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Business Strategy – BAD 4013 – SUMMER 1999 Case Study Southwest Airlines I. Strategic Profile and Case Analysis Purpose 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. Twenty-seven years ago, Rolling King, owner of floundering commuter airline, and Herb Kelleher, King’s lawyer, got together and decided to start a different kind of airline that would provide a short-haul, low-fair, high-frequency, point-to-point service in the United States. The company began service on June 18, 1971 with flights between Dallas, Houston, and San Antonio (“The Golden Triangle” as Herb called it). Southwest Airlines is the fourth

Southwest Airlines is a major US airline established in 1967 that services a multitude of cities in all 50 states and beyond. The company is known for its outstanding quality in providing services and it 's cost effective ticket prices to its many passengers throughout the nation. This airline is based in the southwestern United States, in the city of Dallas Texas, and due to the tremendous number of airplanes that it has and the timely service that it provides to its passengers, this airline services more US passengers than any other airline. This airline also has the largest fleet of planes of any economical or low-cost airline service in the world and employees more than 45,000.

Southwest Airlines is a passenger airline company that arranges and provides scheduled flights for passenger and transportation freight services. The company mainly provides, low-fare, point-to-point services all over the US and near-international markets. The headquarters is located in Dallas, Texas and as of December 2014, the company employed over 46,278 people. The company was founded by Rollin King and Herb Kelleher in 1971. Southwest was the first airline to introduce the frequent mile program. This took place in the mid 1980’s. This type of program allowed passengers to add up traveled miles to use later as credit on a future airline ticket. The traveled miles would add up and would also reduce the price of a ticket. Southwest created the idea of senior discount, fun fares and the fun packs. These were perks that attracted people from different age groups. When Southwest originally was incorporated, the idea was to operate in three cities in Texas, but after taking over Morris Air and TranStar in 1987, this gave them a cutting advantage in the airline industry.

Southwest spearheaded “Shuttle By United” by emphasizing the particularly city-pairs where they competed directly. Additionally, Southwest heavily promoted their 21-day advance fares and other discounts. Southwest’s average fare for the intra-California market decreased from $45.00 in the third quarter of 1994 to $44.00 in the fourth quarter of 1994 and into early January 1995. The Oakland-Seattle route was $51.00, down from $60.00 in the third quarter of 1994. Southwest vice president of marketing and sales estimated the average passenger fare for “Shuttle By United” was roughly 5-10 percent higher in the nine markets it competed directly with Southwest and about $20.00 higher than the average Southwest fare in the markets it did not compete directly.

This podcast interview I choose to listen to focused on Southwest airlines and its founder, Herb Kellener. In 1966, a lawyer based in San Antonio Texas, named Herb Kellener, heard from one of his clients about a small airline based in California. He met his client for a drink and the two of them decided to use the same business plan in Texas utilizing the cities of Houston, Dallas, and San Antonio. Kellener knew nothing about airlines when he began his venture however saw an untapped industry and wanted to take a risk. The idea of this new airline was to get away from the traditional way airlines normally run by cutting down on unnecessary frills so that everyday people could afford to airline travel. Southwest met competition at its creation from local Texas airlines and it took over 4 years for Southwest airlines to eventually take flight. Southwest was even sued and had to take the case to the U.S. Supreme Court. However, Southwest Airlines and Kellener persisted and Southwest has been profitable for

Southwest Airlines Co., established in 1971 by Rollin King and Herb Kelleher, began its operations with only three Boeing 737 aircrafts. It is headquartered in Dallas, Texas(Hawkins, Misra, & Tang, 2012). Southwest is well known as one of the largest low-cost carriers. With this strategy, the company has dramatically grown up and deeply rooted in the US airline industry. Now, Southwest Airlines Co. operates 633 aircrafts to 93 domestic cities and the highest number of passengers used Southwest Airlines to fly around U.S in Jan 2014 (Hawkins, Misra, & Tang, 2012). To accomplish more than 40th consecutive years of both profitability and competitiveness, Southwest Airlines Company is constantly trying to find the routes to differentiate itself from other domestic carriers (Hawkins, Misra, & Tang, 2012).

Southwest was founded in when a group of Texas investors, including Rollin King, M. Lamar Muse, and Herbert D. Kelleher, pooled $560,000 to form the Air Southwest Company. The fledgling airline began operations on June 18, 1971 (Southwest Airlines). Under the direction of President M. Lamar Muse, the airline offers six flights a day of back and forth between 12 flights of round trips daily between Dallas and Houston, Dallas and San Antonio. Tickets for round trip cost $20. So like any company this giant company started small before getting big.

At the onset of the airline industry in the United States, major network airlines were the sole providers of air travel. This multifaceted industry was a difficult industry to break into as a consequence of “sophisticated customer segmentation, hub-and spoke models and costly information systems for reservations, fare wars and intense competition” (Thompson 2008). Shrinkage in airline ticket prices augmented the demand for airline travel. Many markets were simply deserted or over-looked by major network airlines; this is a region a fresh “second tier of service providers” could enter into. This endeavor proved to provide a consumer savings of billions per year. Thus in June of 1971, after a tumultuous battle with other Texas-based

Air Southwest was incorporated on “March 15, 1967” (1966 to 1971, 2016), at a time when “price competition from interstate competitors was ferocious” (Heskett & Sasser, 2013, p. 3). However, Rollin King one of Southwest original founders had an idea that would shake things up. While having a couple of drinks with his friend Herb Kelleher, he scribbled is point-to-point triangular service idea

Some of the incumbent airlines of the time (Braniff, Trans-Texas, and Continental Airlines) initiated legal action, and thus began a three-year

They also had many legal struggles. Southwest infuriated local officials because they refused to leave Dallas Love Field. The courts ruled in Southwest 's favor and they did not change locations. They also received more problems because other airlines complained that if Southwest began serving smaller cities in Texas it would result in costly overcapacity. Once again Southwest prevailed.

Southwest Airlines was formed in 1967 by Rollin King and Herb Kelleher and started service in June of 1971. The airline is headquartered in Dallas, Texas and originally operated flights within the state of Texas. The company has since expanded and now operates flights from Dallas to almost all major cities in the United States and is considered the largest low-cost carrier in the country. “Southwest seeks to offer a travel product that is built around flights targeted to specific demographics and ticket pricing that is simplified so that passengers know

Since 1973, Southwest has been profitable even year. Their strategy included many factors like offering no-frills, short-haul, high-frequency, point-to-point, and low-fair service. Using point-to-point because they acquired only one model of the plane then figured out the latest way to turn an airplane around, using less busy airports, alongside with no meals provided or assigned seating. Southwest also did not have an assigned seat for their passengers but rather given the boarding numbers at the gate eliminating the double-booked seats. Further through the case, it

Southwest Airlines Analysis Summary Southwest Airlines commenced airline operations in 1971 with the plan; if you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline (King & Kelleher, 2016). Their marketing/management scheme and commitment to customer service has paid off and they are currently the largest domestic carrier in the United States. As with any industry they must remain cognizant of the economy and other challenges that arise; while remaining flexible if not fluid in their response to market fluctuations both at present and in the future. Thesis

Bargaining Power of Customers (high)- Customers has several options when it comes to flying. But the main attraction to customers are low prices and Southwest makes it known that they have some of the lowest airfares. The only way Southwest can take back the power is by offering direct flights to cities that other airliners do not offer. Besides the small occurrence of having a direct flight to a city that no other airline has, Southwest