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Business Culture Essay

1337 words - 6 pages

Diego Rodriguez, Deema Alomar, Seungyeon lee
10/05/09
Case Analysis Southwest Airline final draft
Jennifer Uhler
BPE reading, writing research

Background Summary

Southwest Airlines based in Dallas was founded in 1967 by Rollin King and Herb Kelleher. It is one of the major domestic airliners which provides carrier and transportation service. This company has 35,499 employees and it runs over 500 Boeing 737 aircraft in 67 cities in the US. Southwest’s principal values are:
Providing low-fare and short haul service.
Offering the highest quality of customer service.
Putting a lot of importance on the fair treatment to its customers.
Building friendly relationship between ...view middle of the document...

Southwest Airlines main competitors are: Continental Airlines, USAir ways, Delta, United airlines, and American Airlines. As you can see in the table below, the current days have been really challenging for the industry. However Southwest has been able to increase its operating revenues.
 
Operating revenues
 
Company
2 Q 2001
2Q 2000
Dif
Southwest
1,554
1,461
93
USAirways
2,493
2,433
60
Delta
3,776
4,469
(693)
United Airlines
4,658
5,109
(451)
ref. Rapid rewards at Southwest Airlines

Southwest decided to go public in 1977 with the ticker symbol LUV. The company gained $11,023 million in 2008, and today its stock price reaches $9.83. Its strategy as an egalitarian company has let the company achieve success. However some frequent passengers have raised some questions about the policy of avoiding preferential treatment for its loyal customers.

Major problem
The Southwest Airlines major problem is the threat to lose some of its frequent customers. The case illustrates two opposite kinds of frequent passengers:

The first one is William Mark, who loves almost everything that Southwest provides such as: the opportunity to come earlier and have a great seat, the absence of meals, and the ticket prices.
The other one is Liz Bast, who loves the policy of using minor league airports, but has complaints related to the ways of seat assignment, the rules about upgrading restricted tickets, and she wishes to have preferential treatment, especially because she flies more than 100.000 miles per year.
The customers like Liz Bast might be looking for another airliner company. Therefore, Southwest needs to figure out one strategy which helps to avoid this problem.

Contributing Factors:
The threat to lose some of Southwest’s frequent customers is caused by five factors:
Recheck-in baggage: Passengers with connected flight who are going to switch to another airline have to pick up their checked baggage and recheck-in with the next airline.
No assigned seats for passengers: Southwest used first-come first-served system in seats assignment, which means people who arrived first will get the better seats. This is an issue because passengers might easily change their preferences and fly with other airlines. For example, Liz Bast is a frequent customer of Southwest Airlines, but because she is always busy she comes late to her flights and the company cannot offer her the seat she wanted. Liz’s problem will be solved if she could book a specific seat and this service is not valid at Southwest Airlines.
Rewards count on trips number: there is no credit given to passengers on how many miles they flew, but free flights are offered according to the number of trips taken. Therefore, customers could choose Southwest Airlines for only short flights because the length of flight is not a factor in the company reward...

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