Southwest Airlines in

2016: Culture, Values

and Operating Practices

Group 2
Member :

1. Aprilia Kusumaningtyas

2. Cristian Berlian

3. Nurul Almy

4. Riyan Aditya
Content

1. Theory
2. Synopsis to the Case Study
3. Main Issue
4. Tools & Analysis
5. Recommendation & Action Plan
6. Conclusion
7. Questions
Theory

Strategy Execution Process: Three Key Actions

1. Staffing—putting together a strong management team, recruiting and
retaining employees.
2. Developing—developing and updating company’s resources and capabilities,
as well as training and retraining company personnel to match the current
strategy.
3. Structuring—instituting organizational arrangements that facilitate good
strategy execution.
Synopsis to the Case Study

– Southwest Airlines is an airline company based in Dallas, Texas which was founded
in 1967.
– It just started small but now becomes one of the largest airline in the world by
number of passengers and one of the largest in the United States by number of
passengers carried domestically.
– Herb Kelleher CEO of Southwest Airlines since 1981 helped transform the business
with his leadership.
– Southwest Airlines also had the enviable distinction of being the only major air
carrier in the world that had been profitable for 43 consecutive years (1973-2015).
– In 2015, Southwest Airlines was named to Fortune's list of the World's Most
Admired Companies for the 22nd consecutive year, coming in at number seven.
Main Issues

1. How Southwest Airlines maintain efficiency, safety & operational excellence

while also offer the best customer service.
2. Souhwest Airlines strategic plan to expand, in 2016 by AirTran acquisition
creates challenges Integrating two different company
3. Competitors who are known as legacy Airlines and new entrants in the low-
cost carrier Airlines
4. Unsolved issues with SWAPA upon pilots hourly salary compared to
competitors.
 Company History
Southwest Airlines Company

March 1971 1979 1995 2001 2014

Change it’s First route Create it’s Herbert Launched an
name to outside the first website Kelleher step international
Southwest state of Texas called the down as CEO service to
Airlines Co. with Dallas – “ Southwest and president Jamaica and
New Orleans Home Gate “ of the the Bahamas
Route company.

1967 June 1971 1985 1997 2013 2016

Founded by Scheduled The company Entered an Starting to Started an
Herbert Passenger announced codeshare offer an in international
Kelleher and Service it’s first agreement flight satellite service to
Rollin King as began with acquisition.It with based Cuba
Air Southwest Dallas – acquired Icelandair internet
Co. Houston Muse Air service.
route share.
 Legal and other early hurdles

– On it’s early operation the airlines face some legal hurdles where their
competitor took a legal action to try to prevent the company from its plan to
undercut their prices by flying only within Texas and therefore, the
consequences is that it would result of overcapacity of flight destination in the
state of Texas
– Other hurdles it that in it’s early operation, the airlines has attracted a
disappointingly small number of passengers, despite it’s cheaper ticket price
compare to it’s competitor at that time.
– Therefore, the company saw operating loss in it’s early operation, before turned
a profit in 1973 and would remain consistently profitable until 2019.
– However, in recent years there has been an unsolved issues with SWAPA upon
pilots hourly salary compared to competitors.
Southwest Airlines Route
Expansion

- In 1979, the airline start First route

outside the state of Texas with Dallas
– New Orleans Route

- In 2014, the airline announced it’s

first international service to Jamaica
and the Bahamas

- As of April 2021, the airline has

scheduled flights to 114 destinations
from 11 countries
Southwest Airline Strategy
today
There has been some revamped on Southwest’s strategy in recent years in order to
maintain it’s competitiveness in an increasingly competitive airline industry in the
U.S :
❖ Create and sustain a new low-cost operating structure
❖ Providing and offering customers with a top notch travel experience in order to
increase it’s brand loyalty
❖ Charge fares that were appealingly lower than what their competitor were
charging
❖ Fleet modernization by ordering large number of the brand new Boeing
737MAX
❖ Expand it’s domestic flights and introduced international flights
 People Management Strategy &
Culture
- Southwest hired employees for attitude & trained for skills. They screen candidates with personal traits,
Recruting, attitudes & behaviors : Warrior Spirit, Servant’s Heart & Fun-LUVing Attitude (people-oriented who are
Screening & extroverted and had good sense of humor)
Hiring - Southwest does not use personality test, but analyzed specific behaviors, knowledge and montivations with
desired traits
- Training is conducted by Southwest Airlines University for new recruits, employees, and managers.
- Training offered are various, from safety and security training, to communication, leadership and employee relations.
Training - Supervisors & executives have to attend courses on corporate culture to nurture Southwest Airlines culture
- - OnBoarding Program for Newly Hired Employees → Southwest Shuffle, Online interactibe tool, First Bite Luncheon

Promotion, - Approx. 80-90% supervisory positions were filled intermally

Compensation & - Managerial positions → received training in every department over six month period.
Benefits - Compensation & benefits received by Southwest employees are higher or same as rivals.

