The airline industry has become more and more competitive over the years. It takes determination, preparation, knowledge, and recourses to start an airline company, and that is just what happened forty-five years ago in Dallas Texas. Southwest Airline is a very successful airline company serving around 100 million customers annually (Southwest Corporate Fact Sheet). Many things stick out about Southwest such as their satellite-based WIFI and free luggage. These accommodations appeal to the customers. The company describes its mission as “dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit” (About Southwest). From a customer standpoint, there is nothing else …show more content…
One possibility to be discussed is the idea that the success of the Southwest airline company will be directly correlated to the satisfaction of the customers. Economics plays a huge role in the airline industry. For Southwest, the CEO states that they kicked off a “low fare revolution” back forty-five years ago when the company began. It was their goal to make flying affordable and convenient for the average man; flying was no longer going to be just for the elite. According to CEO Gary Kelly when Southwest Airline originated “only 15 percent of Americans had traveled by plane” (The Low-Fare Revolution). That number has currently risen to more than 85 percent of the United States population, with a large part of the credit going to Southwest Airline. All of this being said, one author notes that since …show more content…
They have been known for exceptional customer service, as noted in their mission statement, however in 2014 one headline read, “After decades of prompt departures and arrivals, its punctuality has been abysmal since August” (Southwest Airlines). This unpleasant and unexpected turn came when Southwest attempted to make a change in the time allotted for turnarounds at the airport. Perhaps they became a little too greedy with everything that was going right for them. Their plan was to crunch time and make money by having more flights in less time. Unfortunately, their plan did not work exactly how they had hoped; one delay caused a domino effect and less than 60 percent of their flights were arriving or departing on time (Southwest Airlines). This is a challenge Southwest is having to overcome still to this day. They are in the process of allotting more time for turnarounds, but in the meantime they will be losing money. This is a sacrifice they are having to make in order to gain back customer satisfaction. One reporter noted, “The poor operational performance is a shocking turn for the Dallas-based airline that typically sits atop customer satisfaction ratings, with such consumer-friendly policies as free checked bags and no fees to change a flight” (Southwest Airlines). Southwest Airlines’ reputation of fantastic customer service has been prevalent for decades. This slip up in an
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.
The Organizational Structure of Southwest Airlines. One of the determining factors of the organizational behavior in an organizational structure. It includes several areas such as issues of authority and control, communication team, market and geographic structure, product division. Southwest Airlines determine all these areas and proved a strong competence in all issues. The SWA organizational structure is well-known for being functional. First of all, because their structure is multi-divisional, “each division in a multidivisional structure is essentially a different business. Moreover, the responsibility of each divisional manager is to design the divisional structure that best meets the needs of the products and customer of that division” (Jones, 2007, p. 155). The major positive aspect of such kind of structure is an increased organizational effectiveness and control. In this system, behavior is controlled through internal upward mobility. “A large divisional company possesses an internal labor market which increases managers’ motivation to increase organizational effectiveness” (Jones, 2007, p. 157). One more important issue in such type of structure is how to keep the customer’s happiness. The SWA coped with this question easily. They put the
Current Issues Despite Southwest’s long standing reputation as an employer who makes their employees and customers happy, there have been storms brewing in the company’s labor relations and customer relations sector. As mentioned before, Southwest recently acquired AirTran Airways and revealed plans to take its already successful domestic business international with flights to Mexico and the Caribbean (Martin, 2014). This organizational restructuring is causing Southwest to have what Time Magazine’s Brad Tuttle calls an “identity crisis” for the airline, whose new advertisements have removed the humor they are famous for and the messages of “bags fly free” from commercials. Bob Jordan, a Southwest executive, described the change as a new era for Southwest and a chance for consumers to see them in a brand new light.
Spirit addresses “price” by attempting to get the lowest possible fair for their potential customers. They have instituted their “unbundling” strategy that essentially removes all the conveniences that other airlines afford. Fees for checked bags, fees for flight changes, and no complementary in-flight beverages are just a few of the cost-trimming techniques employed. This strategy allows Spirit to come up with impossibly low fares. It also conforms to customers who just want to get from point A to point B without paying extra for services they don’t use. This strategy, coupled with an in-your-face “promotion” ploy, has made Spirit Airlines “the most profitable airline in the U.S.” (Nicas, 2012).
Southwest Airlines has been a model of admiration for the airline industry and businesses from around the world combined. Southwest Airlines is a rag to riches story that has had to fight for everything it has become. Before Southwest was able to take on its first passengers, they had to fight competitors in the court system for nearly three and a half years.
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 has been in business for about 50 years, and has been very successful. It is a strong company with a strong leader and has a lot of strengths that have helped it stay in business. It has a firm operating strategy, strong fleet operations, and recognition in the industry. However, with strengths come weaknesses. Weaknesses like heavy dependence passenger revenues, declining operating efficiency, and dependence on one airplane producer can cause complications for Southwest’s business operations.
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
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 managed to keep a profit year after year while keeping customers happy. According to Southwest airlines official website, they have a track record of 42 consecutive years of profitability and they have been on Fortune magazine’s list of the most admired companies in the world (Gary Kelly chairman, president and CEO Southwest Airlines). How does Southwest maintain such a stellar service? Most airlines provide the same services and products. A southwest airline differentiates itself from others by providing those services and products at a lower cost and with more professionalism, courtesy, and humor.
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.
The Southwest Airlines strategy is best explained by its co-founder Herb Kelleher during a talk at Wharton: “It’s an obsession with keeping costs low and treating employees well and a commitment to managing the company during booms with an eye to the busts that will inevitable follow. Do that and most of the rest takes care of itself.”