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Feb. 13, 2025

Southwest Airlines: The Next Frontier

The Takeover

It was Monday, June 10, 2024. Bob Jordan, Figure 1. Relative stock price performance of
CEO of Southwest Airlines Co. (LUV), opened his largest US airlines, 2022–2024 (July 2022 = 100).
browser to read the morning news. He braced
himself. Just the day before, he had been contacted
by Elliott Investment Management L.P. (EIM),
which had made him aware that EIM had purchased
a $1.9 billion stake in LUV, representing
approximately 11.3% of LUV’s market cap. This
made EIM and Vanguard Group, Inc., the
company’s largest shareholders. 1 Jordan was keenly
aware that despite a relatively quick recovery after
the COVID-19 pandemic, LUV’s stock price had
languished over the past few years while peers such
as Delta Air Lines (Delta) and American Airlines
(American) had enjoyed relative gains (Figure 1).

Nearly all the major financial news outlets

featured excerpts from EIM’s letter announcing the
transaction, which read:

Southwest’s poor execution and leadership’s

stubborn unwillingness to evolve the Note: DAL = Delta; AAL = American; UAL = United Airlines.
company’s strategy have led to deeply Data source: Southwest Airlines Co. SEC Forms 10-K.
disappointing results for shareholders,

1 Joey Solitro, “Southwest Airline Stock Soars on Elliott Investment Stake,” Kiplinger, June 10, 2024,
https://www.kiplinger.com/investing/stocks/southwest-airlines-stock-soars-on-elliott-investment-stake (accessed Jan. 3, 2025).

This public-sourced case was prepared by Pnina Feldman, Bigelow Research Associate Professor of Business Administration, Raul O. Chao, Oliver
Wight Associate Professor of Business Administration, and Rebecca Goldberg (MBA ’03), Executive Lecturer. It is based in part on previously published
University of Virginia Darden School of Business cases relating to Southwest Airlines Co., including: Anwar Harahsheh and Elliott N. Weiss, “Southwest
Airlines: Keeping That Lovin’ Feeling After Herb Kelleher” (UVA-OM-1015); Marlene Friesen and Elliott N. Weiss, “Southwest Airlines: Singin’ the
(Jet)Blues” (UVA-OM-1150); Marlene Friesen and Elliott N. Weiss, “Marlene’s Marvelous Adventure: Southwest Airlines” (UVA-OM-1152); Marlene
Friesen and Elliott N. Weiss, “Marlene’s Marvelous Adventure: JetBlue Airways” (UVA-OM-1153); and Dane Neilsen, Rebecca Goldberg, and Elliott
N. Weiss, “Southwest Airlines: Where’s the Luv?” (UVA-OM-1571). It was written as a basis for class discussion rather than to illustrate effective or
ineffective handling of an administrative situation. Bob Jordan’s thoughts and actions in this case are either based on publicly available information or
were created by the authors for pedagogical reasons. Copyright  2025 by the University of Virginia Darden School Foundation, Charlottesville, VA.
All rights reserved. To order copies, send an email to sales@dardenbusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval system,
used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School
Foundation. This publication is protected by copyright and may not be uploaded in whole or part to any AI, large language model, or similar system, or to any related training
database. Our goal is to publish materials of the highest quality, so please submit any errata to editorial@dardenbusinesspublishing.com.

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Page 2 UV9152

employees and customers alike. Southwest’s rigid commitment to a decades-old approach has inhibited
its ability to compete in the modern airline industry. 2

While of course this criticism bruised Jordan’s ego, he also had grown accustomed to the ups and downs
of corporate leadership. He reminded himself that, generally speaking, change could be uncomfortable but also
held great promise. Changing a successful business model, in particular, required investment and created new
risks. The best thing he could do now was work with his executive team and the company’s new major
shareholders to reevaluate company strategy in light of current industry trends and market conditions.

