Instructor
Case:
Southwest Airlines in 2010
Dr. Deb Sircar
University of Greenwich
Business School
http://create.mcgraw-hill.com
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Thompson and John E.
Gamble. All rights reserved.
401
2
Case: Southwest Airlines in 2010
402
2
Part Two:
Confirming Pages
Section C: Implementing and Executing Strategy
Z
EXHIBIT 1
Total Number of Domestic and International Passengers Traveling on Selected U.S. Airlines,
2000–2009 (in thousands)
Total Number of Enplaned Passengers (including both passengers paying for tickets and passengers traveling on frequent flyer awards)
Carrier
2000
2002
2004
2006
2007
2008
2009
American Airlines
Domestic
International
68,319
17,951
77,489
16,580
72,648
18,858
76,813
21,313
76,581
21,562
71,539
21,233
66,142
19,578
Total
Continental Airlines1
Domestic
International
86,270
94,069
91,506
98,126
98,143
92,772
85,720
36,591
8,747
31,653
8,247
31,529
9,146
35,795
10,994
37,117
11,859
34,501
12,418
31,915
12,031
Total
Delta Airlines2
Domestic
International
45,338
39,900
40,675
46,789
48,976
46,919
43,946
97,965
7,596
83,747
7,036
79,374
7,416
63,496
10,020
61,599
11,435
59,276
12,339
55,627
12,118
105,561
90,783
86,790
73,516
73,034
71,615
67,745
1,128
—
5,672
—
11,616
116
18,098
408
20,528
777
20,479
1,345
20,008
2,370
1,128
5,672
11,732
18,506
21,305
21,824
22,378
48,462
8,228
43,314
7,454
45,959
7,576
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
The chart that is listed beneath also displays how discount carriers and majors challenge their opponents for market share in the United States. Delta, Southwest, United, and American Airlines are the leading airlines established by the 2015 domestic
Economic, social-cultural, and technological forces are the external macro-environmental factors Southwest Airlines should be most concerned with. Weak economic growth reduces the purchasing power of an airline’s target market. Southwest, known for being a leader in low cost airline, provides flights at a higher frequency and capacity to attain profit. However, the company experienced increasing overhead through the lapse of long-standing fuel contracts, which previously helped provide a competitive advantage. This factor is also amplified by the growth the company experienced with success. Southwest is the fourth largest airline and has seen fuel cost skyrocket from 29 percent to 35 percent over a seven-year period.
American airline industry is steadily growing at an extremely strong rate. This growth comes with a number economic and social advantage. This contributes a great deal to the international inventory. The US airline industry is a major economic aspect in both the outcome on other related industries like tourism and manufacturing of aircraft and its own terms of operation. The airline industry is receiving massive media attention unlike other industries through participating and making of government policies. As Hoffman and Bateson (2011) show the major competitors include Southwest Airlines, Delta Airline, and United Airline.
The terrorist attacks on September 11, 2001 shook the United States in a profound way, deeply upsetting the national perception of safety within U.S. borders. No industry or sector of the economy felt the impacts of these events more than the airline industry. Both the immediate reaction to the attacks and the long-term repercussions have negatively affected the industry. Today’s airline industry is much different than it was prior to September 11. There is a much smaller work force, more low-cost carriers, more security and more fees associated with flying.
In 2008, the senior management team at Continental Airlines, commanded by Lawrence Kellner, the Chairman and Chief Executive Officer, convened a special meeting to discuss the firm’s latest quarterly financial results. A bleak situation lay before them. Continental had incurred an operating loss of $71 million dollars—its second consecutive quarterly earnings decline that year. Likewise, passenger volume was significantly down, dropping by nearly 5 percent from the prior year’s quarter. Continental’s senior management needed to act swiftly to reverse this trend and return to profitability.
1. There are a few trends in the US airline industry. One is consolidation, wherein existing players merge in an attempt to lower their costs and generate operating synergies. The most recent major merger was the United Continental merger, which is still an ongoing affair, but has created the largest airline in the United States by market share (Martin, 2012). Another trend is towards low-cost carriers. In the US, Southwest has been a long-running success and JetBlue a strong new competitor, but in other countries this business model has proven exceptionally successful. The third major trend is the upward trend in jet fuel prices, and the increasing importance that this puts on hedging fuel prices and capacity management (Hinton, 2011).
Southwest Airlines represents a rather unique organizational force that has driven the company to success since its inception in 1971. One of the most unique features about the organizational structure is that it is largely decentralized and employees are openly welcomed to express their opinions on a wide range of organizational issues. However, despite the "hands off" management strategy, the company consistently ranks as one of the top airlines in regards to customer complaints; in 2008, for example, the company received 0.25 complaints on average for every one hundred thousand passengers who used the aviation services (Triangle Business Journal, 2009). This analysis will look at some of the organizational factors that have contributed to the success of Southwest Airlines over the course of the last few decades.
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
This short paper is an overview of Southwest Airlines, its strategy, and what role Human
This proposal addresses the needed steps to be taken in order for Southwest Airlines to see continued growth in the airline industry. Southwest Airlines has been able to remain one of the most profitable airlines in the industry for an extended period of time. Even with the hindrance of the 2001 terrorist attacks involving airplanes and the U.S recession of 2008, Southwest has continued to see strong revenue growth. Meanwhile, other companies were experiencing major losses and in some cases folding. Southwest Airlines has capitalized on the company’s strength of being the top low cost
Based on the case study, and on online and offline research into Southwest Airline’s current state, complete the following Tasks:
Southwest Airlines was created in the late 1960’s by a businessperson Rolling King, and law school graduate Herb Kelleher, who sought a faster travel time between Houston, Dallas, and San Antonio, Texas (Dess, et al., 2014, p. C137). After overcoming all of the antagonism and legal problems of many major airlines, Southwest was able to take its first flight in 1971 (Dess, et al., 2014, p.C137). With a dedication and will power to grow the company, King and Kelleher sought out ways to increase growth.
This document will be using Porter’s Five Forces Model and a Political, Economic, Social, and Technological (PEST) analysis to conduct an external analysis on Southwest Airlines.
Upon review on a profile of a successful company we see Southwest Airlines as a prime example. Their ability to recognize weakness in their management system and adjust strategies has allowed them to emerge as a leader in the US airline industry. Southwest is the largest US low fare carrier with low fare rates, no additional fees and excellent customer service. Southwest Airlines currently has one of the most innovative management practices in the US to date. A review of the critical elements of Southwest Airlines proves to be effective and innovative.