HR - Project_Sothwest Airlines_1-2

Fukue Sierra
Córdova Hidalgo, Kevin
Mejía Barrios, Lis

Human Resource Management

Course Project
Southwest Airlines

Introduction

Southwest Airlines is one of the low-cost airlines in America which has got its
headquarters at Dallas, Texas. It has been one of the recognized airlines in the U.S.
airline industry.

By the year 2009, it was the largest airline in the world measured by the number of
passengers carried per year. Up to date, Southwest Airlines is the third largest
commercial airline in passenger fleet of aircraft among the rest of the world's major
commercial airlines. For twelve consecutive years, from 1991 through 2002
Southwest Airlines has been rated among the top five major carriers in the world by
the department of Transport (DOT). This is attributed by its on-time performance,
minimal customer complaints and best baggage handling (David, 2006). Other
similar companies are working very hard to place first in the annual performance
but Southwest Airline is the only airline to, ever hold the triple crown for its good
annual performance. Southwest features in the magazines as the most preferred
company and also among the 100 best companies to work for. In 2002, a southwest
airline was placed first among airlines for its best services and customer
satisfaction. It was also ranked first for the 30 best stocks since the year 1972.
Southwest has been operating on the profit margin for over thirty years. Southwest
 hired its first black pilot, Louis Freeman, in 1980. In 1992, he was named the first
black chief pilot of any major U.S. airline.

Project Module 1:

Basic information about the company Project

1. Give a short account of the history of the company and trace the evolutions of its
strategy. Try to determine whether the strategic evolution of your company is
the product of intended strategies, emergent strategies, or some combination of
the two.

History of Southwest Airlines

Southwest Airlines was established on March 16, 1967 by entrepreneur Rollin

King and lawyer Herb Kelleher. They came across the idea of starting a low-cost
airline between San Antonio, Dallas and Houston in Texas. Some of the heavy
weights in the industry tried to ground them by filing legal suits against them.
But after three years of heated battle, the U.S. Supreme Court allowed Air
Southwest to continue its services without and penalty and is the premier low-
cost air carrier in the U.S. It has a fleet of 579 airplanes and flies between 89
destinations as of 2013. It has the credit of being the highest used airline by U.S.
citizens for domestic flights.

It operates nearly 3,400 flights each day. In 2012 it had yearly revenue of $17
billion and currently has more than 45,000 employees. It is one of the most
loved airlines in the U.S. because of its low cost, safety and customer care
oriented service.

Purpose:
“Connect People to what’s important in their lives through friendly, reliable,and
low-cost air travel.
Vision:
“To become the world’s most loved, most flown, and most profitable airline.

Values:
“ Live the Southwest Way
Warrior Spirit
Servant’s Heart
Fun-LUVing Attitude

Work the Southwest Way

Safety and Reliability
Friendly Customer Service
Low Costs”

Aligning business strategy and brand positioning

Southwest Airlines is brilliant at aligning business strategy with brand

positioning.

Herb Kelleher knew where he wanted to be. He wanted Southwest Airlines to

own the idea of “low-cost” in the airline category in such a way that it would be
almost impossible for the competition to copy. He understood who his customer
would be.

The challenge was to surpass the competence on how to run the company
profitably while offering low prices to its customers. If they could figure this
out, they could win.

Deliberately, Southwest only flies Boeing 737s increasing the efficiency of

maintaining the aircraft. So that the mechanics and other maintenance people
have to learn how to work on only one model and become expert. Besides they
need to stock parts only for 737s.

The other airlines have thousands more parts to keep in inventory. Their
maintenance department spends much more time training how to repair several
different aircraft models. This results in significant structural savings for
Southwest.
Using this strategy Southwest was building a protective barrier around its
business. It doesn’t end there. Southwest’s turnaround time is 30 minutes on
average compared to the competitions’ 45 minutes. That’s the time from when
the plane lands until it takes off. This adds up to needing fewer planes and fewer
worker hours.

Quick turnaround made the moat deeper.

Southwest can turn planes fast, in part, because most of its airports are in smaller
markets or are the secondary airport in a major market.
In Chicago, Southwest flies out of Midway rather than O’Hare. Gate fees are
less at the smaller airports, and the fact they have less congestion helps the
airline stay on schedule.
Most Southwest flights fly direct to the destination, rather than the hub-and-
spokes service requiring a layover in another city.