LUV had built and sustained a unique and successful market position for nearly five decades. Even during
tough times, when other major US airlines had posted losses, LUV had kept its head above water. The 1980s
and 1990s were particularly tough on national air traffic carriers. In the 1980s alone, almost 100 airlines declared
bankruptcy (see Figure 2 for a summary of bankruptcies, mergers, and acquisitions in the US airline industry).
Following the September 11, 2001, terrorist attacks and the related economic recession, the rest of the airline
industry reported more than $5 billion in losses while LUV remained profitable (Figure 3). Between 2002 and
2011, even as four major US airlines filed bankruptcy (US Airways, Delta, American, and United Airlines
[United]), LUV’s business model remained robust and dominant. By 2003, LUV transported more US
passengers than any other airline. And in 2019, LUV posted its 47th consecutive profitable year. 3

Figure 2. Number of bankruptcies and Figure 3. Net income of major US Airlines—LUV,

mergers and acquisitions in the US airline DAL, AAL, and UAL—1992–2005.
industry, 1980–2024.

Data source: “Data & Statistics: U.S. Airline and

Bankruptcies,” Airlines for America, December 30, 2024,
https://www.airlines.org/dataset/u-s-bankruptcies-and-
services-cessations/ (accessed Jan. 3, 2025).
Note: DAL = Delta; AAL = American; UAL = United Airlines.
Source: Created by authors.

2 Chris Isidore, “Activist Investor Takes 1.9 Billion Stake in Southwest Airlines, Calls for Leadership Changes,” CNN, June 10, 2024,

https://www.cnn.com/2024/06/10/business/southwest-activist-investor-stake/index.html (accessed Jan. 3, 2025).

3 “2019 One Report,” Southwest Airlines Co., 2019, https://www.southwest.com/assets/pdfs/communications/one-reports/2019-Southwest-One-

Report.pdf; Leslie Josephs and Shawn Baldwin, “Why Boeing’s Problems Are Hurting Southwest Airlines,” CNBC, September 17, 2019,
https://www.cnbc.com/video/2019/09/17/how-the-boeing-737-max-grounding-hurts-southwest-airlines.html (both accessed Jan. 3, 2025).

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But LUV had seen some difficult years since 2020, amid pressures on the travel industry caused by COVID-
19 and other events. The price of LUV’s stock had fallen over 50% since 2021 and had recently dropped 16%
between June 2023 and June 2024, while the share price of some traditional full-service airlines like Delta had
risen 6% over the same 12 months. LUV’s 16% share price drop was relatively low, however, compared to that
of other low-cost carriers: JetBlue Airways (JetBlue) had fallen by 35%, Spirit Airlines (Spirit) by 79%, Alaska
Airlines (Alaska) by 21%, and Frontier Airlines (Frontier) by 44%. 4

Should Jordan advocate for a change? And if so, what should those changes be? Any significant shift in
company strategy would require an equally significant investment in LUV’s operating model. Changes required
money, time, and commitment, created new risks, and impacted the value a company was able to offer its
customers. The driving question was this: Should LUV double down on a cost-saving approach or shift to
incorporating more luxury amenities, such as entertainment, connectivity, seat upgrades, or airport lounges?

History: 1967 to 2013 5

In 1967, Rollin King and Herb Kelleher founded LUV. King was a former investment counselor and
Kelleher an attorney and graduate of New York University. In the late 1960s, the new Dallas–Fort Worth
Regional Airport was under construction, and Houston, Dallas–Fort Worth, and San Antonio, Texas, were
among the fastest-growing population centers in the United States. Two Texas-based airlines served the three
regions by way of larger metropolitan areas such as New York or Los Angeles, as opposed to direct flights
between them. In talks with consumers, King became convinced that offering short flights between the three
regions represented an excellent business opportunity. Kelleher and King raised capital and hired Lamar Muse
as CEO. Their goal was to disrupt the airline industry by offering unheard-of low fares to business travelers
and others, effectively substituting buses and trains with the convenience of a plane trip.

