ravi southwest
TRANSCRIPT
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A
Presentationon
SOUTH WESTAIRLINES
Presented By:
RAVI MODH
DIPAK PRAJAPTI
MAHESH RAVAL
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Background :
- Founded in 1967 - Love Field in Dallas, TX- 35,000 Employees (started Flying in 1972)
- Nations 4th largest airline (59+ cities and 65M
Customers)
- Only two fares: regular coach and off-peak
Results and Outcomes:
- Excellent customer service (rated the best for on-time
performance, fewest lost bags; fewest customercomplaints 13 years in a row)
- Safest airline in the world (never had a fatal accident)
- Profitable every year (33 years in a row); only airline
in the world
Southwest Airlines
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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 1980s to 1990s by 1993 Southwest Airlines could fly in 34states in 15 states
They also expanded into new destinations California, Northwest, Florida, EastCoast
The competitors could not keep up, 500 pound cockroach that was too big tostamp out:
While the airfare was dropping the traffic went up tremendously, in 1994 Unitedstarted a shuttle service, the large air carriers were feeding traffic into transpacificand transcontinental routes, they could not keep up
In 2004 Southwest Airlines is fourth largest domestic carrier, customer boarded
In 2002 they traveled in 58 cities and 30 states, it has been 13 years in a row that
they are profitable, even after September 11, 2001, net income fell 52.9 percent,Southwest was the only airline company that had a profit all the other companieswere in the red
Was the first airline to achieve the Triple Crown, they had five difference TripleCrown dedicated to the Employees of Southwest Airlines for their excellentachievements.
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Southwest Airlines and Some Other Airlines: -2008 Profit/Loss
Southwest Airlines
American Airlines
U.S. Air
$63.5M$32.4M*
$(748M)
$(1.0 B)
Delta $(1 B)
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One of Best 100 Companies and in the top 10 Most
Admired companies to work for:
- FUN emphasized!
- Family emphasized!
- Caring for employees emphasized!
- Customers emphasized!- Identify with fellow employees (as internal
customers!)
- Ten-year Labor agreement! (81% unionized)
Employees Love to work there!!
SouthwestAirlines
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Mission Statement
Southwest has a dedication
to the highest quality ofcustomer service delivered
with a sense of warmth,
friendliness, individual pride,and company spirit.
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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.
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Southwests 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 ...dont spoil with seriousness.
Value 3: People are important...each one makes a different.
Beliefs:
Organizations are transparent Family and Hugs
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Key Ratios
Profit Margin: 7.23% Return on Assets: 4.01% Return on Equity: 8.98%
Revenue: 7.58B Gross Profit: 2.49B Operating Cash Flow: 2.23B Market Capital: 14.41B
Current: .941 Debt to Equity: .299 Total Debt: 2.00B
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- Hard-working (94 employees per plane vs.. Americans160 and United 160 - Industry average of 130; serves2,500 passengers per employee Vs. United and Americanaverage less than 1,000)
- Motivated
- Have FUN - fun place to work
- Treat employees as internal customers
- Employees are comfortable
- Fundamental business philosophy is that employeescome first!
- Not a lot of employees!
People at Southwest:
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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 workhours
Marketing on the web, 50% revenue from onlinebooking
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Weaknesses
Conservative Growth Tactics
Cuts cost in customer service areas
Not subscribed to centralized reservation
service
Other Co.s now using same managementstrategies since found out about SW
Airlines
Provides service in only 68 cities
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Market shareMarket share
Southwest
Jetblue
American Airlines
Delta
US Airways
Air Tran
23
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Airline Industry
EnvironmentFive Forces Model
Potential competitors-low
Rivalry among established companies-high
Bargaining power of buyers-high
Bargaining power of suppliers-high Threat of substitutes-low
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PEST Analysis
Political Factors
Economic Factors Social/Sociological Factors
Technological Factors
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Factors in Macro
Environment Consumer demand
Government regulations Technological advances
International agreements
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Organizational Culture
Encourage participation
Employee ownership/empowerment
Freedom, informality, interplay
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Distinctive Competencies
Organizational culture
Customer focused
Low-cost structure
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Why is Southwest
Successful? NOT because of: Only flies 737s
Only Small Airports
Low Ticket Prices Quick Turnaround
Low Cost
Customer Loyalty
Efficiency
Profitable
Rate of Productivity
All Results/
Outcomes/
Effects/
Symptoms
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Because of its Internal Business
Environment and/ or Execution Systems
the Causes:
Culture, Core Values, Philosophies andPrinciples (Vision Direction)
Effective Management of its Workplace
Effective Exemplar Structures, Systemsand Processes (fit between elements of theExecution System)
Why is Southwest
Successful?
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Southwest Airlines
Integrated Low Cost/Differentiation Strategy
Use a single aircraft model
(Boeing 737)Use secondary airports
Fly short routes
15 minute turnaround timeNo meals
No reserved seats
No travel agent reservations
Low Cost
Focus on customer
satisfaction
Focus on customer
satisfaction
New flight services for
business travelers
(phones and faxes)S.W.A.s Culture, Values,
Philosophies & Principles
New flight services for
business travelers
(phones and faxes)S.W.A.s Culture, Values,
Philosophies & Principles
High level of employee
dedication
High level of employee
dedication
DifferentiationDifferentiation
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Possible Strategies
Expand into more cities
Increase amount of shorter destination
flights into the larger airports
Increase direct flights
Purchase bigger planes
Get agreements with Airports for flights
Eventually look to acquire American
Airlines
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Business Strategies
Functional strategy
Business level strategy Strategic fit with internal organization
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Decisions
Based on QSPM, the best looking
strategy would be to expand into more
cities
The longer non-stop flights have more
of a competitive market and would be
hard to keep low cost flights
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Implementation
Increase
The number of flights per day by 5%
Increase revenue by 15%
Helps to cover new increasing cost
Flights into larger airports
Decrease
Operating costs by 10%
Flights to cities with more than 4 flights a
day
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Evaluations
Quarterly reports
Average daily flights
Average passenger per flight Quarterly meetings to evaluate current
plan and make necessary changes as
needed
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UPDATE!!
Expanded into 86 cities as of 2008
Operates over 3,500 flights per day
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Future Issues/ Problems
for SWA Going International Merger (Acquisition of another airline)
Growth: Internal? External?
Both?
Will the Corporate culture change whenHerb leaves?
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