The secret of success of southwest airlines

1. Our people fuel our planes
Presented By: Sachin Bajaj, Ankur Sethi, Ajit Kumar, Ayush Garg, Harsh Narula
Dileep Kumar
WARRIOR SPIRIT – SERVANT HEART – FUN-LOVING
ATTITUDE

2. About SouthWest
• Started operations in 1971 with just 3 aircrafts
• SouthWest was conceptualized to save customers time and money
• The idea was to keep productivity high and fares low
• “Wright Amendment” was passed in 1971 as a result of the legal
battle between “SouthWest” and rival airline “Continental” which
resulted in curtailing some of SouthWest’s operations
• Expanded operations in in California in 1989
• Became leading airline in passenger boarding in 1993
• Achieved 70% market share in California in just 6 years
• At end of 1994 the company operated 199 Boeing 737

3. The mission of SouthWest is dedication to the
highest quality of customer service delivered with
a sense of warmth, friendliness, individual pride,
and company spirit
Mission

4. Growth Of SouthWest
Fleet Size Net Income ($ 000s)
Passenger carried / per employee Aircraft Utilization (Hrs)
Source: 1994 Annual Report

5. Success Criteria For Airlines
• On Time Performance
• Fewest Lost Bags
• Fewest Customer Complaints
Having success in each of the above three criteria requires:
Highly efficient,
proactive,
motivated and
committed staff

6. Critical Success Factors Driving SW Performance
Secrets to the success
SECRET NO. 1 Stick to what you’re good at.
Since 1971, SouthWest Airlines has offered single class service on lots of short-
to-medium range flights to convenient airports. It’s an idea that has propelled
SW to new heights.
SECRET NO. 2 Keep it simple
SouthWest Airlines honours some simple no-no’s: No assigned seats. No meals. No
hassles. No problems. You could say they’re simply nuts about it!
SECRET NO. 3 Keep fares low, costs lower
SouthWest Airlines believes in low fares by philosophy. The only way to keep fares
low is to keep costs even lower. It’s the primary goal.

7. Critical Success Factors Driving SW Performance
SECRET NO. 4 Treat Customers like guests
SouthWest Airlines has won the annual Triple Crown four times: Highest
Customer Satisfaction. Best On-time Record. Best Baggage Handling.
SECRET NO. 5 Never stand still
SouthWest Airlines provides quick turnarounds at gates. Respond quickly to
changes in the business environment. Which helps keep one step ahead of the
competition.
SECRET NO. 6 Hire great People
SouthWest Airlines is a People Company. Spirited, altruistic, fun-loving
Employees who work hard, follow The Golden Rule, and provide the best
Customer Service in America. Team Work and trust further increases
cohesiveness amongst each other.

8. How SouthWest Did it ?
SouthWest strategy – Concentrates on flying to underutilized airports and close to
metropolitan areas
Inducting fuel efficient air carriers 737s (Fleet size increased to more than
200)
SouthWest Services:
Frequent on-time departures
Low cost fares
Emphasizes point-to-point routes, with no central Hub
By avoiding hub and spoke system, SouthWest avoided flight delays associated
with connecting flights
Short turn around times ( In 1991, 70 percent of flights had 15 mins ground
time) and higher equipment use
SouthWest aircraft spent average of 11 hours in air daily vs to industry average
of 8 hours
SouthWest started with business strategy to compete with road transport not other
airlines

9. SouthWest used low fares and frequent flights to increase passenger volume by
2-3 times
1984, Average passenger fare were $49 for 436 miles
1993, Average passenger fare were $60 for 500 miles
1994, round trip fare from Oakland to San Diego were $135 for 1000 miles
Passengers flying weekly between Louisville and Chicago rose from 8000 to
26000 when SouthWest lowered fares and increased frequency of flights
Simplified fare pricing policy -
Two fares on a route
1. a regular coach fare (no first or business class)
2. An Off-peak fare
-All fares were same within a state (Currently $69 fly anywhere within
California)
-Never been part of other airline carriers or be part of other airlines reservations
system
-Less dependence on travel agents for booking of tickets
-SouthWest’s frequent flyer club (“The Company Club”) which entitles a member
to travel free after completing specified number of round trips in an year
How SouthWest Did it ?

10. How People Contributed To The Success ?
Putting “Customer First”. Motivating employees to focus on importance of
customer service
SW management offered stable environment, personal growth resulting in
employee loyalty and retention despite lower salary package VS other airlines
Employees are empowered and made part of the company’s success
Peer hire peer policy, led to employees sense of belonging and ownership
Even rejected people were dealt carefully – Customer Focus
Focus on extensive training to ensure future readiness
Kelleher’s ability to maintain harmonious relations with his trade unions resulted
in only one six day walkout by the workers over a long period.
Accessibility and frequent interaction with top management

11. How People Contributed To The Success ?
SouthWest Culture: To create culture of happiness and fun at
work

12. “Culture” is the Key To SouthWest
Culture is the key to success of SouthWest
SouthWest has a unique culture to keep morale of employees high
SouthWest is committed to keep costs low which is made part of the culture
of the company
Culture is the glue that holds the employees and company objectives together
Emphasis on creativity: employees have been allowed to work in pajamas for
a day
Focus is on ‘Attitude’ and not on technical skills
Initiatives like ‘Day in the field’ to encourage seniors have exposure to field
job experience

13. SouthWest Future Plans For Fleet Additions
The company expecting a growth on year on year basis for
next 10 years
Source: 1994 Annual Report

14. SWOT Analysis
• Emerging
competition from
new and existing
airlines
• Higher oil prices
• New markets
• Increasing the fleet
size
• No backup for CEO
• Increasing
workforce
• Overconfidence in
employees
• Strong Culture
• Low operation cost
• Creative and
genuine people
Strength Weakness
ThreatOpportunity

15. The Competitive Threat
Continental Lite:
A low cost service (even lower than SW) started in 1993 with 171 departures from 14 cities,
cutting fares by over 60%
Continental followed SW best practices related to cost minimization, employee engagement
Continental’s performance despite imitating SW practices was very poor. For example flight
turnaround time 30 mins vs 15 for SW, in addition there were many customer complaints and
lost bags
Though profits were weaker than expected but it witness sharp increase in market share
United Shuttle:
In 1994, United too announced an airline with in a airline, having direct competition to SW
With lower fares, it was all out war between continental lite, SW and The shuttle
Despite such severe competition, SouthWest succeeded due to its organization
culture, committed employees and impeccable top management team

16. The Future Challenge
Threat of competition:
The competition is severe, that requires SouthWest to maintain its competitive advantage. “Its
People”
Maintain its market share to ensure profits does not go down and company can remain cost
competitive
Succession plan for top management
With 14,000 employees and growing, it will be difficult to maintain same level of culture and
employee engagement
The CEO, Mr. Kelleher has been leading the company for over 22 years, there is a need to look
out for new leader for future transition. Also, the top management has been with the company
for many years, there is need for succession planning for each management position

17. What Should SouthWest Do ?
 Induct more and more cost saving initiatives
 Continue with the same highly selective process for recruitment
 Increase operations by expanding operations or through M&As
 Focus on technology which helps increasing fuel efficiency
 Not compensate safety for frugality
 Maintain the same operating efficiency
 Work on more and more reward initiatives
 Not let the people be overconfident of the success and keep motivating them
 Maintain the same culture and employee satisfaction
 Keep customer service as their main motto

18. Thank You…