Southwest Airlines Case Analysis
Southwest Airlines
Executive Summary
“The U.S. airline industry had lost money in 14 of the 28 years from 1980 through 2007, with combined annual losses exceeding combined annual profits by $15 billion. Yet in July 2008, Southwest reported record quarterly revenues, its 69th consecutive quarter of profitability, rising passenger traffic on its flights, and a record load factor.”5 With a brilliant strategy of ‘low cost/low fare/no frills’ Rollin King, along with Herb Kelleher, launched the most surprising success story in airline history. In 1966, King had an idea. “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.”5
Southwest airlines started by only flying between Dallas, Houston and San Antonio. But, before they even began, major airline carriers, threatened by the competition, held Southwest’s arrival into the market until 1971. Then with a small initial public offering, private investors and special deals made with Boeing, Southwest was finally off the ground.
Even with legal and financial problems in the beginning, “morale and enthusiasm remained high; company personnel displayed can-do attitudes and adeptness at getting by on whatever resources were available.”5 The key to success in the airline industry was not only low prices but market visibility. Southwest was willing to take risks to gain that visibility by employing gorgeous flight hostesses who wore colorful hot pants and knee-high boots which attracted customers, free alcohol to any ticketholder over 21 and their wildly popular “LUV” campaign. “Southwest reported its first-ever annual profit in 1973.”5
1981- 27 planes, $270 million in revenues, 2100 employees, 14 destination cities
1984- Ranked #1 in customer service for the 4th straight year
1988- 1st airline to win the Triple Crown
Executive Summary
“The U.S. airline industry had lost money in 14 of the 28 years from 1980 through 2007, with combined annual losses exceeding combined annual profits by $15 billion. Yet in July 2008, Southwest reported record quarterly revenues, its 69th consecutive quarter of profitability, rising passenger traffic on its flights, and a record load factor.”5 With a brilliant strategy of ‘low cost/low fare/no frills’ Rollin King, along with Herb Kelleher, launched the most surprising success story in airline history. In 1966, King had an idea. “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.”5
Southwest airlines started by only flying between Dallas, Houston and San Antonio. But, before they even began, major airline carriers, threatened by the competition, held Southwest’s arrival into the market until 1971. Then with a small initial public offering, private investors and special deals made with Boeing, Southwest was finally off the ground.
Even with legal and financial problems in the beginning, “morale and enthusiasm remained high; company personnel displayed can-do attitudes and adeptness at getting by on whatever resources were available.”5 The key to success in the airline industry was not only low prices but market visibility. Southwest was willing to take risks to gain that visibility by employing gorgeous flight hostesses who wore colorful hot pants and knee-high boots which attracted customers, free alcohol to any ticketholder over 21 and their wildly popular “LUV” campaign. “Southwest reported its first-ever annual profit in 1973.”5
1981- 27 planes, $270 million in revenues, 2100 employees, 14 destination cities
1984- Ranked #1 in customer service for the 4th straight year
1988- 1st airline to win the Triple Crown