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Yoshives Belizaire Zhongling Cao Shawn Parker Dave Saucier 1 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK.

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Presentation on theme: "Yoshives Belizaire Zhongling Cao Shawn Parker Dave Saucier 1 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK."— Presentation transcript:

1 Yoshives Belizaire Zhongling Cao Shawn Parker Dave Saucier 1 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK

2 Overview Company Overview History Mission & Vision Objectives & Strategies Current Issue New Mission and Vision External Assessment Industry analysis Opportunities and threats EFE Matrix CPM Matrix Internal Assessment Strengths and weaknesses Financial Condition IFE Matrix Strategy Formulation SWOT Matrix – (make the frame) Space Matrix IE Matrix Grand Strategy Matrix Matrix Analysis QSPM Matrix Strategic Plan for the Future Objectives Strategies Implementation Issues EPS/EBIT Evaluation © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK 2

3 Southwest Timeline © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK 3

4 From 1966 to © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18, 1971, with four Boeing 737 aircraft serving three Texas cities - Houston, Dallas, and San Antonio.

5 Today 5 Southwest Airlines is now America's largest low-fare carrier, serving more Customers domestically than any other airline. Southwest Airlines operates more than 3,000 flights a day. In 2011, Southwest led the industry with more than 1,100 pieces of electric ground support equipment, which conserves fuel and reduces emissions. May 2, Southwest acquired Orlando-based AirTran Airways and expects to complete the integration of the two airlines by © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK

6 Stock Performance 6 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK

7 Global Industry Growth © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK 7

8 U.S. Industry Growth © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK 8

9 Industry Fuel Costs and Net Profits 9 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK

10 Existing Vision Statement Our vision is to expand our locations both domestic and overseas by being the largest and most profitable airline company, to achieve both short- and long-haul carriers efficiently and with low cost. Also to be an airline carrier that has the most productive workforce, to guarantee the best flight possible for each and every passenger. © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK 10

11 Existing Mission Statement The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit. TO OUR EMPLOYEES We are committed to provide our Employees a stable work environment with equal opportunity for learning and personal growth. Creativity and innovation are encouraged for improving the effectiveness of Southwest Airlines. Above all, Employees will be provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Southwest Customer. TO OUR COMMUNITIES Our goal is to be the hometown airline of every community we serve, and because those communities sustain and nurture us with their support and loyalty, it is vital that we, as individuals and in groups, embrace each community with the Southwest Spirit of involvement, service, and caring to make those communities better places to live and work. TO OUR PLANET We strive to be a good environmental steward across our system in all of our hometowns, and one component of our stewardship is efficiency, which, by its very nature, translates to eliminating waste and conserving resources. Using cost- effective and environmentally beneficial operating procedures (including facilities and equipment) allows us to reduce the amount of materials we use and, when combined with our ability to reuse and recycle material, preserves these environmental resources. TO OUR STAKEHOLDERS Southwest Airlines vision for a sustainable future is one where there will be a balance in our business model between Employees and community, the environment, and our financial viability. In order to protect our world for future generations and uphold our commitments to our Employees, Customers, and other Stakeholders, we will strive to lead our industry in innovative efficiency that conserves natural resources, maintains a creative and innovative workforce, and gives back to the communities in which we live and work. © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK 11

12 Existing Business Strategy 12 Low cost structure, which is designed to allow it to profitably charge low fares Free checked bags Loyal employees © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK

13 New Vision Statement Become the number one airline in the world © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK 13

14 New Mission Statement © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK 14 Here at Southwest Airlines our mission as a company is to provide affordable direct flights (1). We want to also accommodate our customers with the best all around flight service from the moment they arrive at the airport to the time they arrive at their destination (2). At Southwest our service and philosophy is to fly safe with high frequency, low-cost flights that allow for timely arrival with limited travel from the airport(6). Constantly looking for new ways to satisfy our customers by staying atop technological advances and services (4). Not only do we look after our customers but also the planet by limiting waste and recycling used materials (8). We provide equal employment opportunities and a stable working environment with room for advancement (9). Continuing to grow as a company and developing to be the top airline and meet the demand of consumers is key (3). We believe that air travel should be provided at an affordable rate in order to satisfy our customers (5). Providing the lowest fairs and the highest quality service is our guarantee to customers (7).