Kelleher’s filter for decision-making takes into consideration its low-cost

position so they do not give food during the flight. The brand’s positioning idea
is prescriptive for decision-making throughout the organization.
Southwest does not have seat assignments. Nevertheless, the airline manages to
create a fun and enjoyable experience for employees and passengers. The
employees even get paid less, on average, than the competition, yet they seem
happier. The flight crews are more likely to go home each night rather than sleep
in another city.

They keep deepening the moat.

Southwest negotiated with its union members that they would perform more
than one job function. The same employee might unload baggage and guide
planes on the tarmac. Flight attendants might take tickets at check-in and handle
gate announcements.

In addition, Southwest does not pay travel agent or online commissions, because
you can buy Southwest tickets only at Southwest’s website. No other airline
works that way.

They even took away the first-class section of the aircraft, focusing on coach
only. There was strong financial pressure from Wall Street for Southwest to
expand into the Northeast.
 The key in the airline business is to own the “gates” at the airports. Kelleher was
advised to buy an airline with gates in the East. He really wanted those gates,
but he knew he did not t want the “airplanes and the people” that came along
with the deal. Kelleher also knew the culture of the people of the acquired
airline might not gel with Southwest’s culture. He didn’t go through with the
deal they were proposed.

Business strategy drive profits

By using these strategies, Southwest Airlines never has reported an unprofitable

year; 2017 is its 44th consecutive year of profitability. Meanwhile the four
largest airlines have been in bankruptcy at one time or another.
Everyone in the company must be aligned on the strategy for it to be executed
successfully. The strategies must be communicated with everyone so they fully
understand. Only then can there be trust, buy-in and commitment behind the
movement. Everyone’s mind and heart must be on board. Aligning business
strategy to brand positioning is a must.

2. Identify the mission and major goals of the company.

Mission: “The mission of Southwest Airlines is dedication to the highest

quality of Customer Service delivered with a sense of warmth, friendliness,
individual pride, and Company Spirit.

Major goals

Southwest Airlines main goal is to maintain its lead as the best commercial
airline in the world in terms of customer satisfaction, on-time operations and
good luggage handling. To accomplish this, Southwest airline adopts various
sales promotion methods to sensitize people on the services offered, times of
travel and terms and conditions that customers must adhere to enable the airline
serve better. One of the techniques used by the airline to accomplish its
marketing objective is advertising. This technique is important in reinforcing the
high quality services offered by the airline company and increase sales. If a
company offers low priced services, advertising is used to compensate the
difference by ensuring more sales are achieved and hence bigger profits accrued.
Under the marketing mix, pricing is divided into two categories i.e. price
determination and administration. Price determination is the activities that are
considered to arrive at a specific price of a service. To fix their low prices fares,
Southwest considered its competitors and the need to maintain its position in the
airline industry. Price administration refers to attaching basic prices to particular
sales situations like special sales, location of the service or position held by
distribution members. Advertising is the means through which a certain message
is communicated to prospective customers and hence money must be spent in
the same. Advertising is always cheap since it uses mass media to reach
customers and also it can use visual and emotional devices to increase
persuasiveness of the message to targeted people. (Batra, n.d). In any market,
promotion is highly recommended to ensure that the services or the goods in the
market are recognized by the potential customers. Therefore efficient
communication is needed by the use of efficient means to advertise the service.
Southwest airlines uses electronic media like television, newspapers, comic
book, revenue magazine which is the performance marketing tool, NBA all star
sweepstakes, promotional campaign, offering discount to customers and offering
videos on air etiquette. Southwest's ads are aimed at convincing the customer
that what it offers is the best and offers the real value to them. It aggressively
uses internet to market its services and it was the first airline to create a home
page on the Web. This worked well for the southwest in that those who visited
the site were turned to be buyers. Fifty per cent of its revenue is generated
through online booking.

