An Airline in Trouble?
Change in CEO
Implications of the change
Change In Leadership
In 2001Herb Kelleher stepped down
as CEO and President of SW Airlines.
James Parker became the new CEO
Parker v/s Kelleher
oFlamboyant and fun loving attitude
oGreat communication and negotiation
oHigh on extraversion
oPromoted shared identity and values in
oGreat motivational power
oGood negotiation skills
oPoor communication skills
oLess motivational power
Theories Of Leadership
• Behavioral model of leadership- Kelleher,
a perfect example of the model
• Contingency model
Casual Variables Group
Based On Contingency Model
Kelleher score high on the three
Parker score low on these variables
Leader – Member Exchange
oKelleher did not believed in “in-
grouping and out-grouping”.
oLess interaction with out-group by
1. Transactional model
2. Charismatic model
o Kelleher, a combination of both
o Parker belongs to Transactional
o Kelleher possessed all the three
o Parker possessed only Intellectual
Gradual change in leadership
Selection of the successor 1-2 years
before the retirement of Kelleher
Change in Culture
◦ People oriented
◦ No distinct level of hierarchy
◦ No employee restlessness
◦ Lack of communication between
management and employees
◦ Lack of flexibility
◦ Conflict with labor unions on working
conditions and pay.
◦ Employee began to disassociate
themselves with the culture
In Southwest airlines they had Clan
On basis of performance Southwest had
a Strong Culture
oManagers and employees share common
values and methods of doing business.
There was a shift towards Market Culture
Cultural committees should work more
Programs to encourage interaction
between employees at all levels.
Greater part of senior management in
socializing with the employees.
• Employees did not mind doing work
out of there sphere.
• Employees went out of their way to
improve customer service
• Sense of belongingness in the
Union unhappy with work and pay
Demanded remuneration for “extra work”
Flight attendants felt secondary to pilots
What Went Wrong?
Motivation and lack of it.
Southwest employees drew motivation
No Longer Industry Outsiders.
How is Motivation Important
The willingness to exert high levels of
effort towards organizational goals
conditioned by the effort’s ability to
satisfy some individual need.
The Motivation Process
NEEDS DRIVE INCENTIVE
Parker should connect with his
Learn from Kelleher( e.g. watch his
Informal meets within the
Post 9/11 security measures took a toll
on first-come-first-serve seating
Refusal to take ticketing enquiries
First-come-first-serve seating a
perceived benefit for the customer.
Lightly staffed airport systems resulted
in delays in purchasing tickets. Not
accepting email enquiries caused
wastage of time.
Incorporating a system to make
seating more structured.
Utilizing staff in the best possible way
to ensure minimum delays in ticketing.
Accepting email enquiries.
Rising fuel prices
Early retirement plan accepted by more
than thousand employees. Expenditure
Higher labor cost as a proportion of
Hedging position due to expire in 2005
Cost was a big competitive advantage
But it was losing its cost advantage and
also the market to other low cost
Needs to adapt to new costs and
strategize its future policies.
JetBlue and Air Tran- 2 main competitors
Jet blue offered better facilities like more
legroom, comfortable leather seats, set
back television sets and free internet
Had best record for punctuality and
It was a non union airline
Because of increase in number of
competitors in the airline industry and
better services being provided by the other
market players SW airlines was losing its
Update itself with market trend and
improve on its facilities to retain its old
customers and attract new ones
Improve its customer services like
baggage handling, boarding on time
Regular feedback from customers
Can Kelly Replace
2004 : Gary Kelly joined as new CEO
Kelly would be compared to Parker
Kelly should learn from Parker’s