To start, Muse and King purchased three airplanes. After studying flight and turnaround times, they began
scheduling flights at 75-minute intervals between Dallas and Houston and at 150-minute intervals between
Dallas and San Antonio. After adding a fourth plane, they reconfigured the routes and focused on quick
turnarounds, with a goal of planes spending only 10 minutes on the ground. Then they initiated hourly service
between Dallas and Houston and flights every two hours between Dallas and San Antonio. This appealed to
business travelers due to the price points being similar to those of a bus or train for the same trip—and much
less expensive than other airlines. TV ads from the late ’70s featured one-way fares of $19. In an interview with
60 Minutes that Kelleher gave in 1989, it was noted that in every city LUV entered, other airlines were forced to
drop their prices; the CEO of competitor America West Airlines characterized LUV as having the goal of
putting other airlines out of business. Kelleher reminisced about LUV’s $15 fare from Dallas to San Antonio
in the ’70s; Braniff International Airways (Braniff), another competitor, charged $62 for the same journey
(Braniff filed for bankruptcy in 1982). 6 Kelleher said his pricing strategy was “to charge the lowest possible fare
to develop the greatest possible volume.” 7 LUV had established what would become the low-cost airline
segment, and officially disrupted the industry.

In March 1979, Muse resigned and Kelleher stepped in. Kelleher, who had graduated at the top of his law-
school class, established a reputation for the unusual. At company functions, he might appear as Elvis Presley
singing “Jailhouse Rock” or as Roy Orbison singing “Pretty Woman.” Known for his extreme tenacity and
limitless energy, Kelleher slept only four hours a night and read two or three books a week. He promoted and

4 Comparisons performed by author using Yahoo! historical stock prices.

5 Some material in this section is taken from Dane Neilsen, Rebecca Goldberg, and Elliott N. Weiss, “Southwest Airlines: Where’s the Luv?” (UVA-
OM-1571), and is used with permission.
6 “Data & Statistics: U.S. Airline and Bankruptcies,” Airlines for America, December 30, 2024, https://www.airlines.org/dataset/u-s-bankruptcies-

and-services-cessations/ (accessed Jan. 3, 2025).

7 “The 60 Minutes Interview: Southwest’s Herb Kelleher,” YouTube video, 11:01, posted by “60 Minutes,” January 4, 2019,

https://www.youtube.com/watch?v=MyiI8FoJk54 (accessed Jan. 3, 2025).

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Page 4 UV9152

maintained a culture that favored people and a coherent business strategy that was deceptively simple: “People
always want high-quality service at a lower price, provided by people who enjoy what they do.” 8 The approach
developed by Kelleher permeated the culture of LUV for decades, as employees often took it upon themselves
to make sure flights were fun and lighthearted affairs.

LUV introduced many operational innovations, including a simplified on-the-ground process, choices with
regard to customer service, point-to-point route strategy, and a single-airplane fleet design. On the ground,
LUV made use of utilitarian, receipt-style tickets and plastic, reusable boarding passes; eschewed the $25 million
industry-standard computerized reservation system in favor of an internally managed alternative; and analyzed
every aspect of the aircraft-turnaround process, reducing it from the industry average of 60 minutes to a game-
changing 10 minutes. 9

In the air, LUV’s no-frills policy included no assigned seats or meals. Instead, seating was called by zone
and passengers selected seats when boarding began on a first-come, first-served basis, and there was no business
class, only an economy class. While most airlines at the time provided full in-flight meal and beverage services,
LUV’s passengers were given only a drink and some peanuts. For LUV, quality was not a dinner of filet mignon
and fine wine; it was on-time flights, the ability to check up to two 50-pound bags at no charge (as opposed to
the industry standard of charging fees for more than one bag or for all bags), and almost no lost baggage. 10

This customer orientation made LUV the first US domestic airline to win all three categories of the US
Department of Transportation’s ranking report in 1992: highest on-time performance, fewest lost-baggage
complaints, and fewest customer complaints. LUV then proceeded to win the “Triple Crown” for the next four
years and placed first in the Airline Quality Ranking (AQR) in 1993, 1995, 1996, 1997, and 1999. 11 In keeping
with LUV’s approach to investing only in what mattered most to its target market, it originally outsourced
noncore functions such as legal, major maintenance, and data processing.

