Southwest Airlines Abstract

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Southwest Airlines Abstract

Southwest Airlines is a Dallas-based airline founded by Herb Kelleher in 1967 with the idea of serving three Texas cities (Houston, Dallas, and San Antonio) written on a cocktail napkin.  The airline constantly has  over the years surpassed the profits benchmark without recording any loss in all its business for 42 years. The airlines’ major strengths include sensible expansion policy and strong financial systems. In general, Southwest Airlines’ expenditure life cycle is handled by more than one accounting information management system depending on the items are being purchased and the department that is involved in making the purchase. However, the main player is the accounts payable department (AP). The AP department is responsible for the payment and subsequent posting of all expenses and purchases that the airline incurs.

Although the airline uses several Accounting Information Management Systems, SAP is the main Business Process Management Software used by the Southwest. There are; however, four major purchase order subsystems exploited within the airline. These have been reviewed as

(1)Ariba, which is most frequently, used for non-maintenance purchase order items including office supplies, equipment, and furniture,

(2) Solarc Right Angle which is only used for jet fuel purchases,

(3) Wizard, which is used for maintenance purchase order items including aircraft rotables and parts, and

(4) Final subsystem, Trax which is a subsystem inherited from AirTran Airways when Southwest acquired the company in 2011.

These subsystems feed purchase order information into SAP to output the final expenditures. Since the AP system is vulnerable to human error and deception, Southwest has set controls in place to ensure the business functions as required.

This paper reviews Southwest Airlines’ financial and accounting management systems and processes with the aim of comprehending how they interact with the main business process management software, procedures, departmental functions and existing payment controls as well as offer current practical recommendations on improving the airline’s business process.