Sunday, November 24, 2019
Southwest Airlines Case Analysis Essays
Southwest Airlines Case Analysis Essays Southwest Airlines Case Analysis Paper Southwest Airlines Case Analysis Paper Essay Topic: True Grit Southwest History 1966: Rollin King marched into Herb KelleherÃ¢â¬â¢s law office with a plan to start a low-cost/low-fare airline that would shuttle passengers between San Antonio, Dallas, and Houston. Thought of this idea because businessmen were complaining about the commute. 1967: Kelleher filed papers to incorporate the new airline and submitted an application to the Texas Aeronautics Commission for the new company to serve Dallas, Houston, and San Antonio. 4 year legal and regulatory battle from rival airlines 1971 (January): Lamar Muse brought in as the CEO to get operations under way. Boeing supplied three new 737s, discounted price by $1 million (5gt;4) and financed 90% of the $12 million deal. 1971 (June): Southwest initiated its first flights with a schedule that soon included 6 round-trips between Dallas and San Antonio and 12 round-trips between Houston and Dallas. Disappointing results despite only $20 fare compared to rivals $27-28. Their funds stretched thin and they were putting fuel on MuseÃ¢â¬â¢s credit card. Employee morale was high. 1971 (November): Muse came up with idea to offer $10 fare to passengers on the Friday-night Houstongt;Dallas flight. The flight sold-out without advertising. Muse came up with a two-tier on-peak and off-peak pricing structure. BEGINNING OF THE NO-LAYOFF POLICY, they have never laid off or furloughed any employees. 1972: Moved flights in Houston from the newly opened Houston Intercontinental Airport to the abandoned Houston Hobby Airport (for money and location reasons). 1973: Reported its first-ever annual profit in 1973. Introduced a profit-sharing plan for senior employees (first in the airline industry) -Rest of the 1970s consisted of legal battles- 1977: Listed on the NYSE 978: Muse resigned; Howard Putnam became CEO after Kelleher turned down the offer. 1979: First route outside Texas (New Orleans) 1981: Putnam resigned; Kelleher became CEO. Southwest had 27 planes, $270 million in revenues, 2100 employees, and 14 destination cities. Kelleher did not run from his office but among the troops. 1983: 3 additional Boeing 737s purchased; Southwest flies more than 9. 5 million passengers. 1984: Sout hwest is ranked first in customer satisfaction among the U. S. airlines for the fourth straight year. 1985: Service begins to St. Louis and Chicago Midway. Southwest named the Ronald McDonald House as its primary charity (a pilot lost his daughter to leukemia). 1986: Southwest flies more than 13 million passengers. 1988: Southwest becomes the first U. S. airline to win the Triple Crown (best on-time record, fewest reports of mishandled baggage, and fewest complaints per 100,000 passengers) for a single month. 1990: Revenues reach $1 billion; only major U. S. airline to record both an operating and a net profit. The Culture Committee was formed to promote Ã¢â¬Å"Positively Outrageous Service. Ã¢â¬ 992: First annual Triple Crown; second-year running they were the only major U. S. airline to record both an operating and a net profit. 1993: Begins operations on the East Coast and wins second annual Triple Crown; revenues exceed $2 billion and profits exceed $100 million. Third consecutive year of being the only U. S. airline to record both an operating and net profit. 1994: Introduced ticketless travel in four c ities; third Triple Crown; acquires Morris Air (Salt Lake City) 1995: Ticketless travel becomes available system-wide; fourth consecutive Triple Crown. 996: Service to Florida begins; fifth consecutive Triple Crown; ~$740,000 to RMDH 1997: Service begins to SouthwestÃ¢â¬â¢s 50th city; more than 50 million people fly Southwest. 1998: Named by Fortune as the best company to work for in America 1999: Service is added to three more cities. 