Southwest Airlines

Presented by
Samrat
Narayan

Chandana
History of Southwest Airlines

 On February 20, 1968 the Texan Aeronautical Commissions approved plans

to fly in 3 states, the c5eators are Rollin King and Herb Kelleher
 Expanded through 1980’s to 1990’s by 1993 Southwest Airlines could fly in
34 states in 15 states
 They also expanded into new destinations California, Northwest, Florida,
East Coast
 The competitors could not keep up, “500 pound cockroach that was too big
to stamp out:
 While the airfare was dropping the traffic went up tremendously, in 1994
United started a shuttle service, the large air carriers were feeding traffic into
transpacific and transcontinental routes, they could not keep up

 Was the first airline to achieve the Triple Crown, they had five difference
Triple Crown dedicated to the Employees of Southwest Airlines for their
excellent achievements.
Vision and Mission

Vision
 To have a conservative increase growth, capitalize and cutback
schedules of other airlines. To continue expanding
conservatively in long-haul success
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. To give
ordinary people the opportunity to fly.
 To the employees
 We are committed to provide our Employees a stable work
environment with equal opportunity for learning and personal
growth. Creativity and innovation are encouraged for
improving the effectiveness of Southwest Airlines. Above all,
Employees will be provided the same concern, respect, and
caring attitude within the organization that they are expected
to share externally with every Southwest Customer.
 .
Goals and Objectives
 Ensure highest quality Customer Service in the
air or on the ground.
 Ready to help customers under any
circumstances.
 Are there to ensure you make it from point A to
point B safely
 To stay the most successful with low-fare, high
frequency point-to-point carrier.
Corporate Culture
 Tickets must be bought from the airline itself, the
phone or online
 Extra Rapid Rewards
- frequent flier program
- credits for online booking users only
 Customers are assigned to a boarding group
depending on check-in time
- find their own seats on the plane
 Colorful boarding announcements and crews that burst out in
song instead of no video entertainment
 Meal service is less than on historically full service airlines
Conditions for price discrimination
 A firm must have some market power to price
discriminate
 The demand curve the firm faces must be
downward sloping
 Southwest knows that it can attract more
customers at lower fare price
 The firm must have some information about the
different amounts people will pay for its product.
 Southwest must know how reservation prices or
elasticity of demand differ across consumers
 A firm must be able to prevent resale, or arbitrage.
 Customers need to present an identity card before
boarding
External Opportunities and Threats
 Opportunities
 First airline on the web
 Only in 58 cities –
expansion to other cities
 Lowest cost-preavailable-
seat out of all airlines
 Booked online 13.6%
more than American
Airlines
 Top-ranked website in
customer satisfaction
among travel sites
 Threats
 Jet Blue
 Competitors caught SW
strategy
 New Tax System
 New Security measures
 Aviation insurance
costs
 Terrorists Attacks
 Severe decrease in
customer air travel
Internal Strengths and Weaknesses
 Strengths
 Best low-fare carrier
 Triple Crown for annual
performance
 Quickly seize a strategic
opportunity when arises
 “Team Spirit” Employees
come 1st not customers
 Made 20% of flights to
one stop
 Even though Unionized
still negotiate flexible work
hours
 Marketing on the web,
50% revenue from online
booking
 Weaknesses
 Conservative Growth
Tactics
 Cuts cost in customer
service areas
 Not subscribed to
centralized reservation
service
 Other Co.’s now using
same management
strategies since found
out about SW Airlines
 Provides service in only
58 cities
 Why should I go by Southwest Airlines
 Hire Attitude – Train Skills
 Immerse Everyone in the Culture Immediately
 Keep 'Em Learning
 People Give as Good as They Get
 Find the Kid in Everyone
 Do More with Less
 Luv 'Em in Tough Times
 Do What's Right
 Nurture the Corporate Family
Why should I work ?

 FUN emphasized!

 Family emphasized!
- Caring for employees emphasized!
- Customers emphasized!
- Identify with fellow employees (as internal customers!)
- Ten-year Labor agreement! (81% unionized)
- Aggressive under-dog spirit!

Employees “Love” to work there!!

Southwest’s Values, Philosophy, and Spirit

 These are three basic values (“the culture”) or philosophical

 pillars at Southwest Airlines:

 Value 1: Work should be fun ...it can be play . . . Enjoy it.

 Value 2: Work is important ...don’t spoil with seriousness.

 Value 3: People are important...each one makes a different.

 Beliefs:
 Organizations are transparent
 Family and “Hugs”
People at Southwest

 - Hard-working (94 employees per plane vs.. Americans

 160 and United 160 - Industry average of 130; serves
 2,500 passengers per employee Vs. United and American
 average less than 1,000)

 - Motivated

 - Have FUN - fun place to work

 - Treat employees as internal customers

 - Employees are comfortable

 - Fundamental business philosophy is that employees

 come first!

 - Not a lot of employees!

South-West Airlines
o Competitive advantage
o Internal customers
o Leadership
o Work-culture
o Management style
o Trust
o Family spirit
To be cont…
South-West Airlines
•Open sharing of information
•Training
•Collective bargaining
•Flexibility
•Discounted stock purchase
•Creative spirit
•Lay-offs
Why is Southwest Successful?

 Because of its Internal Business

Environment and/ or Execution Systems
—the Causes:
 Culture, Core Values, Philosophies and
Principles (Vision Direction)
 Effective Management of its Workplace
(Level 5 leadership)
 Effective Exemplar Structures, Systems
and Processes (fit between elements of
the Execution System)
Integrated Low Cost/Differentiation
Strategy
Low Cost Differentiation
 Use a single aircraft  Focus on customer
model (Boeing 737) satisfaction
 Use secondary airports  High level of employee
 Fly short routes dedication
 No meals  New flight services for
 15 minute turnaround business travelers
time (phones and faxes)
 No reserved seats S.W.A.’s Culture,
 No travel agent Values, Philosophies &
reservations Principles