MGTCB/576: Competency 2 – Assessment: Part One
2026
Porter’s Five Forces Analysis of Southwest Airlines
Porter’s Five Forces Model provides a framework for analyzing the competitive intensity
and profitability potential within an industry (Porter, 2008). By examining the five
competitive forces and complementors, organizations can better understand the
structural pressures influencing industry profitability. The following analysis evaluates
these forces as they apply to Southwest Airlines and assigns a strength level to each.
Competitive Rivalry: High
Competitive rivalry in the airline industry is high. Southwest competes directly with
legacy carriers such as Delta, American, and United, as well as low-cost carriers like Spirit
and Frontier. Because airlines operate with high fixed costs and perishable inventory
(empty seats cannot be recovered), carriers frequently compete on price to maintain load
factors, leading to fare wars and compressed margins (Rothaermel, 2023). Route
overlaps and limited differentiation in economy-class service further intensify rivalry.
Threat of New Entrants: Low
The threat of new entrants is low due to substantial barriers to entry. Launching a new
airline requires significant capital investment in aircraft acquisition or leasing, regulatory
certification from the FAA, airport gate access, and established maintenance
infrastructure. Additionally, established carriers benefit from economies of scale, brand
recognition, and loyalty programs, making it difficult for new entrants to achieve cost
parity or customer trust (Porter, 2008).
Bargaining Power of Suppliers: High
Supplier power is high in the airline industry. Aircraft manufacturing is dominated by
Boeing and Airbus, creating a near-duopoly that limits airline bargaining leverage;
Southwest relies heavily on Boeing aircraft. Fuel suppliers also exert strong influence, as
jet fuel represents one of the largest operating expenses and is subject to global price
1
2026
Porter’s Five Forces Analysis of Southwest Airlines
Porter’s Five Forces Model provides a framework for analyzing the competitive intensity
and profitability potential within an industry (Porter, 2008). By examining the five
competitive forces and complementors, organizations can better understand the
structural pressures influencing industry profitability. The following analysis evaluates
these forces as they apply to Southwest Airlines and assigns a strength level to each.
Competitive Rivalry: High
Competitive rivalry in the airline industry is high. Southwest competes directly with
legacy carriers such as Delta, American, and United, as well as low-cost carriers like Spirit
and Frontier. Because airlines operate with high fixed costs and perishable inventory
(empty seats cannot be recovered), carriers frequently compete on price to maintain load
factors, leading to fare wars and compressed margins (Rothaermel, 2023). Route
overlaps and limited differentiation in economy-class service further intensify rivalry.
Threat of New Entrants: Low
The threat of new entrants is low due to substantial barriers to entry. Launching a new
airline requires significant capital investment in aircraft acquisition or leasing, regulatory
certification from the FAA, airport gate access, and established maintenance
infrastructure. Additionally, established carriers benefit from economies of scale, brand
recognition, and loyalty programs, making it difficult for new entrants to achieve cost
parity or customer trust (Porter, 2008).
Bargaining Power of Suppliers: High
Supplier power is high in the airline industry. Aircraft manufacturing is dominated by
Boeing and Airbus, creating a near-duopoly that limits airline bargaining leverage;
Southwest relies heavily on Boeing aircraft. Fuel suppliers also exert strong influence, as
jet fuel represents one of the largest operating expenses and is subject to global price
1
