Southwest Airlines: The Blended Winglets Project

Abstract

The Blended Winglet project is a proposed technology that will cost Southwest Airlines approximately $762,000 per aircraft to install and promises to provide improved range, greater fuel savings, and reduced noise and emissions. The project is aimed at providing Southwest with an additional cost advantage over its competitors, an important source of competitive advantage for the company.

The case is set in the spring of 2002 as Aviation Partners Boeing (APB) has approached Southwest Airlines for the second time with the Blended Winglet technology. In APB's original proposal, which came in the spring of 1999, the sales price was much too high for the project to be profitable. Given higher jet fuel prices and significantly lower prices for the winglets, Scott Topping became interested when APB approached him in 2002.

One of the most interesting elements of the case is the illustration of the teamwork necessary to analyze a complex capital budgeting project. The winglet project required analyses conducted by the engineering, facilities and flight operations groups before the economics could be fully assessed. The process lasted approximately one year and the first Blended Winglet technology could be seen on a Southwest flight in early October 2003.

Keywords: Capital budgeting, case study, blended winglets

JEL Classification: A2, G31, M2