Southwest Airlines Case

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Southwest Airlines 2002:
An Industry Under Siege

Case Study
“Discussion Format”

MGMT 5113

Team 7

Dag Yemenu
Sachin Gupta
Michelle May
Shaun Evans

November 22nd 2003

Problem Overview
Southwest Airlines has employed unique operational strategies, incorporating industry revolutionizing methodologies, while developing and sustaining a strong corporate culture that has allowed Southwest Airlines to be profitable for a phenomenal 30 straight years and capture the Airline Industry Service Triple Crown five years in a row from 1992 to 1996. Southwest Airlines own success threatens whether it can maintain the strong corporate culture responsible for its prosperity while growing and adding additional routes. More pressing than the long-term strategy however were the terrorist attacks of September 11, 2001 that created uncertainty in the general environment of US economic trends and the task environment coping with new government security regulations that challenges whether the business model Southwest Airlines was founded on needs to adapt to continue to provide profits to stockholders. Southwest Airlines Organizational Structure & Culture

Southwest Airlines began in concept in 1967 and took its first flights in 1971 connecting three underserved metros in Texas: Houston, San Antonio, and Dallas. Founding members Rollin King and Herb Kelleher pursued a strategy that focused mainly on cost-leadership (goal to make flight less expensive than driving between destination points) and niche strategies (business and pleasure fliers with simple itineraries and short trips) while also offering differentiation (high frequency departures to destinations via point-to-point flights) that did not demand a premium from the customer. The founding strategy drove decisions that resulted in Southwest revolutionizing the industry. Although the aviation industry is considered highly technological, much of Southwest’s organizational design dimensions reflect conscious choices to reduce complexity, partially as a result of regulatory constraints the company faced early in its existence. Southwest was first limited to intrastate routes when it began and following deregulation of the industry in 1978 Southwest was only allowed to fly directly to adjoining states from it base at Love Field in Dallas. Southwest chose to standardize on one type of jet airliner, the Boeing 737. The choice of the 737 allowed for routinization of parts ordering, inventory control, maintenance tasks, and training, significantly reducing expenses. Southwest also chose not to incorporate the hub-and-spoke system intended to increase available seat utilization. The point-to-point route system allowed Southwest to turnaround flights much more quickly gaining greater seat utilization. Other factors reducing complexity included the decision not to serve meals and limiting checked-in baggage on short flights. Early job descriptions in union contracts were not highly formalized; ground crews, flight crews, and boarding personnel were not required to adhere to subdivision of tasks and instead were asked “to do whatever else might be needed to perform the service” to get a flight off. Agents, or liaisons, with a great deal of autonomy and wide variety of resources to bear on the flight servicing process were incorporated also. Southwest broke away from the conventional boarding system of pre-assigned seats using colorful boarding passes given to patrons on a first-come, first-serve basis encouraging early arrival of customers and preventing mediation of an accidental double assignment to a seat. In yet another innovation, after being kicked out of all the major ticketing and reservation systems except Sabre in 1994, Southwest created the first “ticketless” travel program and leveraged internet technology to become the first airline to establish a home page to sell tickets on the Internet. Currently Southwest Airlines management is organized as a team...
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