Southwest Airlines Case Study
1. Company Overview
Southwest airlines began in 1967 as a low-cost, low-fare, customer-friendly air service shuttling passengers between San Antonio, Dallas and Houston, Texas. Founded by Rollin King and Herb Kelleher, Southwest moved from a small commuter transport of 18 round trip flights within Texas to a bustling market share leader providing more domestic flights than any other airline within the industry. Within two years of its first flight the airline was able to report profits in a trend that has continued since 1973, despite industry downturns, economic recessions and intense rivalry attacks. No longer the quirky underdog, Southwest has established itself as the low-fare, low-cost industry leader. 2. Situation Analysis :
Strategic Position: At their core Southwest Airlines (SWA) is truly a mission driven company driven by their triple bottom line – Performance, People, Planet. Through there website they communicate what is most important to them – their employees and their customers. Southwest Mission
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.
To Our Employees
We are 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.
Financial Resources: Since Herb Kelleher began serving as CEO in 1981 Southwest Airline’s has seen their financial growth take off and they have not looked back. * In 1981 they had 27 planes flying and $270 million in revenues * 2001 they flew 350 planes and had $5.6 billion in revenue * By 2009, 537 planes were flying and they had $10.4 billion in revenue * Despite mergers and acquisitions that were forming around in the airline industry, SWA financials have remained strong. * Currently has $3.3 billion in cash and short-term investments, and an available $600 million revolving credit line (Schlangenstein, Hughes, 2010). * Limited control over fuel and labor costs has their impacted their low-cost reputation * Salaries, wages, and benefits constituted approximately 29 percent of their operating cost in 2011 (SWA, 2010). * Jet fuel and oil constituted approximately 38 percent of the SWA’s operating expenses during 2011 (SWA, 2010). * Acquisition of AirTran Holdings Inc. for $1.4 billion in 2010
Operating Profit Margin
Net Profit Margin
Return on invested capital
Personnel and People Management: Southwest has never been shy about their “employees come first” motto. They reason that if you keep employees happy, they will keep customers happy. CEO, Gary Kelly, believes SWA’s people are their single greatest strength and their most enduring long term competitive advantage. They intentionally incorporate people management practices into their business model. * When hiring they identify attitudes rather than skills
* Rigorous Peer hiring process; New hires are expected to live the Southwest Way: Warrior Spirit, Servant’s Heart, Fun-LUVing Attitude * People-oriented jobs require extroverted people who have a good sense of humor * HR department is referred to as People and Leadership Development Department * Teamwork, unselfishness, and initiative are common traits required of all job categories * SWA engages in extensive employee training (over 720,000 hours in 2009) through their “Ever Customer Matters” course. * SWA has a no-lay off policy
* Employee compensation packages are...
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