Investments to Support the Business Unit Strategy or Strategies

As stated above, Southwest invests heavily into fleet modernization of the new Boeing 737 MAX 8 aircraft in an effort to improve fuel efficiency and reduce maintenance costs. Furthermore, because Southwest only operates Boeing 737 variants as a single aircraft type, this strategy streamlines Southwest’s maintenance processes and reduces the complexity of maintaining a diverse fleet. Pilots only need to be trained on a single aircraft type which lowers both training costs and increases schedule flexibility (The Strategy Story, 2023).
Another key component of Southwest’s strategy is market penetration as the company strives to increase its share in existing markets by leveraging its low-cost structure. In a recent study, Vadlamani, Shafiq, and Baysal (2022) employed machine learning techniques to analyze and forecast the factors influencing Southwest Airlines’ decisions when entering new markets. The study identified key data points such as population size, infrastructure quality, and per capita income of the local population as predictors of market entry strategies. The conclusions drawn from the study point to existing infrastructure as Southwest’s largest determinant factor when choosing a new market to break into.
Surprisingly, population size and growth only have a slight impact on Southwest’s choice to operate at a given location, and average individual income had little effect. Despite Southwest’s strategic focus on fleet modernization compounded with single aircraft type strategy places them at the top of low-cost structure airlines, Southwest was forced to withdraw operations from four different airports and reduce capacity in two others in 2024 in a tempt to consolidate and improve operating margins (Southwest, 2024). Due to the challenges faced, It remains to be seen if Boeing’s delivery delays and quality issues could push Southwest to pivot their strategy to include Airbus A220-300 in their fleet.