Management 449

Dr. Mohsen Modaress

Friday 9:00-11:45

Southwest Airlines Case

Michael Vo

Jason Jones

Randy Schroeder

Yan Fredrick

Willy Budiman

Case Analysis

Southwest Airlines Co.

Case Abstract

Southwest Airlines Co., founded by Rollin King and Herb Kelleher over 30 years ago, is the fourth largest major airline in America and the second largest in scheduled domestic departures.  Southwest Airlines has numerously won the coveted Triple Crown for best on-time record, best baggage handling, and fewest customer complaints.  They are well-known for their strategy of high frequency, short-haul, point-to-point, low-fare services.  Southwest averages more than 64 million passengers a year in flights to 58 different cities all over the southwest.  

Being the first airline to launch an Internet home-page, Southwest was able to generate 46% of its passengers online and at about $5-$7 less than their competitors who book flights through travel agents.  They own over 355 of the latest jets and the only aircraft type Southwest works with is the Boeing 737 series.  By having a single type of aircraft, Southwest is able to abridge scheduling, maintenance, flight operations, and training. The average age of their aircrafts is less than 8.5 years.  Southwest also maintains great human resources and employee relations.  In April 2001, Fortune magazine named them employer of choice among college students.  

One of the clever strategies they have implemented is the automatic boarding pass that enabled passengers to get tickets 90 minutes before departure and reduced their (passengers) waiting time in lines.  This strategy as well as their consistent high levels of service has helped Southwest beat out their competition on customer satisfaction.  Their competitors include United, Delta, Northwest Airlines, US Airways Group, American Airlines, and Alaska air group.  They rank number one in market capitalization and despite the September 11 terrorist attacks was the only airline company to withstand its impacts on the economy.  

I. Current Situation

  1. Performance

Despite some decreases in net income (82.3%), operating revenues (12%), and load factor (62.9%), Southwest airlines have posted profit consecutively for the last twenty nine.  In fact, they were the only airline to post a profit for the first quarter of 2002.  With their $1 billion in cash and cash equivalents, Southwest was able to restore service on September 14, only 3 days after the disturbing terrorist attacks.  They had the strongest balance sheet and highest credit ratings among all the airline industry.  There profitability allowed them to continue 100% operations and full employment with no layoffs.  

B. Strategic Posture

1. 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.

2. Objectives 

  • To have more direct, non-stop flights than the traditional hub and spoke systems.
  • To keep the fare structure relatively simple compared to major full-service carriers.
  • To support the company’s low-cost position by keeping reservation and ticketing costs low.
  • Maintain competitive edge by sticking to one type of plane, the 737.
  • Serve only drinks and peanuts
  • Maintain quick turnaround times in order to minimize the number of aircraft out of service.

3. Strategies

  • To provide high frequency, short-haul, point-to-point, low-fare service.
  • To add new destinations only when they have the resources and anticipated adequate demand.
  • Point-to-point route system
  • To cater to more nonstop travelers. Approximately 75% of Southwest’s passengers fly nonstop.
  • First airline to establish a home page on the internet

4. Policies

  • Southwest has resisted attempts to expand to rapidly
  • Southwest tends to avoid the more congested hub airports in favor of more conveniently located satellite or downtown airports.
  • Feature only low, unrestricted, unlimited, everyday coach fares.
  • Southwest does not interline with any other airline
  • Has no commuter feeder relationships

II. Strategic Managers      

  1. Board of Directors

  1. Herb Kelleher, co-founder and Executive Chairman.
  2. Rollin King, co-founder and Chairman of the Board, now retired
  3. James F. Parker
    Vice Chairman and Chief Executive Officer
    of Southwest Airlines Co.,
    Dallas, Texas
    Louis Caldera, President, The University of New Mexico
    Albuquerque, New Mexico;
    Audit and Nominating and Corporate Governance Committees
  4. C. Webb Crockett
    Attorney, Fennemore Craig,
    Attorneys at Law, Phoenix, Arizona;
    Compensation and Nominating and Corporate Governance Committees
  5. Nancy Loeffler
    Longtime advocate of volunteerism
    San Antonio, Texas
  6. William H. Cunningham, PhD
    James L. Bayless Professor of Marketing
    University of Texas School of Business
    Former Chancellor of The University of Texas System,
    Austin, Texas;
    Audit (Chairman) and Nominating and Corporate Governance Committees
  7. John T. Montford
    President, External Affairs, SBC Southwest and SNET,
    San Antonio, Texas;
    Audit and Nominating and Corporate Governance Committees
  8. William P. Hobby 
    Chairman of the Board,
    Hobby Communications, L.L.C.;
    Former Lieutenant Governor of Texas;
    Houston, Texas;
    Audit, Compensation (Chairman), and Nominating and Corporate Governance Committees
  9. June M. Morris
    Founder and former Chief Executive Officer of Morris Air Corporation,
    Salt Lake City, Utah;
    Audit, Compensation, and Nominating and Corporate Governance Committees
  10. Travis C. Johnson 
    Attorney at Law, El Paso, Texas;
    Audit, Executive, and Nominating and Corporate Governance Committees
  1. Top Management

  1. Jim Parker

Chief Executive Officer and Vice Chairman of the Board of Directors

  1. Colleen Barrett

President and Chief Operating Officer

  1. Lamar Muse

President, Chief Executive Officer and Chairman of the Board, from 1971-1978

Join now!
  1. Howard Putnam

President and Chief Executive Officer, from 1978-1982

  1. Bob Montgomery
    Vice President - Properties and Facilities
  2. Donna D. Conover
    Executive Vice President - Customer Service
  3. Gary C. Kelly
    Executive Vice President and Chief Financial Officer
  4. James C. Wimberly
    Executive Vice President and Chief of Operations
  5. Joyce C. Rogge
    Senior Vice President – Marketing
  6. Deborah Ackerman
    Vice President - General Counsel
  7. Beverly Carmichael
    Vice President - People Department
  8. Gregory N. Crum
    Vice President - Flight Operations
  9. Ginger C. Hardage
    Vice President - Corporate Communications
    ...

This is a preview of the whole essay