Southwest airlines employ a number of tactics in order to maintain its position

as the best airline in the world and maintain its profitability. Its competitors are
loosing customers on daily basis while southwest airlines gains flights daily. A
southwest airline carries the most passengers in U.S. (Brancatelli, 2008).
Southwest airlines appear to know something that its competitors do not. It cuts
down its costs by keeping things simple and consistent. This also helps to
maximize assets and it helps manage customer expectations. It uses the
following tactics to remain on top of the market; one plane fits all where
southwest airlines uses only one type of aircraft i.e. the Boeing 737 series unlike
its competitors who uses different types of aircrafts. This save southwest
maintenance costs in terms of spare-parts inventories and training mechanics.
This also allows for flexibility without involving costly disruptions and
reconfigurations when using a different series of aircraft on a network.
Southwest airline uses a tactic referred to as point-to-point flying where their
crafts fly non stop between two points. This minimizes time a planes uses on
ground and therefore reduces delay hence preferred by the most customers. Its
competitors uses what is called hub-and-spoke system where a jet collects
passengers from a central position and distributes them to different destinations
and vice versa. This automatically results in time wastage and accruing
unnecessary costs. This tactic enables the southwest airline to be higher in
completion than its potential competitors.

Another technique that ensures that southwest airline remains on top is its
simple in-flight service in which there is a decent coach cabin that spacious
compared to that of its competitors. Southwest airlines do not offer meals but
only beverages and snacks. This saves time to clean, unload a flight and
restocking the plane which enables southwest airlines jets to fly one extra trip
per day which translates to extra revenue. No frills, no fee is another tactic
where southwest airline sells one-way fares and their prices are kept low. This
cuts the costs down as complex fares are expensive to manage. They ensure that
the prices are inclusive i.e. southwest doesn't have extra charges like fuel,
standby travel and allows for two luggage check free. Since southwest airline
use identical jets, travelers are already familiar with the services they will get
when they purchase a flight.

Strong management is another tactic employed by the southwest airline to

remain on top of its competitors. Its management has avoided practices that
could raise costs or complicated the normal travelling process. Management
positions are lean but productive where top management of southwest generated
ten times more profit than their counterparts from other network carriers
(Brancatelli, 2008). Southwest airline has strong employees union which ensures
that there is a happy workforce. Eighty seven per cent of its employees belong to
a certain union. They have never had any strike and more so southwest staff is
the highly paid. It has 30% fewer employees per craft than the competitors and
hence lowest non-fuel cost per seat mile. All this is aimed at increasing revenues
accrued by the southwest airline and compete efficiently with other network
carriers. Southwest airline ensures that the increasing oil prices do not affect the
cost for running the airline as 40% of the costs of an airline are brought about
increasing oil prices. It has accomplished this through its aggressive fuel-
hedging program which enabled it to save approximately $3.5 billion. It paid
$1.98 a gallon for fuel which was about a dollar less than its competitors in the
first quarter. Southwest airline is flexible to changes in oil prices through the use
of the fuel-hedging program. Southwest has proven it can survive every airline-
industry downturn, grown fast and profited immensely when the business
resumes to normal.

According to David (2006), the major goal at southwest is the major goal which
pushes them to keep costs low and quality high. The airline's operations are safe,
frequent, low cost flights that ensure that the passengers get to their destinations
on time and often close to their destination more than its competitors who use
larger airports far from the cities. Southwest believes that skills can be taught
but willingness to grasp the concepts cannot (Hill, & Jones, 2009). Its motivates
its employees to work hard by offering incentives where all employees are
covered by a profit sharing plan which translates to the more the employees
work, the more profit southwest makes and the more they become rich. At
southwest, you will find a pilot together with the attendants assisting passengers
into the plane unlike in other network carriers where a pilot cannot be involved
in such an activity. Southwest does this to get the plane off the ground as
quickly as possible because they are aware that a plane cannot make money
while on the ground. This flexible and inspired workforce has led to higher
productivity reduces the need to employ more employees. This strategy has
helped them a lot in maintaining their caliber in the airline industry and to
withstand the stiff competition from the like companies. However, in the year
2008, southwest faced a major challenge when its competitors network airlines
which include American and United decided to reduce their costs. They did this
through whatever means possible like going through bankruptcy which allowed
them to record profits in some area while competing directly with the southwest
airline. In order to attract travelers, southwest found it worthy to update its
services and offering internet connections to its customers on board
(Topics.nytimes.com, 1).

