Strategic Analysis: 9301

Anjali Khanna Dheeraj Mehta Deepika Biswas GRN Reddy Amit Guri

S-6 S-20 S-23 S-46 N-4

CONTENT
Introduction

History & Growth of SWA

Management Strategy e-Business Competitors The Future The Present

We operate with a Warrior Spirit, a Servants Heart, and a FunLUVing Attitude.

 LUV : www.southwest.com

www.iflyswa.com

Success {9/11, Insurance , costs, industry}

TOP 5 [ DOT Air Travel Consumer Report : time,

baggage handling, customer complaints]

Fortune Magazine [2nd, <100]

WSJ 2002 [1st, customer service satisfaction]

Introduction
Money Magazine [30 best stocks, 1972]

Enviable record 30 yrs : profit

NUTS Kevin & Jaclie Freidburg

a company with people who are committed to working hard & having fun & who avoid following industry trends

USP
HQ : DALLAS, TEXAS

Keep prices rock bottom

Customer comes second

Work at a place where wearing pants is optional Avoids trendy management programs Avoids formal, doc strategic planning Devotes time to planning parties than writing policies E.g., settled a legal dispute by arm wrestling ! FUTURE ?
Ad/-

History & Growth @ SWA

Idea Conceived in 1967 on a napkin Low fare, No frill airlines to fly between 3 major cities in Texas(Rollin King &

Herb Kelleher) Driving Force: Seat availability & high cost Stiff opposition from major carriers No need for addition carrier in Texas 1971 won right to fly Legal battles Kept SWA in deep debt ( 1st year of operation, loss of $3.7m 1973 1st ever profit and then no looking back. 1978 One of the most profitable airlines in the country. Dominant Player. Further expansion to 8 more cities in Texas By 1993 : Served 34 cities in 15 states Expanded to California, Midwest and North west In some markets were SWA entered, competitors withdrew Allowing the airline to expand faster than ever Several Competitors abandoned LA-SF route : Unable to match SWA $59 fare in comparison to $186

History & Growth(contd..)

500 pound cockroach which was too big to stamp out American and US Airways: Loosing money with fares

dropping and passenger traffic increasing dramatically 1994: United tried to compete with SWA but lost even if the routes chosen were different from SWA Tariffs fell by 30% to $60 and traffic increased by 10% Problem with Larger Airlines: Many of the west cost routes were critical for feeding traffic into highly profitable transcontinental and transpacific routes. Current 4th largest carrier in terms of customers boarded. Transformation from Regional Carrier to National Carrier 2001: Served 58 cities, 30 states and more than 2800 flights a day with fleet of Boeing 355 29th year of profitable operations in arow By 2001: Only profitable airline in US

Management @ SWA
Lamer Muse as CEO

Ousted due to dispute with the board in 1978

Kelleher became the CEO and ran the company

till 2001

Strategy @ SWA
Success Factors
Seize quickly a strategic opportunity whenever one

arises Conservative growth Pattern

Resistance to attempts to expand too rapidly

Cost containment policy Commitment of its employees Flying large number of passengers on high

frequency short hops at bargain fares. Avoided hub-and-spoke operations of its rivals Avoid congested major airports Unique market niche.

Strategy @ SWA
Marketing Strategy
Specific demographics Simplified ticket pricing.

Pricing Strategy
Lowest possible fare More volumes than increase in fare

Distribution Strategies
Direct Marketing no agents

Promotional Strategies
Get there on time, at the lowest possible fares while having

fun.
Growth Strategy
Conservative External expansion opportunity driven

Business Model @ SWA

Use unconventional Models for low lost

Have Fun together

Treat employees as family Hire people who form the fit Involve Employees

e-Business @ SWA
Aggressive mktg : over Internet, (1st airline Webpage) Fortune Mag survey: Expert not many

Doing the business RIGHT

Travelocity of American A/Lines beat SWA look-to-book ratio : 13.8 % = 2 X Travelocity Success story of browsers to buyers InterWeek : March 2002, SWA Internet traffic gain of 16 % SWA online rev generation = 30 % Cost per booking = $1 : via a travel agent = $10

Harris Interactive research: SWA website top-ranked

i/r/o customer satisfaction Score : 8.62/10 InternetWeek , June 2001: SWA top 100 e-businesses in USA

Competitors @ SWA
Changed scenario, post 9/11 Competition shift from Major --> Low-fare A/lines
United: 2nd largest, most formidable competitor

Delta:

downsized employees & filed for bankruptcy by Dec 2002 3rd Largest, 21% workforce cut 2003 255 US locations, alliance with Continental &

NWA America West: $388 MUSD losses in 2002 144 cities, HUB at Phoenix & Las Vegas Alliance with Continental & Mesa Airlines + 35 locations

Characteristics of Low-Fare Carriers

Dont rely on high business fares

Dont offer frills

Ops from secondary airports, less congestion lower

fees & less time Fly point-to-point E-Business is highly efficient Customer appeal: creative mktg strategies + promoting individualism Mkt share 1994 : 5% ; 2000 : 10% by 2003 : > 20%

JetBlue
JB is the newest & most note worthy competitor of SWA

2002 :profit $55M to $635 MUSD revenue

CEO: David Neelam CFO SWA : Gary Kelly Know

your enemy Kelleher I think its good to have some real competitive activity that gets your people stirred up and renews their vigor and their energy and their desire to win

SWA: Success mantra

Rapid 20 gate turnarounds All Boeing 737 -700s fleet : fly non-stop

More productive workforce

SWA has expanded into long haul with 16 % Cap. SWA Cost advantage : 59 % in 500 & 35 % in 1500 mile

category Report DoT: SWA has expanded long haul services by 26 % between 2000 2002 Since, longer flts mean a loss in profits due to increased costs. SWA make profit ? SWA strategy : capitalize conservatively & increase growth steadily Door is open for other low-fare carriers to make profits

The Future
+ Services to 58 Cities, expansion opportunity - Competition - Conservative growth tactics + Req >100 Cities to SWA

The present

NETWORK

The Results: 2012-13

SWA Co.'s Annual Revenues

2012 Co. Revenues : $17.1B USD. 9.1% above the prior year's results. Per Share annual earnings : $0.56 Ist Q 2013 eps : $0.07

Breaking news
(Dated 25 July 2013)

Gary C. Kelly, Chairman of the Board, President, and Chief Executive Officer :"We are pleased to report record quarterly earnings of $274 million (excluding special items). This performance benefited from all-time high operating revenues and lower fuel prices

Thank You