2000: # of passengers exceeds 60 million; revenues surpass $5 billion; 28th consecutive year of profitability; 9th consecutive year of increased profits; becomes the 4th largest U. S. airline in terms of passengers carried. 2001: 30th Consecutive year of profitability; only U. S. airline to report a profit; record 64. million passengers 2001 (June): Kelleher stepped down as CEO but stayed chairman of the Board. James Parker and another trusted protege became CEO. 2002: Ranks second among companies across all industry groups (first in airlines) on Fo rtuneÃ¢â¬â¢s 2002 list of most admired companies. Began changing the look of its planes. 2004: Parker retired unexpectedly. Gary Kelly appointed CEO. 2005: Becomes 2nd largest U. S. airline in terms of passengers carried. First significant blemish on SouthwestÃ¢â¬â¢s safety record (overshot runway in Chicago). 2006: A record 96. 3 million passengers fly Southwest. 007: Becomes the largest U. S. airline in terms of passengers carried; profitable for the 35th consecutive year; named to Business WeekÃ¢â¬â¢s first ever Ã¢â¬Å"Customer Service ChampsÃ¢â¬ list and is voted Ã¢â¬Å"Overall Best Airline in the U. S. They introduced the Business Select fare to attract economy-minded business travelers. Did an Ã¢â¬Å"Extreme Gate MakeoverÃ¢â¬ to improve experience. Ticketless travel accounted for more than 95% of all sales. Operation Kick Tail (customer service initiative) launched. 2008: More people were flying Southwest than any other U. S. airline and they were the only U. S. Air carrier that was consistently profitable and had been since 1973. Southwest did not choose to use a la carte pricing like other airlines; they stuck with an all-inclusive fare. Mission statement was revised to highlight customer service commitment. Belated Aircraft Inspections further tarnish SouthwestÃ¢â¬â¢s reputation (placed three employees on leave). 2008 (May): Kelleher resigned as chairman of the board. Kelly assumed chairman of the board, president, and CEO. Southwest Financial and Statistical Background Key Financial Ratios | 2005| 2006| 2007| 2008| Gross Profit Margin| 31. 2%| 30. 54%| 26. 63%| 22. 07%| Operating Profit Margin| 9. 56%| 10. 28%| 8. 02%| 4. 07%| Net Profit Margin| 6. 38%| 5. 49%| 6. 54%| 1. 61%| Return on Total Assets| 3. 46%| 3. 71%| 3. 85%| 1. 27%| Return on Stockholders Equity| 7. 25%| 7. 74%| 9. 29%| 3. 59%| Earnings Per Share| 61. 00%| 63. 00%| 85. 00%| 24. 00%| Current Ratio| 94. 07%| 90. 09%| 91. 84%| 94. 55%| Quick Ratio| 90. 18%| 89. 37%| 87. 34 %| 88. 80%| Working Capital| -$228| -$286| -$395| -$153| Routes and Flight Data May 2008 serves 52 U. S. cities. Currently serves 69 U. S. cities. Top 10 Airports: May 2008| Current| Las Vegas| Las Vegas| Chicago Midway| Chicago Midway| Phoenix| Phoenix| Baltimore/Washington| Baltimore/Washington| Oakland| Denver| Houston Hobby| Houston Hobby| Dallas Ã¢â¬â Love Field| Dallas Ã¢â¬â Love Field| Los Angeles| Los Angeles| Orlando| Oakland| San Diego| San Diego| Aircraft Fleet: | May 2008| Current| Total A/C: | 527| 544| Total Seats:| 71,824| 74,153| Southwest tested Wi-Fi on four of there airplanes, and in late 2009, made the decision to begin installing satellite-delivered broadband from their Wi-Fi provider, Row 44, on the rest of their fleet. Southwest estimates that heir entire fleet will be Wi-Fi enabled in the 2013 timeframe. Number of Domestic Passengers by Air Carrier | 2000| 2005| 2006| 2007| Q1 2008| Southwest| 15. 32%| 19. 63%| 21. 68%| 21. 95%| 23. 21%| American| 14. 42%| 17. 16%| 17. 29%| 16. 48%| 16. 64%| Delta| 20. 68%| 17. 22%| 14. 29%| 13. 26%| 13. 43%| United Air| 15. 30%| 12. 25%| 12. 88%| 12. 14%| 11. 61%| US Airways| 11. 96%| 8. 22%| 7. 18% | 11. 17%| 11. 26%| Northwest| 10. 23%| 10. 36%| 10. 16%| 9. 43%| 9. 09%| Continental| 7. 73%| 7. 32%| 8. 05%| 7. 99%| 8. 18%| Jet Blue| 0. 24%| 3. 21%| 4. 07%| 4. 42%| 6. 59%| America West| 4. 11%| 4. 63%| 4. 41%| 3. 6%| 0. 00% *| * America West data is included with US Airway starting in 2007 due to merger. Operating Revenues of Selected US Airlines, 2000-2007 (in billions) | 2007| 2006| 2005| 2004| 2003| 2002| 2001| 2000| American| 1st$22. 