Southwest Airlines in 2014: Culture, Values, and Operating Practices

PowerPoint Presentation

Group 8Tran Tu Vy

Nguyen Vu Hoang Tan

Nguyen Kim Khanh

Agenda

Company BackgroundHerb Kelleher

Strategic Analysis

Southwest s People Management Practices and Culture

Recommendation

Company BackgroundFounded in 1967 by Rollin King and Herb KellerhersStarted operation on June 1971 with three Boeing 737 after winning the lawsuit against them. Serving 3 cities: Dallas, Houston and San Antonio

As of September 30, 2015, Southwest operated 692 Boeing 737 aircraft:Lowest operating cost structure in the domestic airline industry and consistently offers the lowest and simplest faresCompany Background

Company BackgroundServed more than 1.5 billion Customers since our inception.Operated more than 22 million flights since our inception.Enplaned approximately 136 million Customers during 2014, which is an average of more than 10 million onboard Customers per month.Received 178,299 resumes and hired 4,136 new Employees in 2014. Fun Facts

Company BackgroundMissionThe 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

To Employees

Weare committed to provide our Employees a stable work environment with equal opportunity for learning and personal growth. Creativity and innovation are encouraged for improving the effectiveness of Southwest Airlines. Above all, Employees will be provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Southwest Customer.Company BackgroundMission

How do they stay successful in a competitive marketWhat Makes Southwest Unique?Much of Southwest's success is due to the willingness of its leadership to be innovative

Two key opponent of its business modelIdentify the customerBe the lowest cost providerSouthwest management has created a culture where employees are treated as the company's number one asset

Faster turn around timeOne class of seating and one type of aircraftPoint to point flight routesHedging programStrong domestic networkServing less-congested airportHigh employee productivityExclude mealHow do they achieve low cost?

Herb Kelleher

Herb Kelleher

Herb KelleherLeadership StyleThe Herb Kelleher leadership style is characterized by a few elementsDoing good for the otherEmpathic approach to run everything around himEmployee-first approachSpiritual leadership comprises of attitudes, values, and behaviors that are necessary to motivate the leader and followers.

Herb KelleherSWA is one of the most honored and valued airlines in the world8 years in a row, SWA was named to Business Ethics magazine as 100 Best Corporate CitizensRewards

Overview of airline industry

Overview of airline industry

Overview of airline industry

Overview of airline industry

Source: transtats.btts.govOverview of airline industry

Overview of airline industry

Source: blogs.lse.ac.uk

2008 due to recession and increase in oil price rival airlines made add-on fees include checking bags fee, buy tickets in person to improve their operating performance.=> US Airlines industry lost $5,2 billion in 2008Overview of airline industry

Southwest Airline ran Bags Fly Free ad campaigns to attract customers by its cost saving rather than paying up to $50 for checking bags to other airlines.No charging fee for changing the flight

Southwest Airline ran Bags Fly Free ad campaigns to attract customers by its cost saving rather than paying up to $50 for checking bags to other airlines.No charging fee for changing the flight

Business StrategyLow-cost, low price, no-frills => Widely approach to customers.

Business StrategyFare Structure StrategyWanna Get AwayAnytimeBusiness SelectSeniors ( over 65 )

Business StrategyRapid RewardsCustomers get some benefits:

Unlimited reward seatsNo blackout datesPoints that dont expire

Wanna Get AwayLowest-fare, need to pay in advanceNonrefundableNo fee for changing to a different travelling date or timeBusiness StrategyFare Structure Strategy

Wanna Get AwayLowest-fare, need to pay in advanceNonrefundableNo fee for changing to a different travelling date or timeBusiness StrategyFare Structure Strategy

Business SelectAlso refundable and changebleHigh priority in boarding, seat, security and drinkingMore points than Wanna Get AwayBusiness StrategyFare Structure Strategy

Business SelectAlso refundable and changebleHigh priority in boarding, seat, security and drinkingMore points than Wanna Get AwayBusiness StrategyFare Structure Strategy

AnytimeRefundable and changeableEarn more points than Wanna Get AwayBusiness StrategyFare Structure Strategy

Source: freakinflyers.comBusiness StrategyFare Structure Strategy

SeniorFor over 65 years old customersPrice between Wanna Get Away and Anytime fareNorefundableBusiness StrategyFare Structure Strategy

Business StrategyBe sustainable and keep operating low-cost

Source: investor.southwest.com

Business Strategy

Source:ir.delta.comBusiness Strategy

Using only Boeing 737 aircraft2013, Southwest operated the biggest fleet of Boeing 737 in the worldBusiness Strategy

Business Strategy

TypeNumberSeats737-300119137/143737-50012122737-700463143737-80098175

As of September 30, 2015, Southwest operated 692 Boeing 737 aircraft:Source: swanmedia.com

Use Point-to-Point Route Structure Strategy rather than Hub-and-Spoke System Business Strategy

Bring blended winglets to all planes and upgrade new models to gain lots of benefits such as reduce fuel consumption, maintenance cost, reach the height quickly.

Business Strategy

First airline to introduce ticketless travel and selling tickets through its websiteBusiness Strategy

Business Strategy

Mainly take flights to medium sized citites

Build convenient facilities such as padded seats. Large-screen TV, wireless Internet

According to Business Insider, Southwest ranked first in customer satisfaction by US Department of Transportation in 2013

2013 introduced Southwest Airline app

Advertise heavily than any other rival airlines

Emphasis on the differences between Southwest and other US airlines

SOUTHWEST'S PEOPLE MANAGEMENT PRATICES AND CULTURE

- At southwest, the operative principle was that: "Employees come first and customer come second".

- Southwest's thesis was simple: Keep employees happy then they will keep customer happy.