As LUV entered new markets and built its fleet, management continued to focus on short-haul, point-to-
point flights and leveraging underused secondary airports, which could save between 30% and 50% in landing
fees and other expenses as compared to major airports. 12 LUV’s competitors generally used a hub-and-spoke
system in which larger planes flew to major airports (hubs) and then connected passengers to smaller airports
(spokes)—routing a passenger through connecting flights with regional airlines or even competitor airlines
(code sharing) if that was what was required to capture the sale. LUV developed no recognizable hub, preferring
instead to maintain a spiderweb system, and it did not code share with other airlines.

The initial purchase of three Boeing Company (Boeing) 737-200 (737) aircraft proved to be another critical
factor supporting LUV’s expansion strategy. The 737, which could seat 175 passengers, required fewer crew
members (only two per plane) than aircraft used by LUV’s competitors. 13 LUV’s average number of flights per
plane per day was almost twice the industry average; its planes were in the air 11 hours a day, 6 days a week—
nearly 50% more than the 8-hour industry standard. 14 LUV’s flights were also more profitable, even though
short flights meant higher fuel costs and a greater number of landing fees.

8 https://www.youtube.com/watch?v=MyiI8FoJk54.
9 “A Turning Point: The Birth of the 10-Minute Turn,” Southwest Airlines Co., https://southwest50.com/our-stories/a-turning-point-the-birth-of-
the-10-minute-turn/ (accessed Jan. 3, 2025).
10 “I Want to Know About the Checked Bag Policy,” Southwest Airlines Co., https://support.southwest.com/helpcenter/s/article/checked-baggage-

policy (accessed Jan. 3, 2025).

11 “Southwest Airlines: Where’s the Luv?,” UVA-OM-1571.
12 For example, a 2024 comparison of Miami versus Fort Lauderdale, Florida, airport passenger jet bridge fees showed a 50% increase. See “Summary

of Rates, Fees and Charges for Miami-Dade Aviation Department Miami International Airport,” Miami-Dade County Implementing Order 04-125,
September 19, 2024; and “Fort Lauderdale—Hollywood International Airport, Summary of Rates and Changes,” Broward County Aviation Department,
2011.
13 “Southwest Airlines: Where’s the Luv?,” UVA-OM-1571.
14 “2019 One Report,” Southwest Airlines Co., 2017, https://www.southwest.com/assets/pdfs/communications/one-
reports/2017_SouthwestAirlinesOneReport_Update_02042019.pdf (accessed Jan. 3, 2025).

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There were other advantages to maintaining a single-aircraft fleet. LUV maintenance teams were easier to
train, and standardized replacement parts were easier to anticipate and keep on hand. Pilot training costs were
also lower. Once a LUV pilot trained on the 737, only annual recertification was required. But pilots for other
airlines usually trained on many types of aircraft because as they advanced in their careers, they usually earned
higher pay for flying increasingly longer distances in larger aircrafts and had to be retrained.

The New Era: 2014 and Beyond

In 2014, LUV merged with AirTran Airways (AirTran) and acquired a mixed fleet of Boeing 717s and
737s. 15 AirTran’s central hub was in Atlanta, Georgia, and while industry observers questioned the effect this
might have on LUV’s operations, LUV integrated the hub into its flight patterns and route offerings such that
it functioned similarly to its other serviced airports. 16 Delta, which operated a diverse fleet, purchased the
717 aircraft, leaving LUV once again with a 737-only fleet. 17 In 2018, Delta maintained 11 different models,
American maintained 8, and United maintained 7. 18 But other low-cost airlines such as Frontier, Spirit, and
Alaska followed the LUV model and stuck with a single-aircraft fleet.

In March 2019, following the devastating crashes of two separate, brand-new Boeing 737 MAX planes in
Indonesia and Ethiopia, the Federal Aviation Administration (FAA) applied additional safety and production
checks on Boeing’s upcoming 737 MAX planes, delaying production and delivery. LUV was forced to accept
these delays, which impacted upcoming scheduled flights. LUV canceled over 20,000 flights, stranding or
inconveniencing thousands of passengers and jeopardizing its stellar customer service reputation. Although
these cancellations were beyond LUV’s control, financial costs included lost revenue, passenger compensation,
and increased staff pay. 19

