More handpicked essays just for you.
The Airline Industry: Trends, Challenges and Strategies ByJohn G. Wensveen
Strengths and weaknesses of southwest airlines
Strengths and weaknesses of southwest airlines
Don’t take our word for it - see why 10 million students trust us with their essay needs.
Southwest Airlines: A Case Analysis ORGANIZATIONAL ANALYSIS It is evident that the greatest strength that Southwest Airlines has is its financial stability. As known in the US airline industry, Southwest is one of those airlines who are consistently earning profits despite the problems the industry is facing. With such stability, the corporation is able to make decisions and adjust policies, which other heavily burdened airlines may not be able to imitate. Having a low amount of cost in their operations is one of the contributing factors in Southwest Airlines’ financial success. Such low cost model of the corporation is brought about by an effective strategy. Southwest uses only one type of aircraft – the fuel-efficient Boeing 737. This tactic keeps training and maintenance costs down. Moreover, the no-frills approach to customer service contributed to the low cost of operations for Southwest. The airline does not serve meals on board, and there are no luxurious or first class seats offered. Services like these have been seen by the airline as unnecessary for an airline that provides a short-haul trip from city to city. By these, Southwest were able to offer low price tickets to customers, which was good for the company because most people would prefer to fly without those services mentioned if it meant for cheaper ticket price. Even though Southwest offers no-frills, there is still a high degree of customer satisfaction that continuously builds customer loyalty for the company. As mentioned, Southwest offers low prices on their airplane tickets. Also, Southwest is renowned in the airline industry for its short turnaround time on arrivals and departures. And since people's biggest concern nowadays is money and time, having low price airline tickets to cater their traveling needs in a shorter period of time will surely satisfy them. Moreover, aside from the low prices offered, what attracts to customers is Southwest’s way in dealing with them. The employees of the airline treat their customers well and really listen to their needs. Southwest Airlines is also well-known for having a very productive and loyal workforce. Such loyalty and productivity among the employees were brought by the way Southwest’s management treats them. As they say, the employees are willing to work hard for the company because they feel appreciated by the top management. Southwest maintains good employee relations because what they believe in is that if employees are happy, satisfied, dedicated, and energetic, they'll take real good care of the customers.
Southwest Airlines is an Equal Opportunity Employer, therefore, has diversity in their employees from all over the world. They have employees from different cultures and experiences. Southwest Airlines invites military personell, active and retired veterans to apply. They also offer positions to qualified disabled individuals and disabled veterans. According to Forbes, “The icing on the cake is an elaborate recognition program for all employees who are recognized by customers. They are lauded in newsletter features, on the intranet, by the CEO in videos that are played at staff meetings, and dinners honoring them. Voluntary turnover is only two percent, and many of Southwest’s original employees are still there. The company receives 43,000 commendations a year, from both inside and outside the company.”
Despite its growing domestic network, the company didn’t offer international flights until July 2014, and even then, it only offered limited destinations (“Southwest Corporate Fact Sheet,” n.d.). Furthermore, the company’s reliance on a single aircraft is cause for concern. Southwest Airlines was also weak with technology utilization initially but has since turned this into an asset, as described later. Finally, the company has a limitation with providing customer perks due to its low-cost operations (Ross & Beath,
Cost controlling is very important in the airline industry. Southwest is very good at controlling their costs. They offer a no frills service for people who want to get to their destination for as little as possible, and are not concerned about the bells and whistles like in-flight movies. Southwest also realized that when their planes are on the ground, they aren’t making money. They decided to keep their planes in the air as much as possible and have worked hard to keep a low turnaround time. They manage to unload passengers and load new passengers for the next flight within twenty minutes, which is shorter than the industry average. Southwest also uses only one kind of plane, the Boeing 737, in order to reduce costs of parts and training employees to use different types of planes. All of these methods have lowered the cost of operations for Southwest and allowed them to have a profit of $4.7 billion, which is twice that of United Airlines. And because they are so efficient they can pass the savings on to customers.
Since 1987, when the Department of Transportation began tracking Customer Satisfaction statistics, Southwest has consistently led the entire airline industry with the lowest ratio of complaints per passengers boarded. Many airlines have tried to copy Southwest’s business model, and the Culture of Southwest is admired and emulated by corporations and organizations in all walks of life. Always the innovator, Southwest pioneered Senior Fares, a same-day air freight delivery service, and Ticketless Travel. Southwest led the way with the first airline web page—southwest.com, DING, the first-ever direct link to Customer’s computer desktops that delivers live updates on the hottest deals, and the first airline corporate blog, Nuts About Southwest. Our Share the Spirit community programs make Southwest the hometown airline of every city we serve.
There are a series of trends that suggest most of the profit is eaten up by overhead, such as the airports, manufacturers, salaries, and service providers, which all remain profitable while the carriers struggle. There is another theory that the continual increase in regulation is the issue. Not to mention natural disasters, terrorist threats, and sickness concerns that all impact passenger attendance. Recognizing industry trends such as growth, prices, and consumer expectations should be assessed. By analyzing trends and new technologies, Southwest can determine what changes should be made to improve operations.
