Firm implementing low-cost business strategy

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Reference no: EM132183788

SOUTHWEST AIRLINES REPORT

Revenue Reconciliation – 2013 to 2017:

   Revenue Effect of Growth: $4,188,332,435

    Revenue Effect of Price Recovery: $(716,332,435)

Expense Reconciliations – 2013 to 2017:

Personnel-Related Expenses (Driver = Employees):

     Cost Effect of Growth: $1,191,494,085

     Cost Effect of Price Recovery: $932,510,936

     Cost Effect of Productivity: $159,994,979

Trip-Related Expenses (Driver = Trips):

     Cost Effect of Growth: $1,624,786,174

     Cost Effect of Price Recovery: $(2,189,197,844)

     Cost Effect of Productivity: $(1,069,588,330)

“Fixed Costs” – Aircraft-Related Expenses (Driver = Aircraft Seats):

     Cost Effect of Growth:   $546,170,476

     Cost Effect of Price Recovery:   $(152,287,818)

     Cost Effect of Productivity: $(284,882,658)

“Fixed Costs” – Other Expenses (Driver = Aircraft Seats):

     Cost Effect of Growth: $523,452,813

     Cost Effect of Price Recovery: $269,371,591

     Cost Effect of Productivity:   $(316,824,405)

Operating Income Reconciliation (aggregated over revenue and expense components) – 2013 to 2017:

     Operating income - 2013: $1,278,000,000

     Aggregate Effect of Growth: $302,428,886

     Aggregate Effect of Price Recovery: $423,270,700

     Aggregate Effect of Productivity:   $1,511,300,414

     Operating income - 2017: $3,515,000,000

EXPLANATORY NARRATIVE

2013 to 2017 Summary:

Does the pattern of Southwest’s aggregate/summary earnings components from 2013 to 2017 resemble the pattern we should observe for a firm implementing a low-cost business strategy? Briefly explain.

Reference no: EM132183788

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