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Southwest airline beginnings
Southwest airline beginnings
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Introduction
Every entrepreneur would have once in for a while had tumbled upon the success story of ‘The Southwest Airlines’. The founder, Herb Kelleher in one of his interviews to CNBC mentions that there were key moments in the history of the airline where things could have gone horribly wrong, but he came up with out-of-the-box solutions that not only saved his business, but made it thrive.
When Southwest started in 1971 they were just a small regional carrier flying from Houston to Dallas. But to make themselves unique, they selected beautiful flight attendants with unique personalities and then put them in hot pants and go-go boots. They made some exceptional non-traditional choices while operating in a very traditional industry. This was how they brought differentiation into the picture.
In their early stages, they realized they needed to get more from less(M4L strategy). They knew if they purchased all the same types of planes — the Boeing 737 — they could save money on maintenance costs. They wouldn’t have to train mechanics and carry parts for multiple different types of planes. They still run a single model of plane today, and this has saved them a great deal of money over the long term.
But when competitors dropped their prices (even below their own costs) it forced Southwest to once again think outside of the box. If they matched those prices, Southwest would go out of business. Instead they decided to give all frequent flyer passengers a free bottle of whiskey each time they flew Southwest. For a few months, Southwest Airlines was the largest whiskey distributor in Texas.
And then there were the peanuts. While every other airline was serving in-flight meals, Southwest chose to be the no-frills airline by offering ju...
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...chedules are followed rigorously to minimise delays &customer complaints & lost baggage. A well defined & distinctive set of people management practises has led to shared goals, knowledge & respect for each other which are useful as the work is highly interdependent, uncertain & time constrained. Some of the strategies which are incorporated so that the business model of south west airlines is sustainable are :
They maintain & promote people friendly company culture.
They provide leadership to the constantly changing workforce.
They hire people who are culturally fit for the job.
They have incorporated the techniques to eliminate the waste generation through source reduction, recycling & reuse.
They have optimised the aircrafts so as to have more fuel efficiency and are searching for alternative energy options. Hence their operational model is sustainable.
As the project management triangle states, “do you want something done good, cheap, or fast?. Pick two!” That had been the constraints applied to many businesses until the launch of Southwest airlines in the mid 1960’s. Southwest managed to break free of the management triangle and offer safe (good), low cost (cheap), and timely (fast) air service in Texas and eventually across the United States. From the beginning, the company’s staff and management shared these goals, and developed a foundation on which to build the business. Visionary leaders Rollin King, Herb Kelleher, Colleen Barrett and other early leaders at Southwest, proved that there is no more competitive advantage than a dedicated, loyal work force. Her Kelleher’s transformational leadership style was just what the new airline needed to be successful, and motivate the staff of SWA to do what no other airline had done before: offer cheap, short distance, no frills air service, and make a profit doing it.
Southwest Airlines is “America’s largest low-fare carrier” (Southwest, 2014). The Headquarters for Southwest Airlines reside in Dallas, Texas. Southwest Airlines was founded by Rollin King and Herb Kelleher and was originally planned to serve only a small three city area. “Southwest Airlines was incorporated in Texas and commenced Customer Service on June 18, 1971, with three Boeing 737 aircraft serving three Texas cities - Houston, Dallas, and San Antonio , and grew to become a major airline in 1989 when it exceeded the billion-dollar revenue mark (Southwest, 2014).
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,
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.
More than 37 years ago, Rollin King and Herb Kelleher got together and decided to start a different kind of airline. They began with one simple notion: If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline. And you know what? They were right. What began as a small Texas airline has grown to become one of the largest airlines in America. Today, Southwest Airlines flies over 104 million passengers a year to 64 great cities all across the country, and we do it more than 3,400 times a day.
Innovation is an essential ingredient in today’s competitive landscape (Denning, 2011). Unless innovation moves beyond initiative and becomes part of an organization’s DNA, innovation is doomed to fail. Southwest Airlines (NYSE: LUV) has embrace innovation as an essential part of its culture. The innovation and importance of the Southwest culture is demonstrated throughout customer service, business strategy and green initiatives.
