In 1971 Southwest Airlines started their operations with a vision of being a low cost/low fare carrier for passengers traveling between San Antonio, Dallas and Houston. After early legal battles and struggles gaining market share, their fighting spirit, integrity and will to succeed paid off. Over the course of the next 40+ years, Southwest has become the world’s largest low-cost carrier, while carrying more domestic passengers that any other U.S. airline (“Southwest Corporate,” 2015). Their culture, values and operating practices are what have driven this company to its current success and will continue to do so for the foreseeable future.
There are numerous things to admire about this company, but also a few that stand out. Reading Southwest’s
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This attitude equates to a very strong corporate culture. Employees need to be fearless in delivering their product/service and live by a “can-do” attitude, while still maintaining the wherewithal to respect customer’s wants and needs and making them feel like they are part of the family. Southwest wants their employees to actually be proud of the fact that they work for this company and they strive to do that each and every day. As for Gary Kelly taking over, I do not foresee any problems with maintaining this culture. Gary has been with Southwest since 1986 and is deeply engrained into the culture there. As he worked his way through the company, he was always one of the brightest stars there and was well liked by senior leadership. He maintained a philosophy of treating employees like family, caring for customers, keeping fares and operating costs low and always being prepared for the unexpected (Thompson, et al., 2012). Through this he has been able to expand operations while still maintaining employee loyalty and low-cost advantages over …show more content…
In 2008 the public found out about Southwest missing required safety inspections, while still flying planes that needed to be inspected (Thompson, et al., 2012). CEO Gary Kelly was quick to publicly apologize for both incidents and reaffirmed the company’s obligation to safety. Looking at comparative statistics in 2010, denied boarding’s due to oversold flights have went up from 1.42 in 2009 to 2.59 in 2010, which puts them at the 3rd worst in the industry (Thompson, et al., 2012). This is also 3.5 times higher than it was in 2005. If maintaining customer satisfaction is their top priority, this needs to be tackled. Another weakness reported in a Southwest SWOT analysis includes contractual obligations which were $2,510 million in FY2014, compared to $1,208 million in FY2010 (Liu, 2012). Even with these statistics, there is still plenty of room for opportunity with the recovery of the U.S. airline industry, recovery of tourism, acquisition of Air Tran, expansion into the International market and improved customer satisfaction (Liu, 2012). The AirTran acquisition makes very good strategic sense for Southwest Airlines. First and foremost this acquisition will accelerate Southwest’s entry into international markets. AirTran will add 21 cities to Southwest’s network and 7 of them are international
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.
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,
Such loyalty and productivity among the employees was brought about 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.
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.
The marketing approach of Southwest Airlines is built upon their strong business model. They have successfully managed to target two specific market segments of the airline industry while remaining profitable. Their strategy is simple, to offer frequent non-stop flights with the lowest costs which appeal to both the business and budget travelers. By segmenting their target audience to specific demographics and ticket pricing, passengers know exactly what they are getting for the price they pay.
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...
Before to select the proper alternative, three alternatives were analysed and evaluated under four decisions criteria: customer experience, cost, growth rate / market penetration and ease to implementation (See Exhibit 2: Factor Analysis). Between all the alternatives, it was suggested that Southwest Airlines enters to New York City by bidding the slots and gates at the LGA (See Exhibit 3: Alternatives Analysis). This alternative sustains the challenge of changing the customer experience which means adding more flights from and to the East; furthermore, entering to new markets will reinforce “the power of the network” through LGA. At the same time, this decision will allow signing more code-sharing agreements with other airlines flying to international destinations and offer new products and services to LUV customers as loyalty rewards, in-flight internet, onboard duty-free purchases, etc.; as a result of this, it will increase passenger’s insights and experiences by flying with Southwest Airlines. Nevertheless, there is potential risk by selecting this alternative, in the recent years the energy prices has had a huge increase affecting costs, fares and even capacity needed, however Southwest Airlines has been able to hedge fuel for decad...
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.
Expansion by co-operative strategy: Merger and Acquisition Southwest airline’s acquires Airtrans On September 27th 2010, Southwest Airlines announced its intention to acquire its rival AirTran Airways. Southwest Airline’s 1.4 billion dollar expansion created the most expansive network of any low-fare carrier in the United States. However, employees from AirTran decided to unionize prior to the completion of this merger, in order to protect their interests. After all parties agreed to the transaction, approval by Southwest Airlines’ shareholders on March 23rd, 2011, followed.
Southwest Airlines was founded on several principles of business; “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”. They understood there was a potential for airline travel to be used by everyone, not just for business travel. Since day one,
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.
3. What are the key policies, procedures, operating practices, and core values underlying Southwest’s efforts to implement and execute its low-cost/no frills strategy?
The Airline industry is a capitally intensive industry, and because of this companies within the Airline industry focus greatly upon cost, as well as revenue generation. If costs increase beyond control, profitability will soon decrease. Southwest were quick to learn that if they were going to run their company in a profitable manner they had to first establish their market, and then make every effort to keep costs low. In the early 1970’s soon after their inception, Southwest established the ten-minute turn. This was the ability to unload and reload passengers, refill the plane with gasoline, and make all the necessary checks, all within a ten-minute window. They had to keep their planes in the air as much as possible, because of their low price, high frequency market niche. “Part of the great strength they’ve had, is that they have consistently followed a pattern of keeping costs low in every place they have gone.” (Freiberg, 1996, p35)
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.