Southwest Airlines Case Study in 2010

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Instructor

Case:
Southwest Airlines in 2010
Dr. Deb Sircar
University of Greenwich
Business School

http://create.mcgraw-hill.com
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This McGraw-Hill Create text may include materials submitted to McGraw-Hill for publication by the instructor of this course. The instructor is solely responsible for the editorial content of such materials. Instructors retain copyright of these additional materials. ISBN-10: 1121643477

ISBN-13: 9781121643475

Contents
1. Southwest Airlines in 2010: Culture, Values, and Operating Practices 1

iii

Credits
1. Southwest Airlines in 2010: Culture, Values, and Operating Practices: Essentials of Strategic Management, Third Edition 1

iv

Confirming Pages 1

Southwest Airlines in 2010: Culture, Values, and Operating Practices

Case

13

SOUTHWEST AIRLINES IN 2010: CULTURE,
VALUES, AND OPERATING PRACTICES
Arthur A. Thompson

John E. Gamble

The University of Alabama

University of South Alabama

In 2010, Southwest Airlines was the market share leader in domestic air travel in the United States; it transported more passengers
from U.S. airports to U.S. destinations than
any other airline, and it offered more regularly
scheduled domestic flights than any other airline. Southwest also had the enviable distinction of being the only major U.S. air carrier that was consistently profitable. The U.S. airline
industry had lost money in 15 of the 30 years
from 1980 through 2009, with combined annual
losses exceeding combined annual profits by
$43.2 billion. Yet Southwest had reported a
profit every year since 1973, chiefly because of
its zealous pursuit of low operating costs, low
fares, and customer-pleasing service.
From humble beginnings as a quirky but
scrappy underdog that flew mainly to secondary airports (rather than high-traffic airports like Chicago O’Hare, Dallas–Fort Worth, Atlanta Hartsfield, and New York’s LaGuardia
and Kennedy airports), Southwest had climbed
up through the industry ranks to become a
major competitive force in the domestic segment of the U.S. airline industry. It had weathered industry downturns, dramatic increases in the prices of jet fuel, cataclysmic falloffs
in airline traffic due to terrorist attacks and
economy-wide recessions, and fare wars and
other attempts by rivals to undercut its business, all the while adding more and more flights to more and more airports. Since 2000,
the number of passengers flying Southwest

had increased by more than 28 million annually,
whereas passenger traffic on domestic routes
had declined at such carriers as American
Airlines, Delta, Continental, United, and US
Airways—see Exhibit 1.

COMPANY BACKGROUND
In late 1966, Rollin King, a San Antonio entrepreneur who owned a small commuter air service, marched into Herb Kelleher’s law office with a plan to start a low-cost/low-fare airline
that would shuttle passengers between San
Antonio, Dallas, and Houston.1 Over the years,
King had heard many Texas businesspeople
complain about the length of time that it took to
drive between the three cities and the expense of
flying the airlines currently serving these cities.
His business concept for the airline was simple:
attract passengers by flying convenient schedules, get passengers to their destination on time, make sure they have a good experience, and
charge fares competitive with travel by automobile. Kelleher, skeptical that King’s business idea was viable, dug into the possibilities during the
next few weeks and concluded that a new airline
was feasible; he agreed to handle the necessary
legal work and...
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