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.
Advertising: As one of the largest domestic airlines, Southwest Airlines has an enormous advertising budget to sustain its presence and increase its market share through focusing on the benefits of flying Southwest over its competitors. Southwest recognizes that flying is no longer a pleasurable experience for many customers, even on Southwest, historically a budget airline. Even though Southwest is often regarded as a no-frills airline, it still attempts to build goodwill from its customers based on its advertising. Of the $249 million it spent on advertising in 2011, Southwest Airlines is unique in that it does not sell additional ad space on the exterior of its aircraft. Many domestic airlines have begun selling aircraft exterior space as a way to increase revenue, but Southwest Airlines insists that it wants to keep its product and advertisi...
Since CEO Gary Kelly took the reins of the company back in 2004, Southwest has maintained and enhanced the company’s ability to offer customers a great flying experience for low fares. This effort start early in Mr. Kelly’s tenure when he identified four success factors
Southwest Arilines has been facing direct competition in 9 routes of the intra-Califonia market with United Airlines and their "Shuttle By United." Shuttle By United was designed to be a high-frequency, low fare, minimal amenity, short-haul flight operation initially serving destinations in California and adjacent states who's intent wsa to "match Southwest's strategy." In the four months since Shuttle By United's inception competition has been fierce resulteing in Southwest and United slashing prices and envoking a merkteting blitz in this 9 route area. Recent news highlighted that Shuttle By United intended to discontinue some service (perticularly the Oakland-Ontraio route) and raise fares $10.00 per ticket. Southwest's respons to this and the coninued threat of losing market share to United should be:
Southwest Airlines strategy of focusing on short haul passenger and providing rates as low as one third of their competitors, they have seen tremendous growth in the last decade. Market share for top city pairs on Southwest's schedule has reached 80% to 85%. Maintaining the largest fleet of 737's in the world and utilizing point-to-point versus the hub-and-spoke method of connection philosophy allowed Southwest to provide their service to more people at a lower cost. By putting the employee first, Southwest has found the key to success in the airline business. A happy worker is a more productive one as well as a better service provider. Southwest will continue to reserve their growth in the future by entering select markets only after careful market research.
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.
There are few things that are impressive about Southwest Airlines first one is how they treat the employees. For Southwest Airlines employees are first and customers are second. If the employees are treated well that will bring in happy customers. Next is that Southwest is not only with their low prices but is able to create a competitive advantage by offering a fun and humorous experience when flying. Finally another impressive fact is when Herb Kelleher’s retire from CEO position yet remained a Southwest employee till July 2014. Even after the retirement he was still active with the Southwest Airlines that reflected his enthusiasm and dedication for the
Southwest Airlines has come from an underdog to being one of the best airlines in the industry. This reputation translates from its strategic management of resources. The Co-founder and former CEO, Herb Kelleher, established a unique corporate culture that leads to high customer satisfaction, employees’ morale, and one of the most profitable airlines in the industry (Jackson et al., 2012). The corporate culture concentrates on empowerment the workforce. It shows through Southwest Airlines core values that “happy employees lead to happy customers, which create happy shareholders” (Jackson et al., 2012). Since its first grand opening in 1971, Southwest Airlines has shown steady growth, and now carries more passengers than any other low-cost carrier in the world (Wharton, 2010). To expand the business operations, Southwest Airlines took over AirTran in 2010 as a strategy to gain more market share for the Southeast region and international flights. However, the acquisition of AirTran brought upcoming challenges both internally and externally for Southwest Airlines. In this case analysis, the objectives are focusing on the change process post the merger with AirTran, and evaluating alternatives to address the impacts of the merger.
It all started in 1971, when Rolling King and Herb Kelleher decided to challenge the existing rut of charging high prices for air travels. They considered the railways and roadways their competitors and decided to offer cheaper travel for smaller routes. The company was incorporated in 1967, apart from initial entry troubles, Southwest has been the only US airline to have earned profits since 1973. The eccentric company’s outlandish way of conducting themselves has been the sole reason for Southwest Airlines to succeed in a highly competitive and packed industry.