Southwest Airlines Corporation
In 2001, Southwest Airlines Corporation’s (Southwest) year-end results marked 29 consecutive years of profitability. Southwest, which was incorporated in Texas, commenced customer service on June 18, 1971, with three Boeing 737 aircraft serving three Texas cities: Dallas, Houston, and San Antonio. The company grew to become the fourth largest U.S. airline (in terms of domestic customers carried). In 2002, it boasted a fleet of 366 Boeing 737 jets. Southwest was the United States’ only major short-haul, low-fare, high-frequency, point-to-point carrier. (Refer to Exhibit 1 for five-year financial highlights.) Southwest had the lowest operating-cost ...view middle of the document...
Instead, its approach was shorthaul (average flight time was 55 minutes) and point-to-point (e.g., Dallas to Houston, Los Angeles to Phoenix). Southwest had no assigned seats, paid its crews by trip, and used
This case was written by Professor Vijay Govindarajan and Julie B. Lang T’93 of the Tuck School of Business at Dartmouth. The case was based on research sponsored by the William F. Achtmeyer Center for Global Leadership. It was written for class discussion and not to illustrate effective or ineffective management practices. Version: 7/09/2002. Sources: www.southwest.com; What Management Is: How it works and why it’s everyone’s business by Joan Magretta, ©2002 The Free Press. NUTS! Southwest Airlines’ Crazy Recipe for Business and Personal Success by Kevin Freiberg and Jackie Freiberg ©1996 Bard Press, Inc.; Southwest Aims East (Condensed), case study written by Steven Sullivan under the supervision of Paul W. Harris. University of Virginia Darden School. Case no. UVA-M-0464. “The Talent Myth,” The New Yorker, July 22, 2002. © 2002 Trustees of Dartmouth College. All rights reserved. To order additional copies, please call 603-646-0898.
less congested airports (e.g., Baltimore instead of Washington’s Dulles or Reagan; Manchester, N.H., instead of Boston, Mass.). Forty-six percent of Southwest’s passenger revenue was generated by online bookings via southwest.com. In 2002, the cost per booking via the Internet was about $1, compared to the cost per booking of $6-$8 through a travel agent. Terra Lycos, the largest global Internet network, reported that Southwest received 50 percent more searches than any other airline. Southwest pilots were the only pilots of a major U.S. airline who did not belong to a national union. National union rules limited the number of hours pilots could fly. But Southwest’s pilots were unionized independently, allowing them to fly far more hours than pilots at other airlines. Other workers at Southwest were nationally unionized, but their contracts were flexible enough to allow them to jump in and help out, regardless of the task at hand. From the time a plane landed until it was ready for takeoff took approximately 20 minutes at Southwest, and required a ground crew of four plus two people at the gate. By comparison, turnaround time at United Airlines was closer to 35 minutes and required a ground crew of 12 plus three gate agents. CEO Herb Kelleher, who founded Southwest, was deeply committed to a philosophy of putting employees first. “If they’re happy, satisfied, dedicated, and energetic, they’ll take real good care of the customers. When the customers are happy, they come back. And that makes the shareholders happy.”1 Southwest’s walls were filled with photographs of its employees. More than 1,000 married couples (2,000 employees) worked for the airline. The average age of a Southwest employee was 34 years. Southwest employees...