9| 1st$22. 5| 1st$20. 6| 1st$18. 6| 1st$17. 4| 1st$15. 9| 2nd$15. 6| 2nd$18. 1| United| 2nd 20. 1| 2nd19. 3| 2nd17. 3| 2nd15. 7| 3rd13. 4| 2nd13. 9| 1st16. 1| 1st19. 3| Delta| 3rd 19. 2| 3rd17. 5| 3rd16. 5| 3rd15. 2| 2nd14. 3| 3rd12. 4| 3rd13. 2| 3rd15. 3| Continental| 4th 14. 2| 4th13. 1| 5th11. 1| 5th9. 9| 5th7. 3| 5th7. 4| 6th8. 2| 5th9. 4| Northwest| 5th 12. 5| 5th12. 6| 4th12. | 4th11. 3| 4th10. 1| 4th9. 2| 4th9. 6| 4th11. 0| US Airways| 6th 11. 7| 6th11. 6| 7th7. 2| 6th7. 1| 6th6. 8| 6th6. 9| 5th8. 3| 6th9. 2| Southwest| 7th 9. 9| 7th9. 1 | 6th7. 6| 7th6. 5| 7th5. 9| 7th5. 5| 7th5. 6| 7th5. 7| America West| *| *| 8th3. 4| 8th2. 5| 8th2. 2| 8th2. 0| 8th2. 0| 8th2. 3| Total| 110. 5| 105. 7| 96| 86. 8| 77. 4| 73. 2| 78. 6| 90. 3| *America West merged with US Airways in 2005. Major U. S. Airlines Fuel amp; Oil and Total Operating Expenses Per Passenger Revenue Miles Southwest Airlines had the 4th lowest fuel cost in 1995, 2nd lowest in 2000, and the lowest fuel cost from 2006 to Q1 2008 Southwest Airlines had the 2nd to the lowest total operating expenses in 1995 and the lowest from 2000 to Q1 2008. | 1995| 2000| 2005| 2006| 2007| Q1 2008| Fuel amp; Oil| | | | | | | America West| 1. 40| 2. 18| 3. 32| 3. 85| 3. 87| | American Airlines| 1. 53| 2. 04| 3. 67| 4. 15| 4. 34| 5. 75| Continental Air Lines| 1. 67| 2. 18| 3. 42| 3. 82| 3. 97| 5. 26| Delta Air Lines| 1. 70| 1. 73| 3. 68| 4. 18| 4. 32| 5. 67| Northwest Airlines| 1. 73| 2. 35| 4. 01| 4. 56| 4. 47| 5. 94| Southwest Airlines| 1. 56| 1. 95| 2. 44| 3. 37| 3. 71| 4. 54| United Air Lines| 1. 51| 1. 98| 3. 53| 4. 11| 4. 26| 5. 5| US Airways| 1. 59| 2. 44| 3. 89| 4. 30| 4. 45| 5. 63| | | | | | | | Total Operating Expenses| | | | | | America West| 10. 57| 12. 15| 14. 50| 16. 15| 15. 58| -| American Airlines| 14. 25| 14. 48| 15. 18| 15. 55| 15. 98| 18. 18| Continental Air Lines| 12. 87| 13. 70| 16. 38| 16. 51| 16. 56| 18. 81| Delta Air Lines| 13. 53| 12. 85| 16. 68| 17. 50| 17. 63| 20. 95| Northwest Airlines| 12. 77| 12. 99| 17. 40| 16. 20| 15. 90| 19. 25| Southwest Airlines| 10. 91| 10. 91| 11. 21| 12. 03| 12. 53| 13. 85| United Air Lines| 12. 58| 14. 65| 15. 35| 16. 07| 16. 27| 19. 13| US Airways| 17. 73| 19. 8| 18. 49| 20. 03| 20. 14| 21. 45| Operating Expenses per Average Seat Mile (Available Seat) | 1995| 2000| 2005| 2006| 2007| Compensation| 33. 95%| 36. 35%| 40. 62%| 37. 39%| 35. 38%| Fuel amp; Oil| 14. 29%| 17. 34%| 19. 63%| 26. 25%| 28. 02%| Maintenance| 8. 49%| 8. 15%| 6. 46%| 5. 80%| 6. 81%| A/C Rentals| 6. 65%| 4. 27%| 2. 36%| 1. 93%| 1. 76%| Landing Fees| 6. 22%| 5. 69%| 6. 58%| 6. 02%| 6. 15%| Depreciation| 6. 08%| 6. 08%| 6. 83%| 6. 36%| 6. 15%| Other Expenses| 24. 33%| 22. 12%| 17. 52%| 16. 25%| 15. 71%| 1. Is there anything that you find particularly impressive about Southwest Airlines? One of the most impressive facets about Southwest Airlines is the foundation the airline was built on and how that foundation remains present after 40 years, Ã¢â¬Å"true grit. Ã¢â¬ Southwest Airlines fought to be in existence, remain in existence, and today fights to remain a lean and fearless competitor by providing a low-cost, low-price and no-frills product. Southwest AirlinesÃ¢â¬â¢ tenacity is very distinctive and they are proud to show it through their marketing campaigns, such as, Ã¢â¬Å"Nobody Is Going to Shoot Southwest Airlines Out of the Sky for a Lousy $13. Ã¢â¬ The value Southwest Airlines has for its employees is impressive. The low employee turnover rate and large number of applicants is a strong indicator that this value is real and not lip service. Another interesting fact in regards to employees at Southwest is that in 40 years there have only been four CEOs, with 20 of those years being one individual, Herb Kelleher. 