CASE STUDY ANALYSIS

BACKGROUND

June 18,1971 began flying with 3 Boeing 737 Serving Texas cities of Dallas, Huston & San Antonio Headquarter: Love Field in Dallas

Competitors were Texas International , Braniff & Continental

S TARTING

HURDLES

Threat from Continental, legal battle. Wright Amendment , named after James Wright , then spokes person of U.S House of Representatives. Prohibited any air carrier from offering direct service into Love Field from any place beyond Texas and 4 contiguous states of Oklahoma , Arkansas , Louisiana & New Mexico.

Neither Airlines nor travel agents were permitted to advertise connections through Love Fields

T HE C URRENT S ITUATION

Concentrates flying to airports that are under utilized and close to metropolitan area. One type of aircraft fleet ( 200 no, 737 , fuel efficient) Point to Point routes . Keeps its fare simple: two fares on a route , a regular coach and an off-peak fare. Never offer meal service on its flights Reusable boarding pass Own frequent flyer club , The Company Club

C OMPETITIVE A DVANTAGE

Cost Structure
3rd Quarter 1993 3rd Quarter 1994

Airline Costs per Available Seat Mile

Southwest Continental United American
TWA Delta Northwest USAir

7.13 7.64 8.11 8.06

9.23 8.66 9.36 10.94

7.03 7.56 8.32 8.08

8.66 8.95 9.79 10.74

C OMPETITIVE A DVANTAGE

High Productivity of Work force 15 min for turnaround an aircraft. 81 employees per craft ,serving 2443 passengers per employee Pilots spends more time in air. Avg. salary $100000 flying 70 hrs a month Routinely volunteer to help customer

( Eg. Dog , elder women) Won Triple Crown 24 times

L EADERSHIP
Organization Chart
Chairman, Pres & CEO

Herb Kelleher

Corporate Services
John Denison Exec VP

Customers
Collen Barrett Exec VP

Internal Audit
Al Davis VP

Operations
Gary Barron Exec VP

T HE P EOPLE D EPARTMENT

100 people serving 18000 employees Sign a mission statement , which is displayed in large posters on the walls of headquarters office.

Recognizing that our people are the competitive advantage , we deliver the resources and services to prepare our people to be winners, to support the growth and profitability of the company while preserving the values and special culture of Southwest Airlines

The two Cs : Compassion and Common Sense. Other companies HR is considered a Backwater , The People Department at Southwest is like the keeper of the flame, Treasurer John Owen

R ECRUITMENT

We draft great attitudes. If you dont have a good attitude , we dont want you , no matter how skilled you are . We can change skills level through training. We cant change attitude. ---- Kelleher

To ensure fit , emphasis on peer recruiting Involve customers in interviewing for new flight attendant.

T RAINING
Emphasis on Team Work & Team Building

6500 employees went to Southwests University for People in 1993. Courses from New Hire Celebration to senior management course New fight attendant go for 4 weeks of class training For managers , three and a half day course on leadership ,pricing , revenue management, and on how business works. The Climb , a two and a half day course for intact work teams. The Front Line Forum: 12 to 15 individuals with 10 to 15 years experience

W ORK F ORCE

89% unionized with 9 separate unions.

Salary and compensation are low as compared to industry standards. Even the CEO salary was lower than the industry standard Profit sharing for all employees who have worked for over a year

80 to 90 % of employees own stock in the company

Young work force , the Avg. age is 34 23 % of employees are minorities Women are widely represented at the highest levels

T HE S PIRIT
Tries hard to Manage and Maintain Culture

Themes like : customer services, hard work, equality, cost consciousness, dedication, fun & family. Cultural committees , to preserve the culture. Catastrophe fund , raised $130000 to help defray fuel cost. A Long time observer of airline industry saidAt other places, managers says that people are their most important resource, but nobody acts on it. At Southwest, they have never lost sight of the fact.

T HE C OMPETITIVE T HREAT
An old adage at Southwest was not to provoke their major competitors. They had done more than provoke them: they had challenged them directly .

United share in California Corridor had fallen from 38% to 30%. Whereas , Southwest share increased from 26% to 45%. United and Continental had begun low cost airlines-within-an airline.

What would have been Anns review of Southwests current position?

SWOT ANALYSIS
STRENGTHS

WEAKNESSES

One of the major low cost airline leaders Initiated the concept of low cost carriers- pioneer of startegy. Healthiest balance sheet in the industry- consistently profitable since last 21 years. Simple fare structure On-time departures, shorter turn-around times.

No segmented seatingno business class / First class. Very less tickets sold through agents.

Company is 89% unionized with nine separate unions.

Positive organisational culture, young motivated employees, highly productive.

SWOT ANALYSIS
OPPORTUNITIES

THREATS

Untapped markets. Further implementation of latest technology.

Competitors entry in low fare market (Airlinewithin-an airline). Online ticketing system by competitors.

Long haul flights for expansion of business.

Business Class travel options.

Growing size of the organisation.

Overconfidence of success

CHALLENGES

Employees are motivated to work longer hours for less pay- Retaining their present spirit.

Maintaining outstanding customer service & adding more distinctiveness in service.

Growing size of Organisation- Maintaining good union relations & communication with employees.

THANK YOU