The marketing mix strategy is greatly used in the southwest airline for better
management and for decision making. It refers to how the four Ps of marketing
i.e. product, place, promotion and price are inter-related to produce a meaningful
result that targets the potential customers. Southwest has taken into
consideration all these parameters into consideration to ensure its business
stands-out and gives its competitors a hard time in the market. Skills are usually
required to ensure that the four Ps are blended properly to achieve optimal
results. For increased revenue to be achieved, experimenting on the market
status and conducting research are essential when coming-up with a successful
marketing mix. By realizing that marketing mix is a combination of tools which
are used to satisfy customers and achieve a company's goals, when used well
result in increased revenue and remain on the profit margin for a long duration
of time no matter how the dependent products in the market fluctuates.
3. Do a preliminary analysis of the internal strengths and weaknesses of the
company and the opportunities and threats that it faces in its environment. On
the basis of this analysis, identify the strategies that you think the company
should pursue. (You will need to perform a much more detailed analysis later in
the book)

Strength Analysis of Southwest Airlines:

Southwest has a competitive edge over its competitors because of its people and
their people management. The culture practiced at Southwest ensured progress
towards their primary goal of customer service and low cost. The HR programs
at Southwest were based on the preserving the values and special culture of
Southwest Airlines (SWA).

Point-to-Point Service: Southwest Airlines focuses on providing point-to-point

services instead of Hub and Spoke system which most airlines follow. In hub
and spoke you are basically connected through some hub points wherein you get
connecting flights. In point-to-point service, direct flights are provided which
saves a lot of time for customers. It also helps the company achieve better asset
utilisation.

Strong Fleet Base: Southwest Airlines has a very strong network of fleet across
the US. It has one of the largest Boeing aircraft fleets in the world. It has under
its armoury multiple models of Boeings which helps it deliver effective services
across the country.

Low Turnaround time: Southwest Airlines has expertise in saving time during
a turnaround. The average turnaround time for the Airlines is about 25 minutes
which is at least 20 minutes lower than the industry average. This helps the
company in efficiently utilizing its aircraft’s in more flights per day and hence
saving the huge amount of capital in buying new airplanes.

Price Leadership: Southwest Airlines offer low priced flights in the US. Its
business model allows it to have low priced fares by saving money on many
accounts like turnaround time or fuel at large hubs etc. Southwest Airlines is one
of the few airlines to be profitable in the world.
Weaknesses Analysis of Southwest Airlines :

Heavy contribution from passenger revenues: Southwest Airlines is over

dependent on passenger revenues which contribute over 93% of its revenues. A
contribution of freight is only about 1%. The revenues can be affected in case of
rising fuel pricing resulting in the reduction in passenger traffic.

Lawsuits and Litigation cases affect image: Southwest Airlines is involved in

some class action lawsuits whose outcomes are pending. If the company
receives any bad outcome, it can affect the finances and image of the company.

Over dependent on Boeing: Boeing has high bargaining power as a supplier

over Southwest Airlines as it is the sole supplier of aircraft and its parts. This
can affect Southwest business in situations of disagreement with Boeing.

Increase freight business: The global freight business is also increasing with
the advent of E-commerce which and extended globalisation. The industry is
expected to grow at a CAGR of 7% in the next 5 years. The company should
take advantage of the growth in the industry.

Threats Analysis of Southwest Airlines :

Intense competition: The US Airline industry has intense competition

characterised by pricing wars in the industry. The company competes
with American Airlines, Delta Airlines, JetBlue and SkyWest etc. Increased
competition forces pricing wars and affects profitability.

Stringent government regulations: The Airline industry is subject to stringent

regulations and legal compliances. The industry is also taxed heavily, which
increases compliance costs of the company which consequently affects the
profitability of the company

Southwest Airlines HR Programs and Corporate Strategy

Recruitment: Very Selective

• Southwest looks for candidates with creative minds to fit in their corporate
strategy of customer service
• It emphasizes on peer recruitment to conduct easier background checks and
offers free-space pass to.
Training: Belief not merely a process

• They do not hire based on skills, but on attitude, fit and importance of culture
• A dedicated training group called “Southwest University of People” trains the
newly hired and existing employees which offers a variety of courses
• The new hires are exposed to history, values, principles, mission and culture of
the company, and emphasized on team work and sometimes customer service.