2. What grade would you give Southwest management for the job it has done in crafting the companyÃ¢â¬â¢s strategy? What is it that you like or dislike about the strategy? Does Southwest have a winning strategy? In respect to SouthwestÃ¢â¬â¢s efforts in crafting the companyÃ¢â¬â¢s strategy, we feel that the company deserves an A for its relentless efforts to stay true to its low-cost provider strategic intent and for its ability to be able to achieve a sustainable competitive advantage. As customers, we feel like the low prices are an extremely likeable aspect of the strategy. It is also important to mention that their customer service level is strong and leaves each passenger feeling a connection with the Southwest brand. However, we dislike the lack of creature comforts and the cattle-like approach to boarding. Southwest does maintain a winning strategy. One of the most important concepts that Southwest developed and grasped in their strategy was that it was not enough to be a low-cost provider; they needed to have a sustainable competitive advantage. The company addressed this by stressing that through the low-cost provider strategy, customer service, and customer satisfaction, they are able to achieve a sustainable competitive advantage, which is demonstrated in their financial and statistical data. A manager from Southwest stated Ã¢â¬Å"our fares can be matched; our airplanes and routes can be copied. But we pride ourselves on our customer service. Ã¢â¬ Although no strategy is without fault or mistake, Southwest has managed to significantly make its strategy into one that can thrive in both a short and long-term vision. With its focus on ways to keep cost low for customers, from paperless tickets to special programs for frequent flyers, the company has been able to effectively provide service to their customers and hold true to their mission. 3. What are the key policies, procedures, operating practices, and core values underlying SouthwestÃ¢â¬â¢s efforts to implement and execute its low-cost/no frills strategy? Southwest has many key policies, procedures, operating practices and core values that help to implement and execute its low-cost/no frills strategy. Fare Structure: Southwest employs a relatively simple fare structure featuring low, unrestricted, unlimited, everyday coach fares, along with even lower fares available on a restricted basis. Route System: Southwest did not use the hub-and-spoke route systems like their rivals; instead their route system was carefully designed to concentrate on flights between pairs of cities 150-750 miles apart where there was enough passenger traffic that Southwest could offer a sizable number of daily flights. Relationship with Boeing: Southwest operates only one type of aircraft (Boeing 737s) to minimize the size of spare parts inventories, simplify the training of maintenance and repair personnel, improve the proficiency and speed with which maintenance routines could be done, and simplify the task of scheduling planes for particular flights. With their loyalty to Boeing they were able to acquire new aircrafts at favorable prices. Ticketless Travel Option: Southwest was the first major airline to use ticketless travel which eliminated the need to print and process paper tickets. They were also the first to allow customers to make reservations and purchase tickets at their website; this allowed them to bypass the need to pay commissions to travel agents for handling the ticketing process and reducing staffing requirements at reservation centers. Congestion Avoidance: Southwest de-emphasized flights to congested airports which helped them produce better-than-average on-time performance and reduce the fuel costs associated with sitting in line on taxiways or circling waiting for clearance to land. It also allowed them to avoid the higher landing fees and terminal gate costs at such high-traffic airports. No Reserved Seats Policy: To economize on the amount of time it took terminal personnel to check passengers in and to simplify the whole task of making reservations, Southwest stopped assigning seats. No Cleaning Crew: Southwest flight attendants