Southwest Airlines Innovative Recruitment Methods Free Essay Example, 2500 words

The current situation at SWA is somewhat disturbing even though they are still performing better than others in the industry. As of June 30, 2008, SWA had about $5.8 billion in cash and short-term investments (Koenig, 2008). The economic downturn and higher fares had reduced the demand for travel and this year SWA expects lower seat occupancy than last year. The airlines' consistent record of sales and growth year on year despite the downturns is an incredible achievement. SWA was the only American carrier to register profit in the first quarter of 2008 when oil prices first crossed the $100 per barrel (Craver, 2008). Their operating costs are 20% below the industry average and 84% of the company is unionized. It bears testimony to the management s vision and talent. Despite the growth, the SWA shares are underperforming other airlines (Walberg, 2007). One of the reasons is that the airline has been hedging against the rising oil prices for the past couple of years. They are locking in fuel prices under $40 per barrel. It did protect SWA from the squeeze from higher energy prices that most airlines encountered. We will write a custom essay sample on Southwest Airlines: Innovative Recruitment Methods or any topic specifically for you Only $17.96 $11.86/pageorder now As the hedges are ending, SWA now has to face higher energy costs even though the crude prices have fallen. In the process, the other sidelines are paying much less for fuel than they did last year. Over the next six months, SWA will not benefit from lower fuel prices. Besides, competition has increased in its domain from short-haul carriers and discounters like AirTran Holdings and Jet Blue Airways, which has exerted pressure on pricing. The legacy carriers like American Airlines and Continental are enjoying lower fuel prices and higher ticket prices while SWA is stuck with higher fuel costs and no pricing power. It has already hedged fuel up to 2012 and because of forwarding hedging, it has paid substantially low prices, below the market rates, for the past few years. This has resulted in its low operating costs and it is able to keep its fares low but this situation will not last for long. SWA is now threatened with exposure to the raw oil market every year which is not a good sign for the airline.