To make matters worse, LUV sustained this loss just a year before 2020, when COVID-19 travel
restrictions devastated the entire US airline industry. And just as the industry was recovering during the 2022
winter holiday season, LUV took another hit to both revenue and customer service when another massive
round of 16,700 flights were canceled between December 21 and 29, representing almost half of scheduled
flights. The cancellations were attributed to outdated staff scheduling technology, which made it difficult to
keep pace with disruptions caused by bad winter weather. Because the impact on LUV’s passengers and the
US transportation system was deemed to be the airline’s responsibility, the Department of Transportation
assessed a $140 million fine against LUV. 20 LUV’s difficulties did not end there: Its labor unions engaged in
tense negotiations in 2023, finally reaching a renewed four-year contract in March 2024 after first rejecting
several proposals. 21

15 “Southwest Airlines Closes the Chapter on AirTran. What’s Next for the Middle Aged LCC?,” Centre for Aviation,
https://centreforaviation.com/analysis/reports/southwest-airlines-closes-the-chapter-on-airtran-whats-next-for-the-middle-aged-lcc-205437 (accessed
Jan. 3, 2025).
16 Trefis Team, “What Has AirTran Done for Southwest Airlines?” Forbes, April 19, 2021,
https://www.forbes.com/sites/greatspeculations/2014/12/11/what-has-airtran-done-for-southwest-airlines/ (accessed Jan. 3, 2025).
17 “Boeing Next-Generation 737,” Boeing Company, https://www.boeing.com/commercial/737ng#design-highlights (accessed Jan. 3, 2025).
18 “Southwest Airlines: Where’s the Luv?,” UVA-OM-1571.
19 “Southwest Airlines Warns of More Disruptions Ahead as CEO Apologizes,” CNBC, December 28, 2022,
https://www.cnbc.com/video/2022/12/28/southwest-airlines-warns-of-more-disruptions-ahead-as-ceo-apologizes.html (accessed Jan. 3, 2025).
20 “Southwest Airlines Plans to Boost Operational Resiliency to Enhance Support for Employees and Customers,” PR Newswire, March 14, 2023,

https://www.prnewswire.com/news-releases/southwest-airlines-plans-to-boost-operational-resiliency-to-enhance-support-for-employees-and-
customers-301771093.html (accessed Jan. 3, 2025).
21 “Southwest Reaches a Labor Agreement with Flight Attendants, Who Voted Down a Previous Deal Last Year,” Associated Press, March 20, 2024,

https://apnews.com/article/southwest-airlines-flight-attendants-contract-1e80aa376cb9d56a8ffef2f846a564c2 (accessed Jan. 3, 2025).

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The Competition

Legacy carriers

By 2024, the US airline industry had seen a clear divide between full-service airlines like Delta and United,
which focused on luxury branding and the associated experiences and amenities, and low-cost carriers such as
LUV. Legacy providers like Delta and United had spent many years overcoming historical shortcomings such
as a reputation for lost baggage, canceled or delayed flights, and dated, inconsistent interior decor—closing the
gap between LUV’s once-differentiating commitment to on-time flights, no lost bags, and a fun, vibrant
atmosphere.

Delta earned the coveted top spot in the most on-time flights in 2023, at 83%. It also remodeled the
interiors of its fleet, adding individual screens on all seats and free Wi-Fi for its SkyMiles loyalty program
members, and, along with United, offered upgraded seats with more legroom in coach class that could be
purchased for a few hundred dollars. Possibly more importantly, Delta had solidified its brand as part of the
experience economy—through strategic partnerships with American Express and Virgin Atlantic, both of
which were already firmly established as premium lifestyle brands—and also by investing over $12 billion
remodeling its US hubs. Airport lounges were reconceptualized from the ground up with the help of a style
partnership with Italian fashion house Missoni and featured a wide array of complimentary high-end luxury
services, including the allure of a signature scent. In the first half of 2024, Delta’s share price rose nearly 23%,
outpacing every other competitor. 22

Airlines like United were leveraging the potential of their established presence in larger cities to retain both
market share and revenue for flights arriving at or departing from their hubs. Low-cost carriers operating regular
flights between major cities forced larger carriers to match their rates. But by adding service to more cities
directly from the hub, United captured passengers traveling to destination cities farther from the hub who were
willing to pay a higher price point. United was also experimenting with moving away from the use of smaller
jets (often operated by regional partner airlines) to reach destination cities extending from its hubs. Instead of
relying on regional jets with fewer seats operating at regular intervals to reach these smaller cities, United
planned to implement larger planes at less-frequent intervals in hopes of a lower seat cost per passenger. 23

