Case Study onSouthwest Airlines 2002: Southwest Airlines 2002: An Industry Under SeigeAn Industry Under Seige

GROUP NO-06 Ritesh Chhadwa – 3Gopal Kadkade - 12Dipesh Kotecha - 15

Darshan Kurlawala -16Jayesh Name - 28

Santosh Vishwakarma - 55

Topics CoveredTopics Covered

The Southwest Story• The Founding Strategy• Competitive Response• Southwest’s Takeoff

Strategy Leadership, Values, and Culture Organization The Impacts of the Events of 9/11

• Immediate Responses• Heightened Security and Regulations• Industry Bailout and Taxation• New Competitive Position• Labour Relations

Short-Term Challenges: Operating Procedures Long-Term Challenges: Growth Strategies A Late October Visit to Southwest Airlines

Headquarters

The Southwest Story:The Southwest Story: The Founding StrategyThe Founding Strategy

• Founded by Rollin King and Founded by Rollin King and Herb Kelleher in 1967Herb Kelleher in 1967

• Need for low cost airlinesNeed for low cost airlines• Comparison to driving a Comparison to driving a

vehicle over the same vehicle over the same routeroute

• Love ThemeLove Theme• Point-to-Point servicePoint-to-Point service• Turnaround time Turnaround time

minimized to 15 minsminimized to 15 mins• Fun during FlightsFun during Flights

The MAPThe MAP

The Southwest Story:The Southwest Story:

Competitive ResponseCompetitive Response• Enjoin issuance of Southwest’s Enjoin issuance of Southwest’s

intrastate operating certificateintrastate operating certificate• Abandon Love FieldAbandon Love Field• Low-price fare “sales”Low-price fare “sales”• 60-day “half price sale” by Braniff 60-day “half price sale” by Braniff

InternationalInternational• Chivas Regal’s biggest distributorsChivas Regal’s biggest distributors

The Southwest Story:The Southwest Story:

Southwest’s TakeoffSouthwest’s Takeoff• Airline Deregulation Act in 1978Airline Deregulation Act in 1978• ””Manage in good times in order to survive in Manage in good times in order to survive in

bad times”bad times”• Acquisitions of Morris Air and Muse AirAcquisitions of Morris Air and Muse Air• ““The Southwest Effect”The Southwest Effect”• NYSE trading symbol “LUV”NYSE trading symbol “LUV”• Replication of service by People ExpressReplication of service by People Express• Cultural devotion to the internal resourceCultural devotion to the internal resource

Market ShareMarket Share

Strategy:Strategy: Non-adaptation of Hub-and-spoke route systemNon-adaptation of Hub-and-spoke route system Point-to-point route systemPoint-to-point route system Turnaround time strategy:Turnaround time strategy:

• Absence of meals on flightAbsence of meals on flight• Limited amount of checked luggage on aircraftLimited amount of checked luggage on aircraft• Near-uniform configurationNear-uniform configuration• Team-oriented ApproachTeam-oriented Approach• High-speed boarding processHigh-speed boarding process• ““Hands-off” of flightsHands-off” of flights• Utilization of agentsUtilization of agents

No fixed assignment of seatsNo fixed assignment of seats Incentive for an early arrival at the gateIncentive for an early arrival at the gate Last-minute arrivalsLast-minute arrivals Maverick in ticketing processesMaverick in ticketing processes Own-ticketing distribution systemOwn-ticketing distribution system ““The world’s first frequent-flier program”The world’s first frequent-flier program”

Leadership, Values, and Culture:Leadership, Values, and Culture:

LeadershipLeadership• Day-to-day operating responsibilities byDay-to-day operating responsibilities by

Jim Parker (Former VP – General Counsel) Jim Parker (Former VP – General Counsel) now CEOnow CEO

Barrett (Former VP – Customers) Barrett (Former VP – Customers) now President and COOnow President and COO

• Anchoring the leadership teamAnchoring the leadership team

• Kelleher positioned as ChairmanKelleher positioned as Chairman Public RolePublic Role Responsibilities for growth strategies, Responsibilities for growth strategies,

government and airline industry relationsgovernment and airline industry relations

