CASE STUDY - SOUTHWEST AIRLINES

GROUP 4
Ankita Singh – 190301004
Aniket Jain – 190301003
Abhinava Sarkar – 190301001
Praveen Goldar- 190301015
Syamantak Sen – 190301019
Sanyam Agrawal - 190301018
Q1. How would you characterize the business model of Southwest
Airlines? How does this differ from the business model used at
many other airlines such as United and American Airlines?

Q2. Identify the resources, capabilities, and distinctive

competencies of Southwest Airlines.

Q3. How do Southwest’s resources, capabilities, and distinctive

competencies translate into superior financial performance?

Q4. How secure is Southwest’s competitive advantage? What are

the barriers to imitation here?
 Q1. How would you characterize the business model of Southwest Airlines? How does this differ from the
business model used at many other airlines such as United and American Airlines?
Southwest Airlines was established in year 1967 and the factors considered in the business model are:
a) Low –Cost Fare Structure
Wanna Get Away , Anytime , Business Select
On an average, the company has lower unit costs
than majority of airline carriers operating in the US.

b) Point –to –Point Service

• Southwest provides point-to-point service, rather than the 'hub-and-spoke' system, which is primarily used by
majority of airlines in the US.
• achieve better asset utilization and reliable on-time performance

c) Efficiency
• Single type of aircraft and engine supplier used – BOEING 737
• Low maintenance
• Use secondary Airports
 Q2. Identify the resources, capabilities, and distinctive competencies of
Southwest Airlines.
RESOURCES
• Strong Ties among Employees – Stable environment and equal opportunity
• Website to Web Marketing . Book tickets only @ www.southwest.com
• High Customer Service and Satisfaction
• Rapid Rewards
CAPABILITIES
• Low Operating Cost
• Low Turn-around time
• Brand Image
• Profitability
DISTINCTIVE COMPETITIVENESS
• Low Cost Structure
• Low Fares
• Target Secondary Airports
 Q3. How do Southwest’s resources, capabilities, and distinctive
competencies translate into superior financial performance?
Multiple factors to Southwest Airlines Advantage
• maintaining a lower cost structure by keeping a standardized fleet with minimal
0 5000 10000 15000 20000 25000
inflight meal and entertainment amenities,
2019 22,428
• a workforce motivated for quick aircraft turnaround
2018 21,965
• and an aggressive fuel hedging program 2017 21,146

• winning customer satisfaction and high customer retention. 2016 20,289

2015 19,820
• to reach on time, by maintaining a decent record of on schedule flights.
2014 18,605
• On average there are 94 employees per Southwest aircraft in contrast to 2013 17,699
competitors who have 130
2012 17,088
• Keeping the workforce number minimal, they have cut off a major fraction of labor 2011 15,658
costs incurred by smooth running of operations. 2010 12,104
• Southwest Airlines pilots are not unionized
Revenue in million U.S. dollars
• innovative profit-sharing plan, they have wittily made each and every employee
his/her own performance appraiser, ensuring that no employee falters behind the
line.
• Applying its Point-to-Point transit system, its admirable how Southwest Airlines has
avoided the congested airports, thus not needing the dozens of gates or thousands
of employees to handle the banks of the flights that come in and then disperse,
leading to reducing a major fraction of the operational costs.
 Q4. How secure is Southwest’s competitive advantage? What are
the barriers to imitation here?
• Looking at the developments in the aviation industry till recent, it would be safe to say that Southwest enjoys
the most secure competitive edge than any other carrier.
• Its strategy, right from having standardized fleet to having minimal but motivated employees while wittily
introducing cost-cutting initiatives like fuel-hedging and employee profit-sharing plan, have helped it gain a
benchmark position which cannot be easily touched by any of its competitors.
• With its punctual flight record, pleasantly approachable staff, impressive Customer service, despite the fact
that it offers no-frills, there is still a high degree of customer satisfaction that continuously builds customer
loyalty for the company. This is one of the reasons why, even in the aftermath of the 9/11 terror attacks, when
the entire aviation industry was reeling under the disastrous consequences of running empty flights,
Southwest Airlines not only was successful in maintaining fully seated flights but also earned an ROIC of 5.8%.
• Its hiring process which lays stress on applicants possessing teamwork skills and optimistic outlook has helped
it shape a dynamic and motivated workforce which not only helps in smooth functioning of an informal
horizontal organization but also promotes accountability among the employees not just as individual but as a
team.
• Its method of offering differentiated products like Rapid Rewards frequent flyer program have made it stand
apart in the LCC sector.
Q4. How secure is Southwest’s competitive advantage? What are
the barriers to imitation here?
However even while being an epitome of success in the Aviation industry, it has been unfeasible and impossible for
Southwest’s rival carriers to imitate its business model due to following factors:
• Southwest Airlines, in order to cut its maintenance, training and inventory costs had standardized its fleet by
Boeing 737 aircrafts; something which its rival cannot think of doing. Its Cost Leadership is one of its vital factors
which it has been able to stay ahead of its rivals.
• While it follows a Point-to-Point transit system enabling it to have punctual and less cost-incurring flight
schedule, most of its competitors follows a Hub and Spoke transit mechanism; and changing from the latter to
the former is not recommendable at this fragile state of the aviation industry.
• Southwest Airlines has a unique, thorough and highly selective hiring process which ensures that its workforce
has the requisite motivation at par with the spirit of the Airlines. Now, this cannot be as easily applied by its rivals
which are mostly very hierarchical and formal.
• Southwest Airlines innovated the strategy of fuel hedging for a long time, something which its rival cannot start
and reap short-term benefits.
• With its unique way of communication to both prospective and incumbent passengers, either by goofy humor or
funny flight attendants, Southwest Airlines has been able to sustain a Differentiation Leadership. No other carrier
can practically think of depending too much on its on-board staff in absence of any kind of inflight entertainment.
Hence, we can see how Southwest Airlines was successful in able to maintain both Cost effectiveness as well as
Customer loyalty and retention, through its innovative and foresighted strategies.