15 External Audit © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK

16 Industry Market Analysis 16 Source from BTS © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK

17 Scheduled Passengers Carried 17 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK

18 Opportunity out of 12 U.S. airline charge second checked bag. Deregulation on global sky policies in international countries (Canada). Business and leisure travel is beginning to increase due to the recovering US Economy. 9 out 12 U.S. airline offers business/first class. Traveler traffic is expected to grow by 3.5% through 2019 as the United States recovers from the recession. Delta partner with 22 other airlines. Over 58 million U.S. citizen travel to overseas in Boeings new plane models could burn 70% less fuel than conventional planes and travel farther. Research shows that economy passengers are willing to spend up to $21 on onboard services (including food and entertainment)

19 Threats 19 Increased competition in low cost market, no longer a niche market for Southwest as there is now JetBlue, Spirit, Frontier, Public Airways and Allegiant Travel. Introduction of ultra low cost carriers like Spirit and Frontier. The operating costs of airlines are constantly increasing, roughly 5% since High unemployment of 8.9% is preventing people from choosing air travel. Joint ventures can negatively affect brand name for example customer service. Transportation Security Administration (TSA) will assess an Aviation Security Infrastructure Fee ("ASIF") on each airline. The company's ASIF liability is $3.5 million annually. In June 2010, the Department of Transportation (DOT) proposed a new rule that would expand the Passenger Protection Rule and increase fines and penalties for airlines. Ever-increasing costs of jet fuel [up 300% since 2000] at historical highs and continuing to rise. Technological and capital intensive industry could prove increasing cost of planes. © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK

20 20 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK SouthwestDeltaUnited Airlines Critical Success factorsWeightsRating Weighted Score Rating Weighted Score Rating Weighted Score 0.0 to 1.01 to 4 Advertising Organization Structure Customer Service Global Expansion Financial Position Employee Deduction Management Experience Customer Loyalty Market Share Product Quality E-commerce Price Competitiveness Totals Competitive Profile Matrix (CPM)

21 21 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK External Factor Evaluation Matrix (EFE) Key External Factors WeightsRating Weighted Score Opportunities 0.0 to 1.01 to 4 11 out 12 us airlines charge for Second checked bag Deregulation on global sky policies in international countries (Canada) Business and leisure travel is beginning to increase due to the recovering US Economy out of 12 U.S. Airlines offers business/first class Traveler traffic is expected to grow by 3.5% through 2019 as the United States recovers from the recession Delta Partnered with 22 other airlines Over 58 million US citizens travel to overseas in Boeings new plane models could burn 70% less fuel than conventional planes and travel farther Research shows that that economy passengers are willing to spend up to $21 on onboard services( including food and entertainment 0.061

22 22 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK Key External FactorsWeightsRating Weighted Score Threats0.0 to 1.01 to 4 Increased competition in low cost market, no longer a niche market for Southwest as there is now JetBlue, Spirit, Frontier, Public Airways and Allegiant Travel Introduction of ultra low cost carriers like Spirit and Frontier The operating costs of airlines are constantly increasing, roughly 5% since High unemployment of 8.9% is preventing people from choosing air travel Joint ventures can negatively affect brand name for example customer service Transportation Security Administration (TSA) will assess an Aviation Security Infrastructure Fee ("ASIF") on each airline. The company's ASIF liability is $3.5 million annually In June 2010, the Department of Transportation (DOT) proposed a new rule that would expand the Passenger Protection Rule and increase fines and penalties for airlines Ever-increasing costs of jet fuel [up 300% since 2000] at historical highs and continuing to rise Technological and capital intensive industry could prove increasing cost of planes Totals External Factor Evaluation Matrix (EFE)

23 Internal Audit 23

24 Organization Chart 24

25 Southwest Net Income Growth 25 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK

26 Net Margin 26 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK

27 Operating Revenues 27 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK

28 28 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK Financial Information – Income Statement (in millions, except per share amount)

29 29 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK Financial Information – Balance Sheet (in millions)

30 30 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK Financial Information – Balance Sheet (in millions, except per share amount)

31 Financial Information – Net Worth Analysis 31 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK Net Worth Analysis (in millions) Stockholders' Equity $6,877 Net Income x (Share Price/EPS) x Net Income 6,594 Number of Shares Outstanding x Share Price 6,876 Method Average $5,309

