During the recession, airlines were one of the worst hit sectors. Passenger numbers fell back drastically, companies showed huge losses, and stock prices fell. Large numbers of employees lost their jobs. Bossiness cut travel expenditures as investments and profitability decline. According to the U.S. Travel Association, corporate spending on business travel in 2008 and 2009 declined by 1% and 11%, respectively, and corporate investment declined by 3.6% and 16%, respectively, due to the global recession (Visser, Coert n.d). However, not all of the airlines were showing signs of defeat. Southwest strategy of early hedging allowed them to migrate the impact of fluctuating fuel prices, while other airlines were forced to ground planes and take alternate routes. …show more content…
Southwest a company that has created itself around its employees, were committed in not laying off at all costs and they did just that. Southwest also maintained an extreme financial performance and was the only American airliner to make a profit during the time. Thanks to its goals and foundation, Southwest surged ahead of its rivals. So how did they do
For starters a few days before the attack on 9/11, the airlines stocks did go up. Which means the supply and demand was greater. America was making more money, which is good. The airlines that stocks markets went up, were the airlines that were hijacked which than lead to them going bankrupt. Gabi Logan was saying on USA today “ Despite this government-funded measure, several prominent American airlines declared bankruptcy not long after the 9/11 attacks.” Due to bankruptcy more than just money was
Southwest airlines is one of the most widely respected companies among those profiled by Firms of Endearment. They are recognized for having one of the best corporate cultures, which is emphatically encouraged from the top down. Southwest’s model clearly exemplifies the concept of servant leadership, and we will elaborate on how this creates a firm of endearment.
Southwest Airlines roots can be traced back to Texas in the 1960’s where a company by the name of Air Southwest Co. was created to provide interstate flights in Texas to avoid federal aviation laws. This technique of trying to avoid federal regulation was challenged when 3 other major airlines filed a lawsuit against Air Southwest Co.; later the state of Texas upheld Air Southwest Co. right to fly within the state of Texas and the Supreme Court decided not to review the case. (Southwest Airlines, n.d.) This was a challenging start for Southwest as it was being targeted right off the bat by some of its competitors. The company name was changed in the early 1970’s to Southwest Airlines Co. and a headquarters was established in Dallas, TX. The company’s main focus was interstate flights between the 3 major cities in Texas including Dallas, Houston, and San Antonio. (Southwest Airlines, n.d.)
When the attacks of September 11th occurred, the federal government had to completely close down some airports in the US. This created a negative effect on the industry as it was a shock to their entire organization. Planes in the US and around the world were canceled due to this attack as well. Planes were not flying anywhere, as the plan was to prevent any other attack. Each plane that was cancelled had to be paid by the airline company directly. According to the International Air Transport Association there was a drastic change in the amount of flights between the date before and after the event. Around 37,600 less flights flew the day after the attack had occurred. The number of flights dramatically decreased in those three days; in addition every...
After September 11th, 2001, the airline industry experienced a significant drop in travel. The reasons for the airline industry downfalls also included a weak U.S and global economy, a tremendous increase in fuel costs, fears of terrorist's attacks, and a decrease in both business and vacation travel.
Southwest Airlines Company (SAC) has turn out to be a shining example not only in the airline industry, but in the business world as a whole. At the heart of the carrier, their vision and mission statements have been diligently working to turn a dream into reality by becoming the world’s most loved, most flown, and most profitable airline, as well as be dedicated to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride, and company spirit, respectfully (Investor Relations, 2015). As a Fortune 500 company, SAC employs over 49,000 personnel to provide first-rate service more than 100 million customers annually. They credit much of their success to its triple bottom line approach
In today's competitive marketplace, all firms are seeking ways to improve their overall performance. One such method of improvement, recently adopted by many firms, is benchmarking. Benchmarking is a technique used to evaluate internal business processes. "In this analysis, managers determine the firm's critical processes and outputs, baseline those processes, then compare the performance of each process against a standard outside the industry" (Bounds, Yorks, Adams, & Ranney 1994). To effectively improve a business process to world-class quality, managers must find a firm that is recognized as a global leader, not just the industry standard. Successful benchmarking requires tailor-made solutions, not just blind copying of another organization. Measurement and interpretation of data collected is the key to creating business process solutions.
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.
The Southwest Airlines company and its culture is one that is often cited in today 's business classes. The airline is widely known to be “different” compared to many of its competitors, a result of its founding values and strong corporate culture. This culture developed early in Southwest’s history and was deeply entrenched due to the competitiveness of the airline industry, as well as due to some of the pressures experienced as a result regulatory issues and stiff competition.
Airline and travel industry profitability has been strapped by a series of events starting with a recession in business travel after the dotcom bust, followed by 9/11, the SARS epidemic, the Iraq wars, rising aviation turbine fuel prices, and the challenge from low-cost carriers. (Narayan Pandit, 2005) The fallout from rising fuel prices has been so extreme that any efficiency gains that airlines attempted to make could not make up for structural problems where labor costs remained high and low cost competition had continued to drive down yields or average fares at leading hub airports. In the last decade, US airlines alone had a yearly average of net losses of $9.1 billion (Coombs, 2011).
Southwest Airlines business opened for operations in 1971, after Rollin King and Herb Kelleher raised enough capital to finance their plan. Their service model broke off from the typical large airline policies and procedures. The typical model had an airline that was “home based” from a hub and ran routes to and from that location. This model added cost that Southwest wanted to avoid, causing them to implement point-to-point flights. The leadership team also made decisions to eliminate the inflight meal options to reduce overhead costs. Customer service and the overall experience of their customers became the valued operating vision and mission for Southwest. Eventually utilizing technology for online booking to the fullest potential saved precious time and gained efficiencies. Though the company started strong and grew slowly, several elements affected the long-term success of the company. Some of the factors that caused Southwest to reevaluate organic growth processes included not operating out of key United States hubs, the rise in fuel costs, and troubled contract negotiations.
Southwest Airlines has always proudly identified themselves as a low cost airline. They have successfully been able to incorporate Human Resource management, merger and acquisitions, financial performance and allocation of resources as part of their corporate strategy. When it comes to the meat and potatoes, Southwest Airlines has implemented a corporate value-creating strategy. Ultimately, because of this strategy, Southwest is surpassing its competitors and gaining a larger share of the market. Furthermore, this strategy is adding perceived value to its products and services by taking advantage of the economies of scope (Bradley, 2016). The airline’s business units can take advantage of their differentiation by lowering their cost structure. For example, Southwest Airlines 714 fleet consist of only one type of aircraft, the Boeing 737. The advantage of having one type of aircraft is extremely cost efficient as the airline only has to train mechanics to repair one type of aircraft and they only have to store parts for one type of aircraft therefore lowering overhead and human resources expenses which translates into lower fares to its passengers (Southwest,
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.
Southwest has comprehensive strategy and they work with harmony. They are low cost airlines which make the customer feel like royalty. Southwest have a winning strategy is proven by their profit year after year even thought they had economy crisis. Since 1973 Southwest reported a profit each year even when they lost billions of dollars from the year 1980 to 2009 because of the low operating cost strategy, low fares and customer service. Since the start of Southwest they have stay faithful of keeping low cost across the industry. Their value in corporate culture reflected through their prices and customer service.
This concept was challenged by Southwest Airlines by marketing itself as a cost leader. Their entire growth curve in the industry has been attributed to its cost effective strategies which has made it more efficient and successful than traditional airlines.