Culture: The mantra of SWA

• The culture at Southwest plays a crucial role in its productivity as it brings in a

sense of family
• A cultural committee consisting of employees from all levels and regions has
been set up in order to preserve and enhance the Southwest spirit
• There is a budget set for parties for employees and their families
• Employees are considered to be customers and the People Department does
what it takes to keep their customer happy. Performance Management: Triple

Crown Oriented

• Service in the aviation industry is measured by on-time performance, fewest

lost bags and least number of customer complaints
• “Triple Crown” is given to a company who does the best in all three categories

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.

Southwest Airlines faced many barriers to entry from the fierce competition of
other airlines in the industry. Though competition was fierce, Southwest Airlines
 managed to succeed by doing things differently. Their mission was to provide
affordable air travel to those who would not normally fly. Contradictory to the
rest of the airline industry, Southwest maintained a profit while keeping its fares
low. Southwest was unique to the industry in two ways. They focused on the
short haul traveler who is the backbone in which Southwest was built upon and
used a point-to-point method of flight connections

If the short haul passenger was the backbone of Southwest Airlines success, then
their 737s were the lifelines that supported it. By choosing the 737 as the
airplane for all of Southwest's flights, the company saved time and resources in
training its employees. The crew could be easily substituted for one another due
to the extensive training on the 737. Low costs and, therefore, low fares are an
enormous competitive advantage, when combined with their high-quality and
loyal workforce. A very unique culture was found at Southwest Airlines among
all of its employees.

The market for short distance airline flights was large enough to allow
Southwest to maintain a profit for over 30 consecutive years. Shorter flight
times allowed for more flights to take place per day. With the industry average
sitting at one or two flights per day, Southwest set itself leaps apart by averaging
10 to 12. Maximizing utilization and minimizing ground time were the key
elements to Southwest's profitability.

4. Who is the CEO of the company? Evaluate the CEO’s leadership

capabilities.

CEO Gary Kelly

Kelly was named Chairman of the Board of Directors of Southwest Airlines on

May 21, 2008, replacing co-founder Herb Kelleher. Gary Kelly also
became president of Southwest Airlines the same year, replacing Colleen
Barrett when her contract expired on July 15, 2008.

As CEO, Kelly has guided the airline to become the largest carrier of domestic
passengers in the United States. He has led the company through a number of
transformative, large-scale initiatives including the revamp of the airline’s Rapid
Rewards program, the introduction of the Boeing 737-800 and 737
MAX aircraft to Southwest’s fleet, the acquisition of AirTran Airways the
launching of Southwest's first international service, an update to the airline’s
branding, the adoption of the Amadeus reservation system, and large expansion
projects at the company’s corporate headquarters in Dallas.

On January 10, 2017, Kelly announced changes to the Company's executive

Leadership ranks with Thomas M. Nealson named as President and Michael G.
Van de Ven named as the airline's Chief Operating Officer. These changes were
effective immediately. Kelly retained the title of Chairman and Chief Executive
Officer.

Kelly was named one of the best CEOs in America for 2008, 2009 and 2010
by Institutional Investor magazine and serves on the President's Council of Jobs
and Competitiveness.

In 2014, Kelly received the Advertising Innovation and Marketing Excellence

(AIME) Award.

Kelly was the 2016 recipient of the Tony Jannus Award for distinguished
achievement in commercial air transportation.

In 2017, Fortune named Kelly the #3 most underrated CEO in America

(after Satya Nadella and Jeff Bezos based on a survey of Fortune 500 CEOs
asking them which of their fellow CEOs do not get enough credit. Kelly
received 85 votes.

CEO’s leadership capabilities

1. Motivation

Motivation is a key component to being an influential leader, whether it’s

inspiring others to a common goal or driving action through confidence. The
reason motivation is so important is because it drives people, and therefore
organizations to accomplish their goals and strategic objectives.
2. Accountability

Like motivation, accountability is another character trait shared by

successful leaders. Accountability shows not only responsibility, but
acceptance to own one’s actions and to lead by example.