HierarchyHierarchyHerb Kelleher

Chairman

Jim Parker Vice Chairman & CEO

Ron RicksVP - Governmental Affairs

Pete McGlade

VP - Schedule Planning

Colleen Barrett President and CEO

Keith TaylorVP – Revenue Management

Gary KellyExecutive VP - CFO

Jim WemberlyExecutive VP & COO

Donna ConoverExecutive VP – Customer Service

Gary KellyExecutive VP - CFO

Airport Technology Strategies

Corporate Project Management Office

Investor Relations

Purchasing

Systems

Finance and Fuel Aspects

Marketing Aspects of the Schedule

Leadership, Values, and Culture:Leadership, Values, and Culture:

Values and CultureValues and Culture• ““The Basic Principle”The Basic Principle”

Focus on the situationFocus on the situation Maintain self-confidence and self-esteemMaintain self-confidence and self-esteem Maintain constructive relationshipsMaintain constructive relationships Take InitiativesTake Initiatives Lead by exampleLead by example

• Culture CommitteeCulture Committee• Partnering with UnionsPartnering with Unions• Joint problem SolvingJoint problem Solving

Organization:Organization:

Cross-functional decisionsCross-functional decisions Operating agents conceptOperating agents concept Group InterviewsGroup Interviews Total CompensationTotal Compensation

The Impacts of the Events of 9/11:

Immediate ResponsesImmediate Responses• No Lay-offs or Cut-back in flightsNo Lay-offs or Cut-back in flights• Security IssuesSecurity Issues• More customer service agentsMore customer service agents• Patriotism and ResiliencyPatriotism and Resiliency

Heightened Security and RegulationHeightened Security and Regulation• Awake of Transportation Security Awake of Transportation Security

Administration (TSA)Administration (TSA)• Daily call on “Today’s directive” with all Daily call on “Today’s directive” with all

Southwest stationsSouthwest stations• Maximum passengers screened Maximum passengers screened

comparativelycomparatively• Abandoning of plastic boarding passesAbandoning of plastic boarding passes

The Impacts of the Events of 9/11:

New Competitive PositionNew Competitive Position• Increase schedules and employment Increase schedules and employment

post 9/11post 9/11• Substantial decline in earnings due to Substantial decline in earnings due to

lower ticket prices, higher costs and new lower ticket prices, higher costs and new taxestaxes

The Impacts of the Events of 9/11:

Labor RelationsLabor Relations• Labor contract negotiationsLabor contract negotiations• Superior relations with labour Superior relations with labour

comparativelycomparatively• ““We don’t want to be just another We don’t want to be just another

airline”airline”

The Impacts of the Events of 9/11:

Short-Term Challenges: Operating ProceduresShort-Term Challenges: Operating Procedures

No change in flight schedule by No change in flight schedule by Southwest Airlines despite 9/11Southwest Airlines despite 9/11

Just doing the best possible jobJust doing the best possible job Reschedule the airlineReschedule the airline Redesign passenger and baggage-Redesign passenger and baggage-

handling processhandling process Boarding policiesBoarding policies Abandon open seatingAbandon open seating

Long-Term Challenges: Growth StrategiesLong-Term Challenges: Growth Strategies

19 aircraft deferred19 aircraft deferred Borrowed Billion dollarsBorrowed Billion dollars Developed Contingency planDeveloped Contingency plan First non-stop transcontinental flightFirst non-stop transcontinental flight No additional catering or on-board No additional catering or on-board

staffingstaffing Analyst’s observationAnalyst’s observation

A Late October Visit to Southwest Airlines Headquarters

Emergency Exercise for crash Emergency Exercise for crash managementmanagement

Preparations for annual Halloween Preparations for annual Halloween celebrationscelebrations

RecommendationsRecommendations

Use its low price tickets to drive its Use its low price tickets to drive its competitors out of business and take over competitors out of business and take over their markettheir market

Buy more 747 Boeing’s apart from Buy more 747 Boeing’s apart from traditional 737 Airbus for larger capacity traditional 737 Airbus for larger capacity and business-class across regionsand business-class across regions

Implementations of cost saving technology Implementations of cost saving technology such as internet is needed to lower the such as internet is needed to lower the operation cost to give customers better operation cost to give customers better dealsdeals

Practice to continuePractice to continue

Thank YouThank You!!!!!!