Southwest Airlines Act - II

An Airline in Trouble?

A Presentation by Group-3

Team Members of “Group - 3”

• Abhishek Mishra (03 A)

• Bhoopendra Tiwari (13 A)

• Javed Qureshi (23 A)

• Prashant Mishra (33 A)

• Rohan Tondon (43 A)

• Sushant Kumar (53 A)

Features of Low Cost Airlines

• Operate in only one kind of aircraft.

• Standard treatment for all passengers.

• Not serving of meals or drinks.

• Faster turnaround of the planes.

• Operates with minimum employees possible.

• Sell major part of tickets on Internet.

Southwest AirlinesA Brief Overview

• In 1966, Herb Kelleher along with Rollin King conceptualized the idea of low cost airline service.

• After battling with initial legal problems, started operations in 1971.

• Started its operation in Texas State. • In 1973, posted first profit year.• In 1977, the airline stock traded in NYSE.• It remained a benchmark for low cost airlines

and a successful brand in US.

Vision of Southwest Airline

• To provide the best service and lowest fares to the short haul, frequent-flying, point-to-point, non-interlining traveler.

Mission of Southwest Airline

• 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.

Southwest’s Success Story

• Since its inception, it posted profit for continuous for 31 years up till 2003.

• Despite,being a low cost fair airline, it became fifth largest airline in terms of number of passengers in US.

• After, 9/11 attack in US,it was only major airline, to remain profitable.

• Main reason to remain successful was its culture helping to cut down its unnecessary costs.

Kehellher’s role

• He was a dynamic and charismatic leader for the airline.

• Developed employee oriented culture.

• He resolved issues even after his resignation from the CEO post.

Troubles Surging Ahead

• Labor Problems.

• Customer Relations.

• Rising Costs.

• Looming Competition.

• Filling in Kehellher’s shoes.

Labor Problems

• Remain “one of the best companies” to work.• Relationship between management and

employees were cordial.• However, in 2002, flight attendant’s union

protested against pay and working conditions.– New contract.– But it increased operating costs.

Customer Relations

• In the wake of securities after 9/11, first come first serve service was aborted, creating a bad image of airline.

• Less staffed airport system also resulted into difficulties in getting tickets.

Rising Costs

• Competitive Advantage - Cost at minimum level and faster turnover.

• Labor’s costs, rising fuel prices.

• In response, airline decided to shift its service over more profitable routes.

Looming Competition

• New entrants in industry - JetBlue, AirTran - providing better services.

• The gap between low cost airlines and full service airlines was closing down resulting into increase in competition.

Imitating Kehellher’s Legacy

• Difficult to match iconic image.

• Resulting in less cohesion between the employees.

PEST Analysis

• Political & Legal -– Strict safety regulations post 9/11

• Economical -– Rising price of ATF.

PEST Airlines

• Social - – Dissatisfied customer with strict safety

regulations.

• Technological -– Greater use of Internet for ticket selling.

SWOT Analysis

• Strength - – Brand Image– Experience of providing best low-cost airline

service

• Weakness - – Loss of charismatic and dynamic leader– Difference of top-level management and

employees union

SWOT Analysis

• Opportunities -– Can look for market other than US.– Can find way to provide better service at lower

cost.

• Threats - – Increasing competition.– Increasing costs.– Strict security regulation.

Porter’s 5 Forces Model

• Threat of New Entrants - Low– Requirement of high capital investment.– High brand image to overcome.

• Power of Buyer - High – Low cost of switching.

Porter’s 5 Forces Model

• Power of Supplier - Low to Med– Low power of airplanes provider.– High power of ATF provider.– Planes landing not on the main airports.

• Threat of Substitutes - Med– Rail/roads services.

• Extent of Competitive Rivalry - High– Many competitors providing better services at lower

costs.

Recommendations

• Help of Kehellher in improvising the image of Kelly in front of employees.

• Grooming of “potential” candidate by Kehellher.

• Expand service out of US.

THANK YOU