In the airline industry, Southwest Airlines is considered a true innovator. By shaking up the rules of flying and improving upon inefficient industry norms, Southwest has quickly grown by leaps and bounds. From the very start, Southwest Airlines' goals were to make a profit, achieve job security for every employee, and make flying affordable for more people (Southwest,2007). Southwest has not strayed from these goals. It does not buy huge aircrafts, fly international routes or try to go head to head with the major carriers; and thanks to a great planning, Southwest airlines has become the most successful airline company in the U.S., if not the world.
Southwest Airline’s commitment to service and friendliness has continued to evolve and expand through the decades. Their mission statement plays a large role in their continued advancement. According to their website, “The mission of Southwest
Moreover, they began this venture with one clear and simple idea/belief: If you get the passengers to the place they want to go, when they want to get there, in a timely manner, with the lowest feasible fares, and ensure they have a fun time doing it, people will want to fly their airline. They were right because Southwest Airlines is one of the biggest domestic air carriers and reputable airline business in the United States. Moreover, it is the only one that is, and has been, endlessly profitable for a number of good years. The key objective of this paper is to highlight Southwest Airlines ability to work and manage people well around
If the short haul passenger was the backbone of Southwest Airlines success, then their 737s were the lifelines that supported it. By choosing the 737 as the airplane for all of Southwest's flights, the company saved time and resources in training its employees. The crew could be easily substituted for one another due to the extensive training on the 737. Low costs and, therefore, low fares are an enormous competitive advantage, when combined with their high-quality and loyal workforce. A very unique culture was found at Southwest Airlines among all of its employees.
Employees are hired, trained and empowered to provide excellent customer service which increases customer satisfaction and loyalty. The people first culture also applies to Southwest customers, who0oopl are referred to as family and friends. Southwest “believes that if you take this approach, you will do things for customers that you would usually only do for friends and family. Customers receive birthday cards; customer service reps develop first-name
The mission of Southwest Airlines is a dedication to the highest quality of service delivered with warmth, friendliness, individual pride, and company spirit (Mission…, 2007). The company also provides opportunities for learning and personal growth to each employee. Creativity and innovation is very important and highly encouraged, for the purposes of improving effectiveness. Employees are to be provided the same concern, respect, and caring attitude within the organization that the employees are expected to share with the customer. Southwest Airlines was initially created to be a low-cost alternative to high price of intra-Texas air carriers (Freiberg, 1996). Southwest’s fares were originally supposed to compete with car and bus transportation. It was a little airline, and it would withstand the test of time. As a discount, no-frills airline, it would provide stiff competition for larger airlines. Their strategy was to operate at low cost, offering no food, no movies, no first class, and no reserved seats. They created their own market and provided increased turnaround times at the gate, by avoiding hub-and-spoke airports and opting for short-haul, direct flights. Through this market approach, Southwest has a majority of market share in the markets they serve.
Using high level aircraft and employee productivity with minimizing cost by reducing aircraft turnaround time at the gate, Southwest was able to generate an operating revenue of 17.7 billion dollars and an average passenger load of 80.1 percent (Southwest, 2014). A major contributor to the airline’s success is fuel hedging. Fuel hedging is a contractual tool used to mitigate rising fuel costs. Fuel hedging allows Southwest to establish a fixed or capped cost, via a commodity swap or option. When buying a fuel swap, if the price of fuel drops, then the company will be forced to pay the above market rate. When purchasing a fuel call option and the price increases, the company will receive a return that offsets their actual costs. Some fuel call options require an upfront cost. In the previous scenario, if the cost of fuel decreases the company will not receive a return on the option, but will benefit from buying fuel at the lower cost. Southwest Airlines has leveraged this technique and in doing so avoids high fuel costs; drastically important to a company whose annual fuel consumption in 2012 topped approximately 1.9 Billion gallons (Southwest,
The low cost and no frills strategy is make travel affordable at low cost. The company only operates one type of aircraft which is Boeing 737 to help maintenance cost low. Southwest was the first airline to use E-ticketing in this way customer can reserve spot and buy ticket on their web and allow less expense in printing tickets. Medium measured airports which allowed them to produce better time performance and less fuel costs so plane do not have to wait in the line at the runway. The core value of the company of “LUV and fun” makes the company great place to work that gives customer with a great experience.
Another internal challenge for Southwest Airlines is the conflicting management style and business operation with AirTran. On top of that, the external challenges such as the increase of competitions and gas prices are some of issues f...
The company’s cost leadership strategy of keeping their fares low to ensure frequent and convenient travel along with its playful, fun poking advertising, exciting promotional ways, and various vibrant ways of operation enabled the company to expand exuded its effect on both customer and competitors, thus lowering the prices in the new market. This is the ‘Southwest