were responsible for cleaning up trash left by deplaning passengers. No First-Class: Southwest does not entertain a first-class section in any of its planes nor do they entertain frequent fliers at fancy clubs in terminals. They also do not serve meals in order to make reprovisioning planes simple and quick. Bags Fly Free: Southwest does not charge a baggage transfer service fee. Passengers pick up their luggage themselves. Software Updates: They implemented use of new software that significantly decreased the time required to generate optimal crew schedules and help improve on-time performance. Cloth to Leather: Southwest concluded that an all-leather interior would be more durable and easier to maintain, more than justifying the higher initial costs. Fuel Hedging: Southwest was a first-mover to fuel hedging and derivative contracts to counteract rising prices. Their fuel hedging strategy had produced savings of about $3. 5 billion since 1998. Vertical Winglets: To enhance the performance and efficiency of the fleet, they added vertical winglets on the wing tips to reduce lift drag, allow aircraft to climb more steeply and reach higher flight levels quicker, improve cruising performance, extend engine life and reduce maintenance costs, and reduce fuel burn. New Technology: Southwest is investing in technology and software to replace its ticketless system and its back-office accounting, payroll, and human resource information systems. This will enhance data flow, operational efficiency, and customer service capability. 4. What are the key elements of SouthwestÃ¢â¬â¢s culture? Is Southwest a strong culture company? Why or why not? What problems do you foresee that Gary Kelly has in sustaining the culture now that Herb Kelleher, the companyÃ¢â¬â¢s spiritual leader, has departed? The key element of SouthwestÃ¢â¬â¢s culture is the total employee benefit package, from compensation to training and development to promotion to retirement. SouthwestÃ¢â¬â¢s operative principle states, Ã¢â¬Å"employees come first and customers come second. Management believes that by placing a high priority on employees, it would result in those employees being passionate about their jobs, but also lets the employees know that Southwest is concerned for their general well-being and would provide them with job security. It is important to note that Southwest Airlines has never laid off or furloughed any of its employees since beginnin g operations in 1971. SouthwestÃ¢â¬â¢s simple thesis is as follows: Keep employees happy- then they will keep customers happy. CEO Gary Kelly even said, Ã¢â¬Å"Our people are our single greatest strength and our most enduring long-term competitive advantage. Ã¢â¬ Southwest is a very strong culture company. By placing their focus on employees first, they are ensuring that their customers will be well taken care of. They hire employees based on their attitude and then train them for skills. Herb Kelleher stated Ã¢â¬Å"We can train people to do things where skills are concerned. But there is one capability we do not have and that is to change a personÃ¢â¬â¢s attitude. So we prefer an unskilled person with a good attitudeÃ¢â¬ ¦Ã¢â¬ Southwest has the belief that superior, hospitable service and a fun-loving spirit flowed from the heart and soul of employees who themselves were fun-loving and spirited, who liked their jobs and the company they worked for, and who were also confident and empowered to do their jobs as they saw fit. Southwest also has the lowest employee turnover rate in the industry with pay scales above the industry average (sometimes even near or at the top of the industry). Another important part of their culture is their no-layoff policy. Kelleher stated Ã¢â¬Å"Nothing kills your companyÃ¢â¬â¢s culture like layoffsÃ¢â¬ ¦you want to show your people you value them and youÃ¢â¬â¢re not going to hurt them just to get a little more money in the short-term. Ã¢â¬ Southwest has two core values: LUV and fun. LUV turned into