Southwest Airlines (A)
Stanford Graduate School of Business Case Study HR-1A (1995)
This case is about Ann Rhoades, vice president of people for Southwest Airlines (LUV). She is preparing for a meeting with the top executives of the airlines to discuss the airline’s competitive position in the light of United’s and Continental’s recent engagement in the low fare market after their huge losses over the last 12 months, whilst LUV could nearly double its share. On the agenda is an overview of the current position in the light of new competition and the resulting threats and opportunities. Background
LUV started flying out of Love Field in Dallas (hence, the acronym, also its stock ticker symbol) in 1971. Before its first flight, LUV had to fight fierce battles with the big carriers which resulted in a law amendment, allowing direct flights to Love Field only from within Texas and its 4 contiguous states (“Wright Amendment”), which meant that all long distant flights needed separate ticket purchases. Initially, LUV gained attention by putting its flight attendants in hot pants and an advertising campaign themed around love. Over the years, LUV became the leading airline in passenger boarding in 1993 and served 10 cities in the state with more than 70 % average market share for those city pairs. From the beginning, LUV maintained the same strategy and operating style, concentrating on flying to underutilized airports close to city centers. It uses only fuel efficient 737s (now over 200 planes) and only serves point-to-point routes without a central hub and with an average flight time of 65 minutes. In 1993, 80 % of its customer flew non-stop to their final destination and any delay caused by connecting flights could be avoided, leading to high on-time percentage. It was competing less with other airlines as with surface transportation....