Just as full-service carriers like Delta, United, and American had caught up to LUV in some regards with
innovations of their own, LUV had begun to look and act a little more like a full-service legacy carrier. The
features that initially differentiated it from legacy carriers began to look more like the stuff of myth. Drinks and
peanuts had become the norm—all airlines had stopped providing food in economy class seating. And LUV’s
legendary 1980s 10-minute turnarounds became a thing of the past as a result of new security requirements and
industry regulations. 24 By 2018, while LUV continued its commitment to efficient and safe turnarounds, its
turnaround time had grown to 35 minutes, and during the peak of the COVID-19 pandemic, turnaround times
were closer to 50 minutes. 25 In 2022, while LUV maintained its 35-minute target, most airlines took between

22 Leslie Josephs, “How Delta Made Itself America’s Luxury Airline—And What United Wants to Do About It,” CNBC, June 25, 2024,

https://www.nbcnews.com/business/travel/Delta-made-americas-luxury-airline-United-wants-rcna158782 (accessed Jan. 3, 2025).

23 Ben Baldanza, “Four Initiatives That Have Changed United Airlines’ Flight Plan,” Forbes, January 13, 2022,
https://www.forbes.com/sites/benbaldanza/2022/01/12/four-initiatives-that-have-changed-united-airlines-flight-plan/ (accessed Jan. 3, 2025).
24 https://southwest50.com/our-stories/a-turning-point-the-birth-of-the-10-minute-turn/.
25 Jordan Yerman, “Turn Back the Clock: Southwest’s Quick Turnarounds,” APEX Experience Magazine, November 13, 2020,

https://apex.aero/articles/2020-11-17-turn-back-the-clock-southwests-quick-turnarounds/; Iain Coutts and Alexander Mitchell, “Turnaround: Here’s

What Happens When an Aircraft Is on the Ground,” Simple Flying, February 12, 2024, https://simpleflying.com/aircraft-turnaround-process/ (both
accessed Jan. 3, 2025).

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90 and 120 minutes to turn around larger aircraft deployed on long-haul flights, and between 25 and 40 minutes
for smaller aircraft with shorter flight times. 26

What of LUV’s historical bragging rights to a business model focused on short-haul, point-to-point flights?
By 2024, while it still operated exclusively in North America, LUV had expanded its offerings to include
medium-haul transcontinental flights, service to Hawaii, and international flights to popular Caribbean and
Central American tourist destinations. 27 And even the point-to-point flight scheduling system had changed to
become a flow-connection model, as LUV’s seats were increasingly filled with passengers connecting at specific
airports between one LUV flight and another, placing it on par with its biggest competitors for the number of
connecting flights. Legacy carriers generated most of their revenue by running large planes as often as possible
between major hubs, so they still utilized a different approach, but LUV no longer relied upon a pure point-to-
point system. In fact, in terms of true point-to-point flights with no connections, Delta, not LUV, led the pack
(Table 1). 28

Table 1. Percentage of passengers in 2022 with connecting flights.

Airline Percentage of passengers with
connecting flights
Delta 37.3%
LUV 38.8%
United 40.9%
American 42.9%
Data source: Michael Boyd, “Southwest’s Holiday Meltdown and the Myth That
It’s a Point-to-Point Airline,” Forbes, January 3, 2023,
https://www.forbes.com/sites/mikeboyd/2023/01/03/the-southwest-point-
to-point-system-lore-facts-v-traditional-assumptions/ (accessed Jan. 3, 2025).

Low-cost carriers

LUV’s early business-model breakthroughs had also been successfully mimicked and even improved upon
by new low-cost US entrants such as JetBlue, Spirit, Frontier, and Breeze Airways, and in Europe by Ryanair
and EasyJet. The low-cost airline segment had further fragmented into low-cost and ultra-low-cost carriers, and
airlines in each of those segments had made different investments in amenities and perks.

