Southwest Airlines

For this Session Long Project I am asked to apply what I have learned from our case study on activity, revenue, variable costs, and fixed costs. I will answer these questions for Southwest Airlines and determine the units of measure for each of these. Additionally, I will include the name and nature of the organization, the activity and time period used, the inputs I used, my results, and any implications from my results.

Rollin King and Herb Kelleher started Southwest Airlines in 1971 out of Texas and began service to Dallas, Houston, and San Antonio. Their first year ended with four aircraft and 195 employees and have continued to grow tremendously over the past 37+ years. Six years later Southwest Airlines became available on the New York Stock Exchange as “LUV”. Today, Southwest Airlines is a major airline carrier moving almost 100 million customers to 68 cities and performing over 3,300 flights a day.

The activity I will use for this organization is the price for an airline ticket per person in 2008 according to their financial information from their website www.southwest.com. This will be an average price since it will be difficult to breakdown tickets based on distance of travel, time, etc.

Breakeven Analysis

The following Revenues, passengers carried, and total amounts is factual information from the 2008 consolidated financial data from Southwest Airlines. I made reasonable estimates with regards to variable and fixed costs since the actual amounts for these were not presented.

Operating Revenues –

Passengers $10,549,000,000

Freight 145,000,000

Other 329,000,000

Total Revenues $11,023,000,000

Variable costs for the activity

Accounts payable 524,000,000

Other Operating costs 552,000,000

Contribution Margin $8,785,000,000

Fixed costs

Accrued Liabilities $1,012,000,000

Long term debt $3,498,000,000...