Southwest Airlines Case Study

By: Andrew Streff, Brett Burger, Graham Steen, Monica
Zakrzewicz, Ujiro Okiomah & Sam Smith

Outline
History & Overview
The Five Forces
Performance
Southwest Spirit
Statistics
Threats & Future Challenges

History of Southwest Airlines
The Southwest Airlines was proposed as a local airline
serving only three cities in Texas.

San Antonio, TX Houston, TX

Dallas, TX
© 2008 G5 Consulting Firm LLC. All Rights Reserved

On June 18th 1971 Southwest Airlines makes its first
commercial flight.

October 1978 President Carter signs the Airline
Deregulation Act.

President Jimmy Carter signs the Airline Deregulation Act.


October 1996 Southwest Airlines expands into the
Northwestern United States.

In 2005 Southwest Airlines carried more domestic
passengers than any other U.S. airline.


Porter’s Five Forces
Supplier power
Buyer power
Substitutes *Southwest Airlines is performing
well in a bad industry
New entrants
Rivalry

*Southwest Airlines business strategy is Low-cost leadership


Performance
Earned a profit for 32 consecutive years:
- Fly more passengers per employee than any other
airline
- Have fewest number of employees per aircraft
- Own almost 80% of there aircrafts


Performance
Has had the fewest customer complaints since 1987
Most admired airline in the World, 1997-2003
Maintained a debt-to-equity ratio much lower that the
industry average


Southwest Spirit
External Spirit: Great Customer Service.
Ex: A gate agent volunteering to watch a dog for two weeks;
Austin passenger needing a kidney transplant operation was
flown there by a southwest pilot in his private plane
Flight attendants are encouraged to have fun, jokes and
have humorous announcements.


Southwest Spirit
Internal Spirit: Employment at Southwest is highly
desired.
In 2004, 1,706 employees were hired and 225,895
applications were received.
An employee had not been laid off since 1971.
Employee turnover hovered around 7%; the lowest rate in
the industry.


Southwest Spirit
Internal Spirit: Camaraderie in the Company.
• New-employee orientation, known as the new-hire
celebration
-Wheel of fortune, scavenger hunts, Southwest Airline
Shuffle
• Advanced Employee Training
-Three-day classes called “Leading with Integrity”.
“Walk-a-Mile Day”
• Employees conserve fuel during flights, ice storage
equipment, luggage faced handles out.


Southwest Spirit
Internal Spirit: Corporate labor relations.
81% of employees were unionized
Southwest pilots belong to independent union
In 1974 Southwest was the first airline to introduce
employee profit sharing. Employees owned about 10%
of the company’s stock.


Statistics
Southwest airplanes flew an average of eight times a
day, nearly double the industry average.
Southwest usually turns around airplanes in 15
minutes, as opposed to the 45 minute industry average.
Southwest uses only one type of airplane, the Boeing 737.
American Airlines uses six different airplanes


Statistics
Southwest pilots belong to an independent union. Other
airline pilots belong to the Airline Pilots Association.
In 2005, Southwest pilots had the highest salaries for
pilots of narrow-body jets (38% above United Airline’s)


Resources
• Spirit & High Moral
• Routes & Lack of Hub
• Reputation
• One type of Plane


Threats
On entering the Northeast market, Southwest Airlines
would now be competing directly with JetBlue Airways
also a low-fare carrier out of NYC’s JFK International
Airport.

*Currently, JetBlue has 60 A320 Airbus aircrafts and orders with Airbus for as
many as 233 A320 aircrafts


Threats
With the potential of the Northeast market, several
threats to Southwest’s smooth operations such as airport
congestions, air-traffic control delays, lengthy
turnaround time at airport gates and severe weather.


Future Challenges
In 2005, Southwest had the highest salaries for pilots of
narrow-body jets (38% above those at United Airlines).

They just concluded a bitter contract negotiation with
flight attendants that resulted in a richer than-expected
settlement for the union.


Recommendations
The reputation of Southwest Airlines in the Western and
Southern part of the country would be enough to help
them break into the Northeast market.

Southwest Airlines could also break into the region by
providing special fares to travelers flying to warmer
climate zones such as Florida and other states in that
region.


Southwest Airlines Case Study

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