32 Ratio Analysis 32 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK SouthwestDeltaUnited Airlines Liquidity Ratios Current Ratio Quick Ratio Leverage Ratios Debt-to-Total Assets Ratio Debt-to-equity Ratio Long-term debt-to-equity Ratio Times-Interest-earned Ratio Activity Ratios Fixed Assets Turnover Total Assets Turnover Accounts Receivable Turnover Average Collection Period Profitability Ratios Gross Profit margins 58.86%67.40%61.00% Operating Profit Margin 4.43%5.62%4.19% Net Profit Margin 1.14%2.43%1.33% Return on Total Assets 0.99%1.96%1.54% Return on Stockholders equity 2.59%-61.17%-14.76% Earning per share Price-earnings Ratio Growth Rations (yearly) Sales 29.36%10.58%6.96% Net Income %44.01%-29.57% Earnings per share %43.66%108.20% Dividends per share 7.69%-

33 Strength 33 Only Airline with 1 st and 2 nd bags flying free within the U.S. Is considered the largest airline carrying 104 million passengers in 2011 compared to its main competitor United Airlines at 96 million. Has been in the airline industry for 40 plus years. Strong brand image, Named tenth most admired Company in the world in FORTUNE magazine's survey of corporate reputations Company is known for its great staff, loyal employees, and low turnover rate having laid off three people in the last 25 years; hiring them back almost immediately. Southwest.com was the second-largest travel site. The "look-to-book" ratio is twice that Travelocity and higher than any traditional retailer. Southwest has high capacity usage due to its low turnaround time leading the industry at approximately 20 minutes attributed by point-to-point service versus hub-and-spoke. Southwest is one of the 7 safest U.S. airlines Largest domestic carrier with 698 aircraft owning roughly 71% or 499 of those aircraft outright and the remaining 29% (199) aircraft being leased. Strong financial position and cash flow with roughly $3.1B in cash and short-term investments, $800M fully available in lines-of-credit, and debt-to-capital down roughly 3% with the acquisition of AirTran. © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK

34 Weakness 34 They only fly to six near-international countries and no international countries. They are heavily dependent on one producer Boeing, and only have two aircraft they use being the Boeing 737 and Boeing-717. They have the lowest number of morning flights in the industry. One of the only carriers who do not offer business class or first class. They do not offer entertainment in their flights like video or audio programs. Southwest doesn't transfer package to other carrier. Customer has to do it on them own. Southwest does not flight 13 states in the U.S. Southwest does not provide any meals, only drinks and peanuts. Realized a -28% change in operating income and a -40% change in net income from ( B Oper. Income / B Net Income) Increased indirect labor costs, health care up $6M, workers compensation up $20M, vacation pay up $48M; totaling $74M and accounting for 75% of the increase in accrued liabilities. © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK

35 Key Internal Factors WeightsRating Weighted Score Internal Strengths 3 or 4 Only Airline with 1 st and 2 nd bags flying free within the U.S Is considered the largest airline carrying 104 million passengers in 2011 compared to its main competitor United Airlines at 96 million Has been in the airline industry for 40 plus years Strong brand image, Named tenth most admired Company in the world in FORTUNE magazine's survey of corporate reputations Company is known for its great staff, loyal employees, and low turnover rate having laid off three people in the last 25 years; hiring them back almost immediately Southwest.com was the second-largest travel site. The "look-to-book" ratio is twice that Travelocity and higher than any traditional retailer Southwest has high capacity usage due to its low turnaround time leading the industry at approximately 20 minutes attributed by point-to-point service versus hub-and-spoke Southwest is one of the 7 safest U.S. airlines Largest domestic carrier with 698 aircraft owning roughly 71% or 499 of those aircraft outright and the remaining 29% (199) aircraft being leased Strong financial position and cash flow with roughly $3.1B in cash and short-term investments, $800M fully available in lines-of-credit, and debt-to-capital down roughly 3% with the acquisition of AirTran © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK Internal Factor Evaluation Matrix (IFE)