Recruiting, Screening, and Hiring.Southwest hired employees for attitude and trained them for skills.

The belief at southwest was that superior, hospotable service and fun-loving spirit flowed from the heart and soul of employees rather than being gorverned by strict rules and procedures.

In hiring for jobs, company looked for people-oriented applicant who were extroverted and had a sence of humor => employees deliver the kind of service that showed they truly enjoyed meeting people and doing their jobs.

Company analyzed each job category to determine the specific behaviours, knowledge and motivations.Recruiting, Screening, and Hiring.

TrainingTraining activities at Southwest were designed and conducted by Southwest Airlines University.

Southwest Airlines University conducted a variety of courses offered to maintenance personnel and other employees to meet the safety and security training requirements of the Federal Aviation Administration (FAA), the U.S. Department of Transportation, the Occupational Safety and Health Administration, and other government agencies.

Leadership development courses that focused on developing people, building teams, thinking strategically, and being a change leader were keystone offerings.Training

Compensation and BenefitsSouthwests average pay for pilots in 2013 was between 31 and 92 percent higher than the average pay for pilots at American Airlines, Delta Air Lines, United Airlines, and US Airways; the average pay for Southwests flight attendants ranged from as little as 12% higher to as much as 38% higher than the pay of their counterparts at those same rivals. Its benefit package was the best of any domestic airline in 2013.

Employees RelationsAbout 83% of Southwests 45,000 employees belonged to a union.Management encouraged union members and negotiators to research their pressing issues and to conduct employee surveys before each contract negotiation.

The No-Layout PolicySouthwest Airlines had never laid off or furloughed any of its employees since the company began operations in 1971.

Southwest had built up considerable goodwill with its employees and unions over the years by avoiding layoffs. Both senior management and Southwest employees regarded the three recent buyout offers as a better approach to workforce reduction than involuntary layoffs.

Operation Kick TailIs a multiyear call to action for employees to focus even more attention on providing high-quality customer service, maintaining low costs, and nurturing the Southwest culture.

Southwest management viewed the Operation Kick Tail initiative as a means to better engage and incentivize employees to strengthen their display of the traits in Living the Southwest Way.

Management StyleManagers were expected to spend at least one-third of their time out of the office, walking around the facilities under their supervision, observing firsthand what was going on, and listening to employees and being responsive to their concerns.

Company executives were very approachable, insisting on being called by their first names.

There were only four layers of management between a frontline supervisor and the CEO. Southwests employees enjoyed substantial authority and decision-making power.Management Style

Southwest's two big core valuesTwo core valuesLUV and funpermeated the work environment at Southwest.

LUV grew into Southwests code word for treating individualsco-employees and customerswith dignity and respect and demonstrating a caring, loving attitude.

Fun occurred throughout the company in the form of the generally entertaining behavior of employees in performing their jobs, the ongoing pranks and jokes, and frequent company-sponsored parties and celebrations.

Culture-building EffortsSouthwest executives believed that the companys growth was primarily a function of the rate at which it could hire and train people to fit into its culture.

Southwests monthly employee newsletter often spotlighted the experiences and deeds of particular employees, reprinted letters of praise from customers, and reported company celebrations of milestones.

Source: http://www.slideshare.net/kashyapshah11/southwest-airlines-38000137

Recommendation

Getting similar airplane like Boeing 737

Expand International flight

Expand to new territories

Improve in-flight facilities

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ReferencesSouthwest Airlines gets the new blended winglet on their 737's. (2003). Retrieved 03 2016, from http://forum.keypublishing.com/showthread.php?17952-Southwest-Airlines-gets-the-new-blended-winglet-on-their-737-s

Southwest Airlines SWOT: Financial strength is mainstay, but cost and culture challenges loom large. (2014, September 21). Retrieved March 2016, from http://centreforaviation.com/analysis/southwest-airlines-swot-financial-strength-is-mainstay-but-cost-and-culture-challenges-loom-large-187714

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Cote, B. (2015, October 13). Leadership Analysis: Southwest Airlines Flying High with Herb Kelleher, Former CEO. Retrieved March 2016, from https://www.linkedin.com/pulse/leadership-analysis-southwest-airlines-flying-high-bob-cote-phd-mba

Gulliver. (2015, June 24). The world's largest airlines. Retrieved March 2016, from http://www.economist.com/blogs/gulliver/2015/06/worlds-largest-airlines

Martin, E. (2015, July 29). A major airline says there's something it values more than its customers, and there's a good reason why. Retrieved March 2016, from http://www.businessinsider.com/southwest-airlines-puts-employees-first-2015-7

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Southwest Airlines. (n.d.). Retrieved March 2016, from https://en.wikipedia.org/wiki/Southwest_Airlines

Southwest Airlines: A Case. (n.d.). Retrieved March 2016, from http://www.123helpme.com/southwest-airlines-a-case-analysis-view.asp?id=167353

Southwest Corporate . (n.d.). Retrieved March 2016, from http://swamedia.com/channels/Corporate-Fact-Sheet/pages/corporate-fact-sheet#funfacts

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traveltrotter. (2012, July 2012). Airline cost structure. Retrieved March 2016, from http://www.slideshare.net/traveltrotter/airline-cost-structure-13749344

traveltrotter. (2012, July 25). Airline cost structure. Retrieved March 2016, from http://www.slideshare.net/traveltrotter/airline-cost-structure-13749344

amarchukov. (2015). Southwest: the Classic Budget Airline. Retrieved 02 2016, from http://www.airlines-inform.com/flight-reports/amarchukov-1755.html

Thompson, A. A., & Gamble, J. E. (2014). Southwest Airlines in 2014: Culture, Values, and Operating Practices.

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