Core Values & - Southwest encourage in house union members to research issues and conduct employee surveys before
Culture Building contract negotiation. Contracts are free o restrictive work rules.
Efforts - Implement no-lay off policy → low turnover
- Maintain culture through Corporate Culture Committee, Local Culture Committee & Cultural Ambassadors
Tools & Analysis

– Balance Scorecard → financial perspective, business process, customer, learning

& growth.
– SWOT Analysis
– Competitive Strategy (Porter) → best cost provider strategy
Balanced Scorecard: Southwest Airlines
Internal Business Process
Financial Perspective
Perspective
1. Profit Growth: 47.8% 1. Fleet Increase: 685
increase aircrafts
2. Revenue Growth: 5.6% 2. Sustainable Operating
increase efficiency: 50 million
kilowatt-hours of
renewable energy
Learning and Growth
Customer Perspective
Perspective
1. Daily Reservations: 1. New Processes: 3,600
57,901 flights a day
2. Customer Satisfaction 2. Flight Completion
Score: 89 Record: 98.3%
Recommendation & Action
Plan
1. Integrating two different company cultures between Southwest Airlines and
AirTran → implement seven steps of merger excellence (Hill, Weiner & Weiner,
2008)
2. Competitors → Uphold competitive advantage
3. Unsolved issues with SWAPA upon pilots hourly salary compared to
competitors. →Strong & healthy communication with unions
Integrating two different company cultures
between Southwest Airlines and AirTran
Seven Steps of Merger Excellence (Hill, Winer & Weiner,2008):
• … Based on Supriyanto (2018):
New cultural integration
strategy in company stood
from several aspects:
(1) Internal values in new
cultural integration;
(2) Technical stages : pre
merger, during meger and
post merger.
(3) Leader role should
continuously inspire and
motivate every employee
(4) New cultural integration
construction consists of
balance collaboration
Conclusion
– Southwest Airlines focuses on best-cost provider strategy → best customer
service with low costs compared to competitors.
– Southwest Airlines has strong corporate culture and believes employees
come first.
– Strategic challenges forthcoming → integrate two different company cultures
prior to AirTran acquisition
Questions
Please answer three out of six questions below:

1) Southwest Airlines continued to record profits in 1973-2015, what strategy does the
company have to achieve this sustainable profitability?
2) Will non-low-cost carriers be a threat to Southwest Airlines? Explain!
3) Will Southwest Airlines be able to expand internationally using its current strategy?
Explain!
4) What competitive strategies and tactics should Southwest Airline consider to maintain
its position as one of the best low-cost carriers and its customer loyalty?
5) Why would you want to work as a manager for Southwest Airlines? Do you agree with
Southwest Airline’s “No Lay-Off Policy”?
6) How do you explain the organizational structure of Southwest Airlines with its
corporate culture & values?
 Rubric
Item Score 1 Score 2 Score 3 Score 4 Weight

Theory was explained but not related

Teori No theory being explained Theory was explained briefly Theory was explained and related to the case 10%
to the case

Relevant explanation on the Relevant explanation on the

Background/ Case Very brief on background of Relevant explanation on the background and it creates
background, and it create background, and it create sufficient 10%
Synopsis the case excellence sufficient sense to the case
some sense to the case sense to the case

Brief explanation on company Company history is explained using graphical

No explanation on company Company history is explained using
Company History history with no graphical information, and the explanation is succinct and 10%
history graphical information
information excellent using meaningful graphic.

Main Issues of Only one issue was Only two issues was At least three issues was explained and the coherence of
Only three issues was explained 20%
the case explained explained the issue is well justified
Some tools being used for
Some tools being used specifically for Some tools being used specifically for analyzing the
The analysis is massive but analyzing general nature of
analyzing the symptoms/ issues, as well symptoms/ issues, as well as the solutions for the case.
Analysis Tools no relation to the issue being the case (nothing specific to 20%
as the solutions for the case. However, The analyses are free from major errors and produced
considered the problems or solutions at
major errors was found in the analysis. substantial recommendations.
hand).
The recommendation & planned of
The recommendation & planned of action sufficiently
The recommendation & The recommendation & action sufficiently related to the
related to the analysis and the issue being considered
Recommendation planned of action does not planned of action somehow analysis and the issue being
with logical applicability to the company. Explanation 20%
& Plan of Action relate to the analysis nor the related to the analysis and the considered. No explanation given in
was also given on how to implement the suggested
issue being considered issue being considered regards to the implementation of the
solution.
recommendation.
There is no conclusion
Conclusion There is a conclusion presented 10%
presented