Southwest decided to provide safe and low-cost transportation with maximum customer service. Southwest used to operate short-haul flights mostly in the south-west region that have good climate. At that time, to keep costs low and have competitive advantage choose those routes. Not to hamper the companies growth, it later (1996) started to expand to east-coast (providence, RI , Florida) and not-so good climate. Recently it started operating in all major airports such as Newark, Philadelphia etc¬1 and even some international cities2.
Southwest carefully choose each market where this is no competition, congestion (example Providence, RI) and bad weather. So that it can provide low cost and value to travelers by having very quick turnaround times. It provided simple point-to-point service using very less ground staff. With expanded routes this has changed in the now long-haul routes. Long-haul requires complex computer systems and more manpower on ground to manage the operations, reducing the profitability in both cases. Southwest had and still has the best safety record for a low cost airline.
The southwest culture and the customer service were and are still a major differentiator. Southwest was the first airline to provide ticketless travel and now everyone does it. It used to be the cheapest in 90s nowadays it is the cheapest if you include the baggage checkin and other added fees3. But Southwest always focused on differentiating themselves by some means. Nowadays it is by providing free checked baggage, no changing fees etc4. By moving with times it is adapting and differentiating itself
Southwest followed a go-slow philosophy and targets underserved markets. It is still using the same market selection strategies to slowly grow the RPM about approx 12% per year till 20076.
Southwest used to operate in secondary airports in larger cities, with less congestion and gate fees. That has now changed as it has added more major cities. The profitability has reduced. But Southwest has doubled4 its ASM over the period (1997 to 2011) the overall revenue is up so profit would increase but not profit margin. From 1996 to 2011 the revenue increased by approx 400% buy the operating profit increased by approx 100% only. Southwest had good profitability by maintaining a simple fleet. It still maintains only Boeing 737 in its fleet5 so all the training and maintenance costs can be kept very low. In summary, Southwest has started to expand its arena and vehicles to reach. But it still has the same philosophy in which it grows and differentiates itself.