Southwest Airlines - Key Points for

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Iqra University Gulshan Campus
M. Phil: Strategic HRM
Presentation Topic: Southwest Airlines: A Case Study Linking Employee Needs Satisfaction and Organizational Capabilities to Competitive Advantage written by Roger Hallowell Reference:Human Resource Management, 1996, Vol. 35(4), p. 513-534 Presented by:M. Shahnawaz Adil

Dated:Tuesday, March 01, 2011
Course Facilitator:Mr. Ahsan Durrani

Abstract (as written by Roger Hallowell):
This article analyzes the sources of Southwest Airlines’ competitive advantage using an integrative approach, employing economic analysis tools to illustrate the roles of commitment and organizational capabilities in delivering competitive advantage at Southwest. A framework is presented illustrating that much of the value Southwest generates is: (1) created through employee needs satisfaction;

(2) converted to customer and shareholder value via organizational capabilities; and (3) captured by the firm as a result of its cost advantage and superior service. This three-part framework may be applicable to other labor-dependent service organizations.

Southwest’s Major Courses of Actions(Southwest Airlines, here-in-after called, ‘SWA’) 1. SWA developed its industry niche and (contrary to many airlines) stuck to it. 2. The concept was to offer frequent, no-frills, low-fare service in short-haul markets using a point-to-point system rather than a hub-and-spoke system: i. That meant about 10 daily flights between two cities, with no in-flight meals (SWA served only drinks and snacks), ii. And a single class of open seating.

3. SWA was not listed on a computer reservation system so travelers or travel agents had to call SWA’s own ticket agents to get on a flight. 4. SWA had a frequent flier program that was based on number of trips, not mileage. 5. The Company had one of the best overall customer service records and had been given very high ratings on the overall customer satisfaction index. 6. SWA was able to keep cost down mainly because it was a no-frills carrier offering limited service. 7. SWA had the lowest cost structure in the industry, with expenses at 5.8 cents per available seat-mile, compared with an industry average of 7.5 cents. 8. Operating the same type of plane (Boeing 737 on every route) helped to keep maintenance cost at a minimum. 9. Boarding passes were reusable plastic cards, and to save boarding time, there was no assigned seating. 10. To save investment in labor and equipment, SWA did not even transfer baggage to other carriers. That was the passengers’ responsibility. 11. Furthermore, having the lowest costs in the industry allowed SWA to charge low prices. Its entry into the St. Louis-Kansas City (distance = 240 miles or 386.242 km) market provided a good example: SWA offered a 21-day advance purchase fare of $29 one way, and an unrestricted fare of $59 one way. Prior to SWA entry into the market, the lowest unrestricted coach fare available on the above route was $156 ($97 more) one way, offered by Air Midwest. 12. SWA CEO - Kelleher’s zaniness permeated SWA, especially in promotional campaigns. For example, in 1988, for the opening of Sea World in San Antonio, Kelleher had one of the 737s painted to look like a killer whale. 13. On a flight to Austin in the winter of 1988, flight attendants were dressed as reindeer and elves, and the pilot sang Christmas carols over the loudspeaker system while gently rocking the plane. 14. On board antics have ranged from the zany to the mildly outrageous. ‘As soon as y’all set both cheeks on your seats, we can get this ‘ol bird moving’ was one quoted cockpit announcement. Such examples illustrate what Kelleher meant when he said flying Southwest was supposed to be fun. 15. Kelleher acknowledge that SWA had not added a great many routes to its schedule since 1981, when he became CEO. ‘But we attack a city with a lot of flights, which is another form...
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