3. Innovation

Innovation, in this context is about showing an adaptability for change. In

today's world, being agile is one of the important skills you can acquire. The
ability to recognize agility and being open to change course to achieve better
outcomes, is also a respected and desired trait in leaders. To foster growth, a
leader must be open to change, whilst adhering to the core values and
objectives of the organization.

Motivation, accountability and innovation are only a few of what is required to

be a successful. When looking into traits, characteristics and capabilities of a
great leader, it's good to agree what success actually looks like and what areas of
development the individual requires.
Project Module 2: Legal issues
Research the Web and other sources to find legal issues related to non-compliance with
labor laws that your chosen company had.

1. Give a short account of the case.

In 1981 Southwest was successfully sued for its then-existing policy of hiring only
female flight attendants and ticket agents.

This case presents the important question whether femininity, or more accurately
female sex appeal, is a bona fide occupational qualification ("BFOQ") for the jobs
of flight attendant and ticket agent with Southwest Airlines. Plaintiff Gregory
Wilson and the class of over 100 male job applicants he represents have challenged
Southwest's open refusal to hire males as a violation of Title VII of the Civil Rights
Act of 1964, as amended, 42 U.S.C. § 2000e et seq.

In Wilson v. Southwest Airlines Company case, a male sued the airline after he was
not hired as a flight attendant, because he was male. Southwest argued that allowing
only females to be flight attendants was a BFOQ. The airline claimed that
maintenance of its female-only hiring policy is crucial to be financially successful.

Bona fide occupational qualification (BFOQ) is legalized discrimination, and

available only on rare occasions, when the employer is able to prove that the ground
for choosing one group over another goes to the essence of what employer is in
business to do. BFOQ test include two steps: (1) does the job require that the
employee be of the one gender only, (2) is that requirement reasonably necessary to
the “essence” of the employer business. Southwest conceded that its refusal to hire
males was intentional. The airline also conceded that its height-weight restrictions
would have an adverse impact upon male applicants, if actually applied In
Southwest’s case, primary marketing goal of the company was to maintain “sexy”
image of their airline by hiring attractive females and dressing them in high boots
and hot-pants. It really has nothing to do with the primary function of the business –
safely transferring passengers. So, answering question one – no, flight attendant job
is not require to be female only. There is no difference among who will check
luggage, serve drinks or assist passengers during the flight. Southwest failed to
prove that this particular job must be done by females only. Secondly, hiring
females were convenient for Southwest, but not necessary. The company was
 pursuing a goal of making money, but BFOQ focuses on services provided,
functions and job tasks, not business goal. Personally, I don’t think the standards for
BFOQ are too strict; actually, I think it should be more of them. A lot of companies
concentrate too much on their marketing, and forget about Title VII, which I think
one of the major achievements of the United States. Imagine, if BFOQ was easy to
get, employers can do whatever they want and they will find a way to twist the law.

2. Identify the preventive actions the firm should have done in the first place to
avoid the legal incident.

A Preventive Action is a proactive process of continual improvement intended to

prevent occurrence of nonconformance or to eliminate the cause of a potential non-
conformance or other undesirable potential situation.

Identifying Preventive Actions

• Develop an action plan

– Specify what situation needs preventive action

In this case of SWA, the airline should improve a better way of recruitment
allowing men as well as females have equal opportunities to get the job as a
flight attendant and ticket agent.

– Define what changes/actions need to occur

SWA should stop publishing height-weight, personnel hostess attributes
requirements for flight attendants because it operates to exclude from
eligibility a greater portion of
male than female applicants.

– Assign responsibility
A very good publicity agency should carry out the advertisements,
improving the ads promising to provide “tender loving care” in which SWA
has developed a “Love personality” projecting an image of femine spirit, fun
and sex appeal.
– Implement the preventive action
The marketing department has to work together with the publicity agency
focusing on newspapers, billboards, magazine, television and the Internet.
Reduce encouraging its attendants to entertain the passengers and maintain
an atmosphere of informality and “fun” during the flights.
Make hiring decisions based on its own business judgment considering not
only customer attitudes and preferences, but qualifications and capabilities
of the applicants whether it is a male or female.