Southwest Airlines in 2008: Culture, Values and Operating Practices

Irma Irsyad – 1040002194

Strategy and Execution

Lecturer: Mr Janpie Siahaan

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Background Pioneered the low-cost model

Primarily short haul

High-frequency

Point-to-Point

The 3rd largest airline in the world (fleet size)

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History Founded: 1971 (Rollin King and Herb Kelleher)

Fleet size : 472

Destination : 63

Headquarter: Dallas, Texas

Started serving Dallas, Houston and San Antonio based on: convenient schedules, low fares, on time arrivals

Gained foothold after several difficulties

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Company Values

Core Values

LUV

Code word for treating individuals, employees, customers

Dignity, respect and caring loving attitude

Appeared on banners and posters at company facilities

FUN

Entertaining behavior of employees in performing their jobs.The ongoing pranks and jokes

Frequent company-sponsored parties and celebrations.(e.g charity benefit games, chili cook-offs, Halloween parties)

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Company’s CultureEmphasis on Value of People

• Keep Employees Happy – then they will keep customers happy

Colorful personalities

• Employees are friendly, creating unique love based atmosphere

“Now There’s Somebody Else Up There Who Loves You”

•Airport: Dallas Love Field•Route: Love Triangle•Planes: Love Birds •Drinks: Love Potion• Peanuts: Love Bites•Coupon: Love Ticket

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Business ConceptGood

Experience

Short, Safe, Reliable Trip

Short, Safe, Reliable Trip

On-time arrival Low fare and High Quality

service

Flying convenient schedule

Point-to-Point

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Top-Ten Airport (daily departure)

Avoided congested Airport

Realiable on-time Performance

Hedging on Aviation Jet Fuel (to gain competitive advantage)

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ActivitiesThe low fare airline

Standardised 737 aircraft

15 mins. gate-turnaround

High level Employee stock ownership

Limited used of Travel Agents

Flexible Union contracts

High employee compensation

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Business Segment

Business Travelers(Time sensitive)

Leisure Travelers(Price sensitive)

Frequent Conveniently timed flights Low fares

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Geographical Segmentation

Southwest flies to 62 cities in 32 states in America

Albany Columbus Indianapolis Midland/Odessa Philadelphia San Diego

Albuquerque Corpus Christi Long Island Nashville Phoenix San Jose

Amarillo Dallas (Love Field) Jackson New Orleans Pittsburgh Seattle/Tacoma

Austin Denver Jacksonville Norfolk Portland Spokane

Baltimore/Washington Detroit (Metro) Kansas City North Virginia (Dulles) Providence Tampa

Birmingham El Paso Las Vegas Oakland Raleigh-Durham Tucson

Boise Ft. Lauderdale/Hollywood Little Rock Oklahoma City Reno Tulsa

Buffalo Ft. Myers/Naples Los Angeles (LAX) Omaha Sacramento West Palm Beach

BurbankHarlingen/South Padre

Island Louisville Ontario St. Louis  

Chicago (Midway) Hartford/Springfield Lubbock Orange County Salt Lake City  

Cleveland Houston (Hobby) Manchester Orlando San Antonio  

Southwest looked for city pairs that could generate substantial amounts of both business and leisure traffic

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Route Map

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Strategy Implementation

No meals

No seat assignments

Passenger related

departure

High aircraft utilisation

Limited passenger services

No baggage transfers

Short haul & point to point

travel

Low ticket prices

No connection with other

airlines

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Building Capable Organization

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•Staffing the Organization

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•Core Competencies and Competitive Capabilities

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•Matching the Organization Structure to Strategy

Southwest Capability

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Staffing ‘Employee come first and Customers come second’

Putting Together a Strong Management Team• 80 to 90% Southwest’s supervisory positions: filled

internally• Development of leadership and communication skills

for low level management • Up and Coming Leaders received training in every

departments over sixth-month period

Recruiting, Screening, and Hiring• Hired employee for attitude and trained them for

skills• Analyzed each job category to determine the specific

behaviors, knowledge, and motivations that job holders needed and with the desired traits