the code word for how to treat customers, with dignity and respect and demonstrating a caring, loving attitude. LUV and red hearts appeared on posters at company facilities to remind employees of the behavior that was expected towards customers and other employees. Fun at Southwest includes pranks and jokes, dressing up on holidays, charity benefit games, entertaining behavior of employees while on the job, and more. CEO Gary Kelly explains that the Ã¢â¬Å"Southwest WayÃ¢â¬ , which includes having a Warrior Spirit, ServantÃ¢â¬â¢s Heart and a Fun, Loving attitude are the three things that have defined their culture for 36 years. In 1990, a Culture Committee was formed to nurture the Southwest Spirit. The committee sponsored and supported hundreds of ways to promote the Southwest Spirit by using the red hearts and LUV to embody the spirit of caring and other things such as serving employees pizza. SouthwestÃ¢â¬â¢s monthly newsletter, LUV Lines, spotlights experiences and deeds of certain employees, reprinted letters of praise from customers, and company milestone celebrations. There are also occasional meetings called Culture Exchange in which they share similar information as the LUV Lines. All of these culture-building exercises have helped Southwest be a profitable company with loyal employees and happy customers. Gary Kelly may still encounter problems after taking over as CEO. Herb Kelleher instituted practices and support systems that promoted operating excellence which were a source of company pride. He devoted many years and a great amount of effort to find the best and most effective ways to operate every aspect of the company, from aircraft maintenance to efficient baggage transfers. CEO Gary Kelly has been following KelleherÃ¢â¬â¢s lead in pushing for operational excellence. Kelly may not be the Ã¢â¬Å"original spiritual leader,Ã¢â¬ but he is doing his part to keep the company the way Kelleher left it. Kelly has strong strategic objectives; one being that Southwest would be Ã¢â¬Å"the safest, most efficient, and most reliable airline in the world. Both men believed that having a strong balance sheet and profitability were important financial aspects of the company. KelleherÃ¢â¬â¢s vibrant, fun and caring attitude will be hard for any other CEO to match. He was known for his Hawaiian print shirts, making jokes and tricked out motorcycle. He was well known not only inside the company, but also outside for his combativeness. In 1990, he had a message penned in the Dallas Headquarters Office that stated: Ã¢â¬Å"The people of Southwest Airlines are the creators of what we have becomeand of what we will be. Ã¢â¬ Kelly will never be the same person as Kelleher and it may take longer for employees to warm up to his different management style. Kelly is less of a Ã¢â¬Å"culture pusherÃ¢â¬ than Kelleher, which could hurt Southwest in the long run, since their whole company is based on promoting a fun, caring atmosphere. Although Kelleher spoke very highly of Kelly when he took over as CEO in 2004, that doesnÃ¢â¬â¢t mean that Kelly will be as highly respected in terms of a spiritual leader to employees than Kelleher was. In addition, the Kelleher era at Southwest seemed to always be in a dogfight to build and become what they are today. As the employees who fought that fight with Kelleher retire, a piece of the Ã¢â¬Å"warrior spiritÃ¢â¬ goes with them. This may make it hard for Kelly to keep the warrior mentality alive with new employees who didnÃ¢â¬â¢t have a dog in the fight and may feel they donÃ¢â¬â¢t have as much invested to ensure they stay on top. 5. What grade would you give Southwest management for the job it has done in implementing and executing the companyÃ¢â¬â¢s strategy? Which of SouthwestÃ¢â¬â¢s strategy execution approaches and operating practices do you believe have been most crucial in accounting for the success that Southwest has enjoyed in executing its strategy? Are there any policies, procedures, and operating approaches