SWA brands themselves as a fun and caring airline, which can be determined by their logo, a heart with wings, as well as their stock name “LUV” and take pride in the fact that they do things differently compared to other airlines, making a point in entertaining their passengers while on board, giving them the best flight experience at a bargain price.
Since 1987, when the Department of Transportation began tracking customer satisfaction statistics, SWA has consistently led the entire airline industry with the lowest ratio of complaints per passengers boarded. Many airlines have tried to copy their business model, and culture which is admired and emulated by corporations and organizations in every industry.
Always the innovator, SWA pioneered “Senior Fares”, a same-day air freight delivery service, and “Ticketless Travel”. They also led the way with the first airline web page “southwest.com”, “DING!” the first-ever direct link to customer’s computer desktops that delivers live updates on the hottest deals, and the first airline corporate blog.
Company Culture and Management
Southwest’s culture emphasizes teamwork over individual effort and use a procedure called “team delay” which is a non-precise way of reporting the cause of delays with the purpose of diffusing blame and encouraging learning. It is used to identify problems between two or more employee groups. In order to improve on any faults perceived, the team would debrief, and all members of the crew would meet in order to determine the cause of the delay and learn from the experience. SWA emphasizes on “learning from mistakes.” but also on small supervisory spans of control compared to other airlines. While similar airlines have 30 to 40 front-line workers to each supervisor SWA has only 8 to 9.
After the supervisory level, there is a single layer of middle management (directors) before the Vice President level, unlike their competitors. The Vice Presidents are responsible for specific functions such as: Special Marketing, Schedule Planning, Properties, Fuel, Treasury, Purchasing, Maintenance, Customer Relations, Reservations, Marketing, Ground Operations, Legal, Labor Relations, and Planning. Each Vice President reports to one of eight Senior Vice Presidents who in turn report to one of two Executive Vice Presidents, one for Customer Operations and the other for Aircraft Operations. The two Executive Vice Presidents, along with SWA’s president (whose duties are mostly related to investor issues and public discourse) report to Gary Kelly, Chairman and CEO.
SWA pilots are the only pilots of a major U.S. airline who do not belong to a national union. National union rules limit the number of hours pilots can fly. However SWA’s pilots are unionized independently, allowing them to fly far more hours than pilots at other airlines. Other employees at are nationally unionized, but their contracts are flexible enough to allow them to jump in and help out, regardless of the task at hand. From landing to takeoff took approximately 20 minutes at SWA, and required a ground crew of four plus two people at the gate. By comparison turnaround time at competing airlines was closer to 35 minutes and required a ground crew of 12 plus 3 gate agents.
SWA also has a meticulous approach to hiring new employees. In 2001, SWA reviewed 194,821 resumes and hired 6,406 new employees. Furthermore the company’s hiring process was unique: peers screened candidates and conducted interviews. Pilots hired pilots and gate agents hired gate agents. In order to better understand what the company sought in candidates, SWA interviewed its top employees in each job function and identified their common strengths which led them to identify top candidates during the review process. SWA then hired for attitude as much as aptitude.
Recent Financial Status
Stock Chart taken from google finance.
As a highly successful business, SWA has always had a healthy stock price, highest of which can be noticed was at $18.15 a share in the past 5 years, however when the recession hit in 2008, they were reduced to $5 a share in march 2009, but were still better off than most competing airlines. Currently stock prices stand at $11.78 per share.
Ratios taken from FORBES.
Ratios taken from FORBES.
Ratios taken from msn money.
At a first glance, it can be determined that despite the financial crisis, SWA is currently in a healthy state especially when compared to the industry (Regional Airlines) as a whole with a 0.46 for Debt/Common Equity ratio, 5% on Return on Invested Assets.
In the perspective of the past 5 years, despite plunging to -1.06 for Net Average Annual Income as a result of the financial crisis, they have maintained 6.3% Return on Equity, 2.5% Return on Assets and 0.44 for Debt/Equity Ratio.
Competitors
Some of SWA’s main competitors in the regional airlines industry include:
American Airlines (AMR) with a current stock price of $5.79 per share, JetBlue Airways (JBLU) $5.75 per share and United Airlines (UAL) at $21.37 per share.
Competitor comparison chart taken from yahoo finance.
At a glance, while American Airlines has a workforce of 78,250 employees, they are currently in loss with -$471 million in net income, and United Airlines with 86,000 employees is only at $252 million, leaving the only worthy competitor to be JetBlue Airways with 9,626 employees and $97 million, however nowhere near a threat to SWA for the moment as they are much too small.
SWA boasts a prosperous $459 million with a workforce of 34,901 employees which is only half as much as AMR and UAL.
Stakeholders
The primary stakeholders for SWA are first and foremost the employees and the customers, each of which invest into the company by either purchasing the service and associated products in the customers’ case, and investing time and effort into the daily job when it comes to the employees. Furthermore suppliers are key in their influence over the company, which for SWA’s case include Boeing and their range of suppliers to manufacture the 737 aircrafts, the petroleum industry as well as catering industry are some of the few key suppliers.
Additionally the investors and stockholders also play a key role in the company by financing it, which allows it to operate, expand, prosper and in return allow the investors to capitalize through dividends.
List of top 10 share holders taken from SWA website.
Capital Group Companies: 85.6M shares
It is one of the world’s largest investment management organizations with assets of around one trillion USD and it comprises a group of investment management companies, out of which: Capital Research Global investors
Primecap Management Company: 78.3M shares
Is an independent investment management company whose goal is to provide superior long-term equity investment results by following an investment approach based on four key principles: commitment to fundamental research, long-term investment horizon, emphasis on individual decision-making, focus on value.
T. Rowe Price: 39.9M shares
Is a publicly owned investment firm that deal in mutual funds, sub advisory services, account management for individuals, institutions, retirement plans and financial intermediaries.
Fidelity Investments: 35.4M shares
Is one of the largest mutual fund and financial services groups in the world, that manages a large family of mutual funds, fund distribution and investment advice services, discount brokerage services, retirement services, wealth management, securities execution and clearance and life insurance.
The Vanguard Group: 27.5M shares
Is an American investment management company that manages approximately $1.4 trillion in assets. They offer mutual funds and other financial products and services to individual and institutional investors in the United States and abroad.
The secondary stakeholders for SWA encompass and include the government with taxation, legislation and regulations, the general public that support and praise them for their unique way of dealing with their customers as well as for their important contribution to the community, and finally the media who cover both their successes and their shortcomings, such as the case of the march 2009 hull rupture on one of their planes.
Work Citation
