Employees per aircraft much lower than industry◦ SWA: 94, United & American: 160◦ Industry: 135

Passengers served per employee◦ SWA: 2,443◦ Industry: 840

Customer service◦ Triple Crown winner

On-time performance Fewest lost bags Fewest customer complaints

Fewer employees at the gate◦One agent, ground crew of 6 (SWA)

◦Three agents, ground crew of 12 (Avg.)

Quicker aircraft turnaround time◦25 minutes (SWA)

What is the secret of Southwest Airlines unbelievable level of performance?

Southwest Video

SWA values◦Work should be fun…it can be play…enjoy it

◦Work is important…don’t spoil it with seriousness

◦People are important…each one makes a difference

“They can imitate the airplanes. They can imitate the ticket counters and all the other hardware…..But they can’t duplicate the people of Southwest and their attitudes.”

Herb Kelleher

One of FORTUNE ‘s Most Admired Companies

FORTUNE has ranked Southwest Airlines in the “Best Companies to Work For”

2005, American Customer Satisfaction Index (ACSI) recognized Southwest Airlines as leading the industry in customer satisfaction

Business Week “Top 25 Most Innovative Companies”

Traditionally staffing has focused on the match between an applicants skills and experience and the job requirements.

Match

PersonKSA’s

Motivation

JobRequirements

Rewards

Most Companies

MatchImpact

PersonKSA’s

Motivation

JobRequirements

Rewards

HR Outcomes

Performance Extra Effort Retention

Satisfaction Commitment

Hire for the Job

SWA

MatchImpact

PersonKSA’s

MotivationATTITUDE

JobRequirements

Rewards

Organization

Task

Flexibility

Val

ues/

Cul

ture

Career Progression

HR Outcomes

Performance Extra Effort Retention

Satisfaction Commitment

Hire for the Organization

It used to be a business conundrum: “Who comes first? The employees, customers, or shareholders?” That’s never been an issue to me. The employees come first. If they’re happy, satisfied, dedicated, and energetic, they’ll take real good care of the customers. When the customers are happy, they come back. And that makes the shareholders happy.”

Herb Kelleher (1996)

CharismaticCharismatic

LeadersLeaders

Strong vision and articulationStrong vision and articulation

Self-sacrificing, risk-takingSelf-sacrificing, risk-taking

Unconventional, Unconventional, novel behaviornovel behavior

High expectationsHigh expectationsBuild self-esteem in followersBuild self-esteem in followers

Self-confident, dynamicSelf-confident, dynamic

Founder of SWA Zany, crazy approach

to management – e.g. arm wrestling to settle business matters

Work should be fun – sing, dance, play but get the job done….

Began as a secretary at Southwest Airlines and eventually became SWA President

Known for◦ Humanistic◦ Idealistic◦ Sense of Humor◦ Commitment to Customer◦ Servant Leadership

“We look for folks who are eager, who are “quick on their feet” with “outside the box” thinking and who have caring, friendly natures.”

About Herb and Colleen

Current president, CEO and chairman of the board

Long history in SWA culture working with Herb and Colleen

Leadership is..."Effectively supporting your team of Employees."

Fuel hedging a key strategic advantage but becoming more difficult each year◦ SWA fuel hedging for future:

2007 95% hedged at $50/barrel 2008 65% hedged at $49/barrel 2009 50% hedged at $51/barrel 2010 25% hedged at $63/barrel 2011 15% hedged at $64/barrel 2012 15% hedged at $63/barrel

“Even with $511 million in favorable cash settlements from derivative contracts in the

second quarter 2008, our economic fuel costs increased 35.2 percent to $2.19 per gallon.” -

Gary Kelly

Failed acquisitionWhy??

Could it have worked?

InternalMaintenance

ExternalPositioning

Flexible Processes

Control-orientedProcesses

CLANBuild interpersonalRelationships; cohesion;morale

ADHOCRACYEntrepreneurial; innovative;Adaptable; risk-taking

HIERARCHYStability; efficiency;Rules & regulations;Policy development

MARKETCompetitive; achievement-oriented;Goal-focused

SWA vs. S&P 500 over 10 years

Past 3 months

What has been SWA’s competitive advantage?

Can they keep this competitive advantage in the future?

What does their future hold?