Southwest Airlines 2002: An Industry Under Seige Case Study on Southwest Airlines 2002: An Industry Under Seige GROUP NO-06 Ritesh Chhadwa – 3 Gopal Kadkade - 12 Dipesh Kotecha - 15 Darshan Kurlawala -16 Jayesh Name - 28 Santosh Vishwakarma - 55

Topics Covered   The Southwest Story The Founding Strategy Competitive Response Southwest’s Takeoff   Strategy   Leadership, Values, and Culture   Organization   The Impacts of the Events of 9/11 Immediate Responses Heightened Security and Regulations Industry Bailout and Taxation New Competitive Position Labour Relations   Short-Term Challenges: Operating Procedures   Long-Term Challenges: Growth Strategies   A Late October Visit to Southwest Airlines Headquarters

The Southwest Story:  The Founding Strategy Founded by Rollin King and Herb Kelleher in 1967Founded by Rollin King and Herb Kelleher in 1967 Need for low cost airlinesNeed for low cost airlines Comparison to driving a vehicle over the same routeComparison to driving a vehicle over the same route Love ThemeLove Theme Point-to-Point servicePoint-to-Point service Turnaround time minimized to 15 minsTurnaround time minimized to 15 mins Fun during FlightsFun during Flights

The MAP

The Southwest Story:  Competitive Response Enjoin issuance of Southwest’s intrastate operating certificateEnjoin issuance of Southwest’s intrastate operating certificate Abandon Love FieldAbandon Love Field Low-price fare “sales”Low-price fare “sales” 60-day “half price sale” by Braniff International60-day “half price sale” by Braniff International Chivas Regal’s biggest distributorsChivas Regal’s biggest distributors

The Southwest Story:  Southwest’s Takeoff Airline Deregulation Act in 1978Airline Deregulation Act in 1978 ”Manage in good times in order to survive in bad times””Manage in good times in order to survive in bad times” Acquisitions of Morris Air and Muse AirAcquisitions of Morris Air and Muse Air “The Southwest Effect”“The Southwest Effect” NYSE trading symbol “LUV”NYSE trading symbol “LUV” Replication of service by People ExpressReplication of service by People Express Cultural devotion to the internal resourceCultural devotion to the internal resource

Market Share

Strategy:  Non-adaptation of Hub-and-spoke route system  Point-to-point route system  Turnaround time strategy: Absence of meals on flightAbsence of meals on flight Limited amount of checked luggage on aircraftLimited amount of checked luggage on aircraft Near-uniform configurationNear-uniform configuration Team-oriented ApproachTeam-oriented Approach High-speed boarding processHigh-speed boarding process “Hands-off” of flights“Hands-off” of flights Utilization of agentsUtilization of agents  No fixed assignment of seats  Incentive for an early arrival at the gate  Last-minute arrivals  Maverick in ticketing processes  Own-ticketing distribution system  “The world’s first frequent-flier program”

Leadership, Values, and Culture:  Leadership Day-to-day operating responsibilities byDay-to-day operating responsibilities by  Jim Parker (Former VP – General Counsel) now CEO  Barrett (Former VP – Customers) now President and COO Anchoring the leadership teamAnchoring the leadership team Kelleher positioned as ChairmanKelleher positioned as Chairman  Public Role  Responsibilities for growth strategies, government and airline industry relations

Hierarchy Herb Kelleher Chairman Jim Parker Vice Chairman & CEO Colleen Barrett President and CEO Jim Wemberly Executive VP & COO Donna Conover Executive VP – Customer Service Gary Kelly Executive VP - CFO Airport Technology Strategies Corporate Project Management Office Investor Relations Purchasing Systems Keith Taylor VP – Revenue Management Gary Kelly Executive VP - CFO Finance and Fuel Aspects Ron Ricks VP - Governmental Affairs Pete McGlade VP - Schedule Planning Marketing Aspects of the Schedule

Leadership, Values, and Culture:  Values and Culture “The Basic Principle”“The Basic Principle”  Focus on the situation  Maintain self-confidence and self-esteem  Maintain constructive relationships  Take Initiatives  Lead by example Culture CommitteeCulture Committee Partnering with UnionsPartnering with Unions Joint problem SolvingJoint problem Solving

Organization:  Cross-functional decisions  Operating agents concept  Group Interviews  Total Compensation

The Impacts of the Events of 9/11:  Immediate Responses No Lay-offs or Cut-back in flightsNo Lay-offs or Cut-back in flights Security IssuesSecurity Issues More customer service agentsMore customer service agents Patriotism and ResiliencyPatriotism and Resiliency

 Heightened Security and Regulation Awake of Transportation Security Administration (TSA)Awake of Transportation Security Administration (TSA) Daily call on “Today’s directive” with all Southwest stationsDaily call on “Today’s directive” with all Southwest stations Maximum passengers screened comparativelyMaximum passengers screened comparatively Abandoning of plastic boarding passesAbandoning of plastic boarding passes The Impacts of the Events of 9/11:

 New Competitive Position Increase schedules and employment post 9/11Increase schedules and employment post 9/11 Substantial decline in earnings due to lower ticket prices, higher costs and new taxesSubstantial decline in earnings due to lower ticket prices, higher costs and new taxes The Impacts of the Events of 9/11:

 Labor Relations Labor contract negotiationsLabor contract negotiations Superior relations with labour comparativelySuperior relations with labour comparatively “We don’t want to be just another airline”“We don’t want to be just another airline” The Impacts of the Events of 9/11:

Short-Term Challenges: Operating Procedures  No change in flight schedule by Southwest Airlines despite 9/11  Just doing the best possible job  Reschedule the airline  Redesign passenger and baggage- handling process  Boarding policies  Abandon open seating

Long-Term Challenges: Growth Strategies  19 aircraft deferred  Borrowed Billion dollars  Developed Contingency plan  First non-stop transcontinental flight  No additional catering or on-board staffing  Analyst’s observation

A Late October Visit to Southwest Airlines Headquarters  Emergency Exercise for crash management  Preparations for annual Halloween celebrations

Recommendations  Use its low price tickets to drive its competitors out of business and take over their market  Buy more 747 Boeing’s apart from traditional 737 Airbus for larger capacity and business-class across regions  Implementations of cost saving technology such as internet is needed to lower the operation cost to give customers better deals

Practice to continue

Thank You!!!