at Southwest that you disapprove of or that are not working well? During a difficult time within the airline industry, Southwest made its entrance in 1971, despite the endless attempts from rivals to collapse the company before they could get started. Southwest emerged and made its first flight in June 1971. Since then SouthwestÃ¢â¬â¢s management team has done a monumental job in implementing their strategies. By using a differentiation approach Southwest was able to stand out amongst its competitors. Low fares, entertainment, more flights to the same locations, the gradual expansion into new geographic markets, adding flights in areas where rivals were cutting back service using first-mover strategies, and flight turnaround times around 25mins (compared to 50-60 minutes from its competitors) all contributed to a grade A for SouthwestÃ¢â¬â¢s management. SouthwestÃ¢â¬â¢s overall strategy has transitioned from the 1971 to 2010. When the airline first started, they were serving a market niche in the Golden Triangle (Houston, San Antonio, and Dallas). They moved towards a Focused Low-Cost Provider as they expanded their service by expanding into new geographic markets and adding flights in areas where rivals were cutting back service. Southwest is now moving towards becoming a Best-Cost Provider by upgrading the quality of the customer experience (i. e. leather seats, business-focused areas, family-focused areas, etc). The low-cost, low-price, and no frills strategies have worked very well for Southwest. The company took a two-tier fare approach which gave customers a choice between a low unrestricted, unlimited, everyday coach fare and one which was restricted that was even lower cost. Despite its highly effective strategy, Southwest has some aspects that may not be working as well as others. Their infamous cattle call (procedure for boarding) can make customers feel like animals rather than people when they are fighting for a seat. Many customers may choose to forgo the lower airfare to enjoy a more peaceful boarding experience. Another issue to be addressed is the maintenance policies and procedures that ultimately led to the fairly recent media debacle. Reports of lax aircraft inspections surfaced and Kelly admitted the wrongdoing of the company. He limited the bad media exposure by ensuring the public his airline was one of the safest to fly with. Despite his public apology, this matter needs to be aggressively approached to ensure customers feel safe flying Southwest. 6. What weaknesses or problems do you see at Southwest Airlines? 1. Public perception of safety after airline inspection issue 2. Lack of creature comforts such as pre-assigned seating and on-board meals. 3. There is no first class for customers, so those wanting a more luxurious experience may fly with competing airlines. . It also offers no baggage transfers to other airlines, which may be a complaint from passengers needing to catch another plane in a short amount of time. 5. Cattle-call boarding procedure 7. What recommendations would you make to Gary Kelly? 1. Establish a more aggressive maintenance inspection program, especially with the older aircraft in their fleet. 2. Offer premium services for a fee. For example: seat selection, leg room, seat size, baggage transfer, and boarding first. 3. Provide a few more creature comforts on longer flights. Doing without comfort is fine on short flights. 4. Sell even lower cost tickets to spontaneous travelers who truly decide at the last minute to get away for a short weekend vacation when there are vacant seats available. 5. Continue hedging fuel to save money in that aspect. 6. Explore increasing the number of destination cities so they can grow their customer base. 7. Southwest should continue learning about the types of customers that tend to fly with Southwest so they can make changes to better serve their clientele. 8. Explore international flight options.
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