• A trait common to all job categories was teamwork

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Development of Core Competencies &Competitive Capabilities

One type of aircraft

Reservations and purchase tickets at the company’s website

No congested airports, focus on major metropolitan areas and in medium-sized cities

Point-to-point flights

No reserved seat

No first class section, no fancy clubs at terminal and no meals

No baggage transfer services

Conversion from cloth to leather seats

Low Operating cost

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Development of Core Competencies &Competitive Capabilities

Make sure Passengers had a positive, fun flying experience

Happy face & fun loving attitude to passengers

Complaint letters as learning opportunities for employees and reasons for improvements

Focus on Customer and Customer Satisfaction

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Development of Core Competencies &Competitive Capabilities

Setting the external conditions and Strategy

change

Expansion into new

geographic markets

Adding flights in

areas where rivals cutting back service

Attractive frequent

flyer program

Adding longer

nonstop flights to the route system

Strong emphasis on safety, high-

quality maintenance, and reliable operations

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Development of Core Competencies &Competitive Capabilities

Training and retraining employees (to maintain skill-based

competencies)

Designed and conducted by Southwest’s

University for People

Courses for new recruits ,

employees, and leadership

training program (for new and experienced managers)

Leadership course :management style based on coaching and

courage, not supervising or enforcing rules and regulations

Courses: safety, communications,

stress management,

career development, performance

appraisal, decision making,

and employee relations

Orientation program: videos on Southwest’s

history, overview of the airline industry, and competitive

challenges that Southwest faced, and introduction

to Southwest culture and

management practices

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Matching the Organisation structure

Designing an organization structure that facilitates good strategy execution

•Only four layers of management between a frontline supervisor and the CEO

Decision how much decision making authority to push down to lower-level managers and front line employees

•Decentralised organisation structures•Employee-led initiatives were common•Employees have substantial authority and decision-making power•Candid meetings of frontline employees and managers•Managers 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, listening to employees and being responsive to their concerns.

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SWOT Analysis

Strengths

- Low price tickets - Low operating costs

- Good customer service- High frequency service

- Productive pilots & ground crews

Weaknesses

- Doesn’t serve international flights

- One type of airplane

Opportunities

- Ability to add scheduled flights

- Low prices enable market share growth

Threats

- Big companies emulate Southwest's low cost model

- Difficulty securing new gates at existing airports

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Five Forces Analysis

Rivalry among

Competitor(HIGH)

Substitute Products

[train, bus](LOW)

Customer’s bargaining

power(MEDIUM)

Potential New Entrants (LOW)

Supplier’s bargaining

power (LOW)

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The Blue Ocean way

Made competition irrelevant

Looked across alternative industries

Looked beyond existing demands

Uncontested market space

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Four actions framework

A new value curve

Reduce(what factors should be used below the industry standard)

Create (what factors should

be created which industry has never

offered)

Raise(what factors should be raised well above

the industry standard)

Eliminate(which factors the industry take for

granted which the industry should

eliminate)

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The eliminate-raise-create-reduce Grid

Eliminate

•Hub connectivity

•Seating class choices

Raise

- Hub connectivity

- Seating class choices

Reduce

- Lounge- Meals- Price

Create

- Frequent point-to-point departure

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Key success factors

•Created employee ownership

•Post 9/11 went ahead with the employees’ payroll

Employee First

•For price sensitive customers

Low fares

•33 US States

•65 Cities

More destinations

Operational efficiency

Financial

Safety

Transition Plans

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Key People

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Other airlines

Conclusion

Southwest

Numbers

Culture

Scheduling

Strategy

Culture

Scheduling

Strategy

Numbers

Southwest build numbers on its culture whereas other airlines have their culture shaped by numbers