Culture, Values, and Operating Practices

1. Southwest Airlines in 2010 :
Culture, Values, and Operating Practices
Corporate Business Strategy Group Assignment
Domeniko Wikarda | Endah Widiastuti | Haris
Suhendra | Marisa Karsen | Pramita Wardani
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2. Table of Contents:
 The Journey of Southwest Airlines
 Business Strategic Analysis
 Recommendations
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3. The Journey of
Southwest Airlines in 2010 :
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4. Southwest Airlines Is a low-cost/low-
fare airline.
• Their concept is attract passengers by
flying convenient schedules, get
passengers to their destination on
time, make sure they have a good
experience, and charge fares
competitive with travel by automobile.
• Target market : Business Travelers and
Price-sensitive leisure travelers
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5. 2001-2008| Colleen Barret
Southwest Airlines • Principal : to ensure the employee felt good on
Leadership what they’re doing and felt empowered
1981| Herb Kelleher • The first women appointed as a CEO
• Principal : Employee
comes first
• Becoming the market
share leader In
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domestic air travel
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1996 | Rollin King
• Starting a low- 2001-2001| James Parker
cost/low fare airlines 3 • Personality : Honest,
straight-arrow
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1
1971| Lamar Muse
• Personality :
Aggressive, self-
confident airline Strategy :
veteran • Attractive stewardess
• He recruit talented • Free Alcoholic beverages during daytime flights
senior staff that • Attractive marketing campaign
included a number of • In Operational, 25 minutes average turnaround time
veteran executives • Focus on business travelers and price sensitive leisure
from other carriers travelers
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6. Key Success Factor of Garry C. Kelly leaderships :
• Hire great people and treat them like family
• Care for the customers warmly
• Keep fares and operating cost lower than competitor
6 • Prepared for bad times with strong financial strategy
2008 - …
Garry C. Kelly 5 Objective Strategy of Garry C. :
• Be the best place to work
• Be the safest and more efficient airline
• Offer customers a convenient flight schedule
• Give the best over all travel experience
• Do all of the things in an effective way to maintain the
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low cost

7. Southwest Airlines 800
Financial Performance
per year in 2005-2009 600
400
Net Operating Expenses
200
Net Income
-
2005 2006 2007 2008 2009
-200
-400
2005 2006 2007 2008 2009
Net Operating Expenses - 54 144 - 267 171 98
Net Income 484 499 645 178 99
Revenue per passengers 77,693,875 83,814,823 88,713,472 88,529,234 86,310,229
Revenue per passengers
90,000,000
85,000,000
80,000,000
75,000,000
70,000,000
2005 2006 2007 2008 2009
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8. Business Strategic Analysis
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9. The Strategy Canvas of Southwest Airlines
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10. Southwest Strategies
• Low cost/low-price/no frills strategy
• Tagline : Freedom to Fly
• Fare promotions to stimulate ticket sales on
flights that otherwise would have had
numerous empty seats
• Bags fly free
• Shrewd practitioner of the concept of price
elasticity, proving in one market after another
• Southwest designed a carefully route system
to concentrate flights between pairs of city to
allow Southwest sizable number of daily
flights(Point-to-point scheduling of flights)
• Southwest frequent flyer program and giving a
reward
• Standard Awards; accumulated 1 free round-
trip after 16 credits within 24 months
• Companion Passes; accumulated 1 free round-
trip after 100 credits within 12 months
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11. Southwest Strategies
• Gradual expansion into new geographic
markets
• Adding flights in areas where rivals were
cutting back services
• Curtailing flights on marginally profitable
routes where numerous seats often went
unfilled and shifting planes to routes with good
growth opportunities
• Putting Strong emphasis on save, high quality
maintenance and reliable operations
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12. Southwest Airlines
Marketing Strategies
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13. PESTEL Analysis
• Politics
- Terrorist attack
- US Housing bubble cause a lot of unemployed and lay off, 10% unemployment rate on 1
oct 2009, highest since 1983  Relate with “No-layoff” policy of Southwest
- Obama election relieve America and world wide politically
US Housing Bubble
• Economy
- Industry downturns
- Jet fuel increase
- World wide recession
- Investment stopped coming
• Social
Economic recession force citizens to live more “Saving minded” and more
price sensitive, including company demand to cut cost
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14. PESTEL Analysis
• Technology
Fast growth of technology influencing
airlines technology (fuel, system, IT, vehicle,
etc) growth, with benefit of :
a. Cutting cost
b. Additional technology, such as :
Southwest in-flight wi-fi • Legal
c. Convenience and speed Dog eat dog competition, cause company to
• Environment use any “legal” tools, such as :
Emiision from jet fuel force ailrines company a. Wright amendment in 1979 : Restrict
to have emmision standard  Reseach of Southwest operational in Love field
alternative bio fuel. In the future, people b. Access Now, Inc. v. Southwest Airlines
might be more environment sensitive. Co in 2002 : Access now, inc suing
Soutwest airlines, as their websites
couldn`t accomodate Robert Gumson
(Which was blind)
c. Aneglica Keler`s hot tea accidents : Sued
Soutwest $800,000 over spill of hot tea
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15. Southwest Airlines’ PORTER 5 Forces
Threat of New Entrants
MODERATE
 New LCC Airlines companies
could enter this industry and
attract passengers
Buyer Power
Supplier Power
Competitive Rivalry HIGH
HIGH
 Most of the LCC offers similar
 Need Software & hardware
HIGH, Southwest’s direct services and limited
vendor in along term
competitors are the seven differentiation
 Only using one type of
major low-carriers operating  xx
Boeing, so Southwest has
domestically with similar
strong dependency with
services
Boeing
Threat of Substitute
Products
LOW
 Alternative another vehicle,
like Car, Train, Ship but not
significant compete with
airplane
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16. SWOT MATRIX
Strength Weakness
• The first major airline to • Little room for strategic
introduce ticketless travel management
• Operated only one type of • No establish alliances with
Boeing other airlines
• Point-to point scheduling • No international flight
• Develop good strategies to
expand the business
• 25 minutes average
turnaround time
Opportunities Strength – Opportunity Weakness – Opportunity
• Mostly of passengers like LCC  Still focus on LCC  Southwest could strengthen
because of the lower price. So  Operated the other type of its position through an
Southwest airlines still could Boeing alliance
develop their position in the  Make innovation in
airlines industry technology
• The development of technology
to create IT innovation
Threats Strength – Threats Weakness – Treats
• Rising labor cost and fuel cost  Keep promote the new  Create “barriers to entry” with
• Competitors offer product and facilities and features to implement innovative
services like Southwest customers using all kind of strategies
Airlines media
• The new LCC Airlines  Try to find another supplier
• Terorism that can reduce operating cost
• Government regulations
• Tax system in US 16

17. Recommendations
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18. RECOMMENDATIONS
• Expand geographically. Open new route
• Do streamlining and automation in order to
both aid in cost cutting and maintain the
competitive advantage ( Use IT to achieve
operating efficiencies)
• Since Southwest is a player in low-cost
provider so they must keep prices as low as
possible in order to stimulate demands and
look redistribute expenses through other area
• Keep it simple structure (lean organization)
• Maintain high utilization rate of fleet of
aircraft
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19. Corporate Business Strategy Group Assignment
Domeniko Wikarda | Endah Widiastuti | Haris Suhendra |
Marisa Karsen | Pramita Wardani
19