Southwest Airlines

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

Southwest SpiritSouthwest SpiritPerformance Performance The Five ForcesThe Five ForcesHistory & OverviewHistory & Overview

Statistics Statistics

Threats & Future ChallengesThreats & Future Challenges

Outline

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

San Antonio, TX

Houston, TX

Dallas, TX

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

October 1978 President Carter signs the Airline Deregulation Act.

History of Southwest Airlines

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.

History of Southwest Airlines

Outline

Supplier power

Buyer power

Substitutes

New entrants

Rivalry

Porter’s Five Forces

*Southwest Airlines business strategy is Low-cost leadership

*Southwest Airlines is performing well in a bad industry

Outline

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

Performance

Outline

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

Southwest SpiritInternal 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.

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.

Southwest Spirit

Outline

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

Outline

ThreatsOn 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

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.

Threats

Future ChallengesIn 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.

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