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Southwest Airlines Case Study

1671 words - 7 pages

Case #20 – Southwest Airlines Marisa Melchiorre Amber Harrison Emeka Onyia Company History  1966 Rollin King approached Herb Kelleher’s law office with plan to start low-cost/lowfare airline  Ran into legal problems, rival airlines in Texas did everything they could to block new airline  Herb Kelleher was determined to start up airline  1971 – Lamar Muse Southwest CEO, background in industry to get it up and starting  Raised $7 million in capital and private investors to purchase planes and equipment  Flights started between Dallas, San Antonio, and Houston known as the “Golden Triangle”  First ever annual profit in 1973  2010 – market share leader in domestic air travel in US, ...view middle of the document...

Their ability to succeed by their winning strategy is proven in their capability of creating a profit year after year despite a downturn in the economy where as their rivals and the industry as a whole suffered drastically. The US airline industry lost billions of dollars in profit from 1980-2009 yet Southwest reported a profit every year since 1973 due to their strategy of low operating costs, low fares, and customer pleasing service. What is appealing about their strategy is their determination and keeping their promise of keeping their costs the lowest across the industry and finding other ways to make up for the lost cost in low prices

which has been crafted since the start of Southwest. Herb Kelleher’s determined and outgoing personality is how the strategy was crafted and still how it remains today. Their strong values in their corporate culture are reflected through their customer service and their prices.

3. What are the key policies, procedures, operating practices, and core values underlying Southwest’s efforts to implement and execute its low-cost/no frills strategy? The low-cost/no frills strategy is their ability to make travel affordable at a low cost. The fare structure is simple and easily displayed and accessible on their website. The lowest fares were usually nonrefundable but could be applied to future travel on Southwest Airlines with a change fee which many other competitors such as US Airlines charges customers between $100-175 dollars for flight changes. One of the biggest advantages that Southwest offers is the “Bags Fly Free” which allowed for bags to fly free and no additional costs such as fuel surcharge, fees for travels awards, or fees for buying a ticket in person like many of their other competitors implemented to make up for the increasing costs of jet fuel. Southwest also initiated special fare promotions when advance reservations were weak for particular weeks or times of the day to fill up planes and avoid losing revenues and covering costs. This strategy combined with the “Bags Fly Free” resulted in Southwest having record load factoring of filling up all seats on the aircrafts. By filling up available space and the volume of passenger traffic helped to compensate for the low fares they were able to offer to customers. Southwest also concentrated on their route system on flights between pairs of cities 150 to 700 miles apart that handled enough passenger traffic to offer a sizable number of daily flights. They also implemented a quick turnover of flights with boarding times ranging from 15-30 minutes to create more daily flights. Other ways of execution of their low-cost/no frills strategy include:  The company operates on only one type of aircraft (Boeing 737) to minimize the size of spare parts inventories, simplify training of maintenance and repair, and improve proficiency and speed of routines.  Southwest was the first major airline to introduce ticketless travel and allowed customers to make...

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