36 Key Internal Factors WeightsRating Weighted Score Internal Weaknesses 1 or 2 They only fly to six near-international countries and no international countries They are heavily dependent on one producer Boeing, and only have two aircraft they use being the Boeing 737 and Boeing They have the lowest number of morning flights in the industry One of the only carriers who do not offer business class or first class They do not offer entertainment in their flights like video or audio programs Southwest doesn't transfer package to other carrier. Customer has to do it on them own Southwest does not flight 13 states in the U.S Southwest does not provide any meals, only drinks and peanuts Realized a -28% change in operating income and a -40% change in net income from (1167 to 839B Oper. Income / 550 to 330B Net Income) Increased indirect labor costs, health care up $6M, workers compensation up $20M, vacation pay up $48M; totaling $74M and accounting for 75% of the increase in accrued liabilities Totals Internal Factor Evaluation Matrix (IFE) © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK

37 Strategy Formulation 37 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK

38 Source of Passenger Revenues 38 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK

39 SWOT Matrix © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK 39 StrengthsWeaknesses Opportunity SO StrategiesWO Strategy 1. Add ability to purchase tickets threw mobile devices (S6, O3) 1. Provide a better variety of food that people can eat on the plane (W8, O9) 2. Start charging second checked bag (S7, S8, O1) 2. Offering business/first class (W4, O3) 3. Expand international flight to Canada. (S2, O2) 3. Have flights to all 50 states in the US. (W7, O6) 4. Acquire new planes that have wifi, tv access, and audio in there planes. (W2, W5, O8) Threats ST StrategiesWT Strategy 1. Aquire/merge with competitors such as Jetblue and Frontier. (S10, T1, T2) 1. Offer a business/first class to differentiate itself from other ULCC(W4, T2) 2. Purchase airline fuel refinery(S10, T8)2. Start offering Wi-fi, videos on demand, video games, satellite radio, etc to differentiate itself from its competion, and market the changes. (W5,T2) 3. Market southwest's web site more, with the highest look-to-book ratio, there low cost flights might appealing then competitors sites(S6,T1)

40 SPACE Matrix 40 Financial PositionScoreCompetitive PositionScore Cash flow4Market share working capital5Product quality Inventory turnover7Customer loyalty-2 EPS3Technology know-how Leverage3Product life cycle-2 Liquidity3Capacity utilization Stability PositionScoreIndustry PositionScore Technological changes-2Growth potential5 Rate of inflation-3Profit potential6 Demand variability-4Financial stability4 Competitive pressure-3Extent leverage4 Barriers to entry-3Resource utilization5 Price elasticity of demand-3Ease of entry into market © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK

41 SPACE Matrix 41 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK Market Penetration Market Development

42 Grand Strategy Matrix © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK 42 Quadrant IIQuadrant I Quadrant III Quadrant IV Rapid Market Growth Strong Competitive Position Weak Competitive Position Slow Market Growth

43 Matrix Analysis © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK 43 Alternative StarategiesIESPACEGRANDBCGCOUNT Forward Integration xx 2 Backward integration xx 2 Horizontal Integration xx 2 Market Penetration xx 2 Product Development xx 2 Market Development xx 2 Related Diversification x 1 Unrelated Diversification x 1 Retrenchment 0 Divestiture 0 Liquidation 0

44 QSPM 44 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK Add meal, entertaining system, and business/first class Add more international and domestic flights Key factorsWeightASTASASTAS External 1 to 4 Deregulation on global sky policies in international countries (Canada) Business and leisure travel is beginning to increase due to the recovering US Economy out 12 U.S. airline offers business/first class Traveler traffic is expected to grow by 3.5% through 2019 as the United States recovers from the recession Over 58 million U.S. citizen travel to overseas in Boeings new plane models could burn 70% less fuel than conventional planes and travel farther Research shows that economy passengers are willing to spend up to $21 on onboard services (including food and entertainment) The operating costs of airlines are constantly increasing, roughly 5% since Joint ventures can negatively affect brand name for example customer service Ever-increasing costs of jet fuel [up 300% since 2000] at historical highs and continuing to rise Technological and capital intensive industry could prove increasing cost of planes Total1

45 QSPM 45 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK Internal Only Airline with 1 st and 2 nd bags flying free within the U.S Strong brand image, Named tenth most admired Company in the world in FORTUNE magazine's survey of corporate reputations Southwest has high capacity usage due to its low turnaround time leading the industry at approximately 20 minutes attributed by point-to-point service versus hub-and-spoke Strong financial position and cash flow with roughly $3.1B in cash and short-term investments, $800M fully available in lines-of- credit, and debt-to-capital down roughly 3% with the acquisition of AirTran They only fly to six near-international countries and no international countries They are heavily dependent on one producer Boeing, and only have two aircraft they use being the Boeing 737 and Boeing One of the only carriers who do not offer business class or first class They do not offer entertainment in their flights like video or audio programs Southwest does not fly to 13 states in the U.S Southwest does not provide any meals, only drinks and peanuts Increased indirect labor costs, health care up $6M, workers compensation up $20M, vacation pay up $48M; totaling $74M and accounting for 75% of the increase in accrued liabilities

