of dollars in revenue every year.
It operates 7,400 flights daily and has an annual revenue of $36.1 billion. United Airlines operates a hub at Chicago-O’Hare International Airport and has a strong presence in the Asia-Pacific region. United Airlines Holdings accounts for 22% of all domestic passenger traffic in terms of market share.
Financial data
This company has a market capitalization of $24.5 billion and annual revenue of $37.7 billion. United Airlines also pays a dividend of $0.78 per share, which yields 1.6%. The company has a price-to-earnings ratio of 9.4 and an Earnings Per Share of $3.87.
4. JetBlue Airways
JetBlue Airways Corporation, stylized as JetBlue, is an American low-cost carrier and the sixth-largest airline in the United States. The company is headquartered in the Long Island City neighborhood of the New York City borough of Queens. It also maintains a corporate office in Sunnyvale, California.
Market share and annual revenue
JetBlue Airways is known for its perks, including free in-flight entertainment, snacks, and Wi-Fi. The airline also offers a generous baggage policy. JetBlue Airways has a market share of about 10%. It had annual revenue of $6.5 billion in 2016.
Financial data
The airline earned $297 million in net income during the third quarter of 2018, down from $306 million during 2017. Earnings per share were $0.53, down from $0.58 in the year-ago quarter.
5. Virgin America
Virgin America was founded in 2007 by Richard Branson and his Virgin Group. The airline began flying in August of 2007 and was headquartered in Burlingame, California. The company prides itself on its customer service and its unique onboard products.
Market share and annual revenue
Its market share has grown steadily over the years. Its market share was estimated to be about 9% in 2016. Virgin America’s annual revenue has also been growing steadily, and it’s estimated to have generated about $2.5 billion in revenue in 2016.
Financial data
Virgin America’s financial data is very impressive. Virgin America has an earning per share of $0.92. Additionally, Virgin America has a P/E ratio of 36.
6. US Airways Group
The US Airways Group is a conglomerate of airlines that offer their services throughout North America. The company has its headquarters in Tempe, Arizona. The company was founded in 1939 as All-American Airways. It became a major airline after it merged with Piedmont Airlines in 1987. The company continued to grow and merge with other airlines until it became the US Airways group in 2005.
Market share and annual revenue
It’s one of the largest airlines in the world, carrying more than 200 million passengers a year. It’s also one of the ten largest airlines globally regarding the fleet size. The company has an annual revenue of over $17 billion.
Financial data
The company operates over 950 aircraft and serves more than 200 destinations worldwide. The earnings per share for US Airways Group is $2.13, while the P/E is 9.24.
US Airways Group also offers a dividend yield of 0.90%. This is a relatively high yield, and it could be an appealing factor for some investors.
7. AirTran Holdings
AirTran Holdings is a popular airline known for its customer service and affordable prices. The company was founded in 1993 by two entrepreneurs, Bob Fornaro and Joe Leonard.
They had a lot of experience in the airline industry and were looking to create a new airline that would focus on customer service. AirTran Holdings was the first airline to offer online check-in for its passengers.
Market share and annual revenue
It provides scheduled passenger service to over 70 destinations throughout the United States, Mexico, and the Caribbean. AirTran Holdings had a market share of 5.2% and annual revenue of $1.4 billion in 2009.
Financial data
The company has been profitable every year since it began operations in 1992. In 2010, AirTran Holdings earned $101 million on revenue of $2.6 billion, giving the company an earnings-per-share ratio of 3.9 and a price-to-earnings ratio of 8.5.
8. Continental Airlines
On July 1, 1934, Continental Airlines was founded as Varney Speed Lines. The airline changed its name to Continental Airlines in 1937. It has been a part of the United Airlines family since 2010. The airline is headquartered in Houston, Texas. Continental Airlines offers more than 550 daily departures to 133 destinations in 59 countries.
Market share and annual revenue
The airline has several awards and accolades to its credit, including being named the best regional airline in North America by Air Transport World magazine. The airline’s primary shareholder is United Continental Holdings, Inc., with a 38% stake. Continental Airlines has a total revenue of $17.5 billion and a market share of 18.1%.
Financial data
Continental Airlines is publicly traded on the New York Stock Exchange (NYSE). Over the years, the company has maintained a healthy earning per share (EPS) and price to earnings (P/E) ratio. The airline’s EPS for the fiscal year ending December 31, 2010, was $5.29. The company’s P/E ratio for the same period was 9.14.
9. Spirit Airlines
Spirit Airlines was founded on February 1, 1984, by four entrepreneurs: Morris Air, Bruce Schaffner, Ken Chahine, and Edward Essa. The company has been in operation since 1983 and operates scheduled and charter flights throughout the United States, Latin America, the Caribbean, and Europe.
Market share and annual revenue
As of September 2017, Spirit Airlines had annual revenue of $2.181 billion. Spirit Airlines accounts for 5.6% of the total domestic air travel market share in the United States.
The company also offers ancillary services that generate revenue and reduce the cost of travel for the customer, which helps it remain profitable.
Financial data
Spirit Airlines’ earnings per ratio are higher than Southwest Airlines in the last four quarters because their revenue has grown from $100 million to $900 million in the previous four years.
The P/E ratio of Spirit Airlines is higher because they have to pay their pilots more and also have to provide them with a lot of benefits that other airlines do not need.
10. Frontier Airlines
On April 1, 1994, Frontier Airlines was founded as a low-cost airline in the United States. It originally served five destinations in Colorado and Wyoming. The airline has grown rapidly and now serves over 100 destinations in the United States, Mexico, and Costa Rica.
Frontier Airlines is a Colorado-based airline that offers business travelers and vacationers services.
Market share and financial revenue
The airline has maintained a significant market share in the United States. In 2016, the airline reported annual revenue of $2.3 billion. The airline has also increased its revenue by 9% from the previous year.
Financial data
Frontier Airlines’ earning per ratio was -$0.08, and its P/E ratio was 190.37, whereas Southwest Airlines’ making per share is $0.76, and its P/E ratio is 16.47. Although Frontier Airlines may have a higher P/E percentage, it is not as profitable as Southwest Airlines.
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Conclusion
So, how does Southwest stack up in the competitive airline industry? The answer is that they’re doing pretty well.
With a 4-star rating on Skytrax and being ranked as one of Fortune’s 100 Best Companies to Work For six years in a row, it’s clear that Southwest has been able to build an excellent company culture for its employees.
And, with a strong focus on customer service and an impressive safety record, it’s no wonder that Southwest Airlines is one of the most popular airlines in North America.
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