JetBlue expanded its single-model Airbus A320/A321 fleet to include the smaller Embraer ERJ-190 jets,
extending its reach into even greater numbers of smaller markets. It embraced a full-service, modern on-flight
experience, creating luxury for the everyday passenger with free Wi-Fi, seat-back entertainment, and satellite
radio. Finally, in contrast to other low-cost carriers, JetBlue expanded its routes and reach by code sharing with
a wider array of partner airlines than any other low-cost carrier. This included regional partner airlines, larger
international names like Aer Lingus and Lufthansa, and perhaps most surprisingly, American. 29 Frontier, in
contrast, competed directly with larger incumbent airlines by expanding service and routes out of established
hubs. In 2024, it announced 14 new routes out of American’s Dallas–Fort Worth hub, as well as hub-to-hub

26 Melissa Yeager, “What Does It Take to Get a Plane Ready Between Flights? American Airlines Shows Us,” azcentral, May 14, 2019,

https://www.azcentral.com/story/travel/airlines/2019/05/14/how-long-it-takes-to-get-a-plane-ready-between-flights-airplane-turnaround-
time/1123694001/; Alec Wignall, “How It Works: The Aircraft Turnaround,” Aerotime, November 27, 2022, https://www.aerotime.aero/articles/32767-
how-it-works-the-aircraft-turnaround (both accessed Jan. 3, 2025).
27 Aaron Spray, “2,100+ Miles: Examining Southwest Airlines’ Longest Non-Hawaii Routes,” Simple Flying, May 7, 2024,
https://simpleflying.com/southwest-airlines-non-hawaii-routes/ (accessed Jan. 3, 2025).
28 Michael Boyd, “Southwest’s Holiday Meltdown and the Myth that It’s a Point-to-Point Airline,” Forbes, January 3, 2023,

https://www.forbes.com/sites/mikeboyd/2023/01/03/the-southwest-point-to-point-system-lore-facts-v-traditional-assumptions/ (accessed Jan. 3,

2025).
29 Justin Hayward, “The Rise of JetBlue: How and Why the Airline Is Winning,” Simple Flying, February 24, 2021, https://simpleflying.com/jetblue-

rise/ (accessed Jan. 3, 2025).

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routes of both American and United. 30 Breeze competed using a strategy more reminiscent of LUV’s initial
beginnings in Texas. It worked with local authorities to generate tourism demand between small destination
cities such as Charleston, South Carolina, and Charleston, West Virginia, then connected the routes using small
planes in a true point-to-point model, almost like a shuttle. 31

The low-cost carrier market had begun to mature. A merger between Spirit and Frontier was announced
in 2022, making the new Spirit the fifth-largest US airline and combining Spirit’s East Coast foothold with
Frontier’s on the West Coast. 32 Two years later, in 2024, a federal judge blocked a proposed merger between
JetBlue and Spirit, citing potential harm to consumers who relied upon the lower-cost airline segment. 33

Market share and profitability

Figure 4 shows market share and Table 2 shows key profitability indicators for the US airline industry in
2024. 34

Figure 4. 2023 market share of the US airline industry

in terms of domestic revenue passenger miles.

Note: Revenue passenger miles was one measure of market share and was
often used as a proxy for demand. It indicated the number of airline miles
flown in a year that were sold.

Data source: US Department of Transportation Bureau of Transportation

Statistics website, https://transtats.bts.gov/ (accessed Jan 3, 2025).

30 Sean Cudahy, “Strategy Shift? Frontier Unveils 54 New Routes, Goes Head-To-Head with Competitors at Their Big Hubs,” The Points Guy, January

24, 2024, https://thepointsguy.com/news/frontier-new-routes/ (accessed Jan. 3, 2025).

31 Alexander Mitchell, “How Breeze Airways’ Business Model Differs From Other Carriers,” Simple Flying, June 3, 2023,
https://simpleflying.com/breeze-airways-business-model-differs-other-carriers/ (accessed Jan. 3, 2025).
32 Phil LeBeau and Leslie Josephs, “Frontier and Spirit to Merge, Creating Fifth-Largest Airline in U.S. in $6.6 Billion Deal,” CNBC, February 7, 2022,

https://www.cnbc.com/2022/02/07/frontier-and-spirit-to-merge-creating-5th-largest-airline-in-us.html (accessed Jan. 3, 2025).

