Southwest Airlines’ paradox - strong fundamentals confronted by a challenged business model

As three distinct business models - global network airlines, hybrids and ultra low-cost airlines - have taken shape in the US market during the last few years, Southwest Airlines has purposely avoided aligning itself with a particular strategy. Instead the airline has opted to continue inflating its maverick low-fare image, which is at risk of fading as the US landscape changes in the medium to long term.

But despite lingering questions over how Southwest intends to position itself in the market place, the airline's financial foundation has remained strong, evidenced by its stature as one of the few global airlines to consistently sustain investment-grade status.

Even as Southwest faces challenges in maintaining its maverick image, ensuring its message still resonates with customers and widening a shrinking cost gap with its legacy airline peers, most of its fundamentals remain on solid ground.