46 3 Year Goal and Annual Objectives 46 Year one, expand into Canadas 10 largest cities. Expand south into Mexicos vacation destinations Year two, start trans- Atlantic flights into Europe, expand into more cities in Mexico and Canada, re-evaluate. Year three, expand into South America and Asia, Australia. © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK

47 47 Increase advertising budget by 282 million to market the expansion into Canada and Mexico Purchase 15 more planes for the extra flights 150M * 15 planes = 2.25 Billion Legal fees for expansion and terminal fees 468 Million Total cost for all three years Approximately 3,000 Million © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK Strategy Selection with Year 1 Cost

48 EPS/EBIT 48 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK RecessionNormalBoom RecessionNormalBoom Close Price for Southwest on October 11, Common Stock FinancingDebt Financing EPS for Disney on October 11, EBIT EBIT Initial Shares Outstanding 807 Interest Dividends on Preferred Stock EBT EBT Funds Needed 3,000 Taxes Taxes % of Funds Needed 2,700 EAT EAT % of Funds Needed 300 # Shares 1,159 1,943# Shares 807 Interest Rate5% EPS EPS Conclusion RecessionNormalBoom RecessionNormalBoom The preferred financing option would 100% debt financing, proving the best EPS. 90% Stock – 10% Debt Financing90% Debt – 10% Stock EBIT EBIT Interest 15 Interest 135 EBT EBT Taxes Taxes EAT EAT # Shares 1,124 # Share 821 EPS EPS

49 Projected Balance Sheet 49 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK SOUTHWEST AIRLINES CO. CONSOLIDATED BALANCE SHEET / PROJECTED Projected Assumptions ASSETS Current assets: Cash and cash equivalents$1,261$829 1,500 Short-term investments 2,2772,3152,384 3% increase in short term investments Accounts and other receivables % increase in receivables Inventories of parts and supplies, at cost % increase Deferred income taxes % increase Prepaid expenses and other current assets % increase Total current assets 4,279 4,345 5,191 Property and equipment, at cost: Flight equipment 13,991 15,542 17,542 2B increase Ground property and equipment2,1222,4233, M increase Deposits on flight equipment purchase contracts % of 2B in new planes 16,34318,42121,471 Less allowance for depreciation and amortization -5,765 -6,294 -7,188 increase of 894 for new planes 10,57812,12714,283 Goodwill 970 Other assets increase of 3% $15,463$18,068 35,371

50 50 Projected Balance Sheet LIABILITIES AND STOCKHOLDERS EQUITY Current liabilities: Accounts payable 7391,0571,216 15% increase Accrued liabilities ,076 8% increase Air traffic liability 1,1981,8362,570 40% increase for international flights Current maturities of long-term debt % increase Total current liabilities 3,3054,5335,731 Long-term debt less current maturities 2,8753,107 5, M long term debt portion of new strategy Deferred income taxes 2,4932,5662,617 2% increase Deferred gains from sale and leaseback of aircraft 8875 Other noncurrent liabilities Stockholders equity: Common stock, $1.00 par value: 2,000,000,000 shares authorized; 807,611,634 shares issued in 2011 and Capital in excess of par value 1,1831,222 Retained earnings 5,3995,3955,685 Accumulated other comprehensive loss (262(224)-239 Average of two prior years Treasury stock, at cost: 35,050,991 and 60,177,362 shares in 2011 and 2010 respectively (891(324)-324 Total stockholders equity 6,2376,877 7,152 Total Liabilities and Stockholders' Equity 15,46318,06835,371

51 Projected Income Statement 51 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK

52 Southwest Update 52 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK

53 Questions 53 © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK

54 Reference 54 Southwest 2011 Annual Report Book: Lunch: How to quickly propel your business beyond the competition Southwest.com Southwestonereport.com airline-food 001/index.html © 2013, Yoshives Belizaire, Zhongling Cao, Shawn Parker, Dave Saucier, UMFK


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