33 Michelle Chapman and David Koenig, “JetBlue and Spirit Are Ending Their $3.8 Billion Merger Plan After a Federal Judge Blocked the Deal,”

Associated Press, March 4, 2024, https://apnews.com/article/JetBlue-Spirit-merger-court-airline-2d9a640e7f7ecb87d5f60c1cbffbc163 (accessed Jan. 3,

2025).
34 L. Adam Rothman, “Analyzing Southwest Airlines’ (LUV) Market Share,” Investopedia, September 15, 2021,
https://www.investopedia.com/articles/markets/021216/analyzing-southwest-airlines-market-share-luv.asp; Tejeshwari Chandrappa, “How Yield and
Cost Structure Contribute to Southwest’s Low Break-Even Load Factor?,” Yahoo! Finance, August 21, 2014, https://finance.yahoo.com/news/yield-
cost-structure-contribute-southwest-210014797.html (both accessed Jan. 3, 2025).

This document is authorized for use only by Daniel alejandro Hernandez sanchez in ESTRATEGIAS GOP MA 2025-1 taught by larodriguezr@unal.edu.co, Universidad Nacional de Colombia
from May 2025 to Nov 2025.
 For the exclusive use of D. Hernandez sanchez, 2025.

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Table 2. 2023 key performance metrics for major US airlines.

Total
operating Revenue Available
Number Revenue Revenue per
revenue Net passenger seat miles Passenger Number
Airline of per FTE aircraft
(in millions income miles (ASM) load factor aircraft of FTEs (in millions) (in millions)
of US (in millions) (in millions)
dollars)
Delta $58,050 $4,609 232,241 272,033 85.4% 989 103,000 $0.56 $58.70
United $53,717 $2,618 244,435 291,333 83.9% 956 103,300 $0.52 $56.19
American $52,788 $1,188 231,926 277,723 83.5% 1,521 132,100 $0.40 $34.71
LUV $26,091 $465 136,256 170,323 80.0% 817 37,829 $0.69 $31.94
JetBlue $9,615 $(310) 56,578 68,497 82.6% 287 20,222 $0.48 $33.50
Spirit $5,363 $(447) 45,244 55,665 81.0% 205 13,167 $0.41 $26.16
FTEs = full-time employees.
Note: Load factor, a measure of productivity or utilization, was calculated as the percentage of ASM that were occupied (revenue passenger miles).
Operating revenue was revenue generated from everyday business activities, including passenger and freight transport, memberships, amenities, and
the like. Net income was revenue less the costs associated with doing business as well as taxes and interest payments.
Data sources: Author analysis; Southwest Airlines Co. annual report, 2023; and Southwest Airlines Co. SEC Form 10-K, 2023.

The next frontier?

Jordan faced an interesting challenge. Was LUV still really a low-cost carrier? Or had the maturing low-
cost carrier market continued to innovate in ways that even LUV would be hard-pressed to emulate? Was LUV
now competing against legacy carriers, albeit with an innovative scheduling model and lower cost structure?
Given the tremendous shifts in the US airline industry’s competitive landscape, especially since COVID-19,
what operational changes might best position LUV to create sustainable value for shareholders and customers
going forward?

Jordan had recently announced reductions and eliminations of existing routes in order to optimize LUV’s
flight network, and he had mentioned that the airline was seriously considering offering predetermined seat
selection for the first time in its history. But he knew that EIM was looking for potentially much broader
changes, including “increased customer choice, improved cost execution and updating outdated IT systems,
among other opportunities”—and quite possibly a change in leadership. 35

35 https://www.cnn.com/2024/06/10/business/southwest-activist-investor-stake/index.html.

This document is authorized for use only by Daniel alejandro Hernandez sanchez in ESTRATEGIAS GOP MA 2025-1 taught by larodriguezr@unal.edu.co, Universidad Nacional de Colombia
from May 2025 to Nov 2025.