Southwest Airlines

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Southwest Airlines

  1. 1. Culture, Value, and Operating Practices Barry Cynthia Dedy Fitrie Indah Made Novita Rival Presented by : MBM Group 3
  2. 2. Company Overview... <ul><li>major domestic airline that provides :… </li></ul><ul><li>primarily short haul </li></ul><ul><li>high-frequency </li></ul><ul><li>point-to-point </li></ul><ul><li>low-fare service </li></ul>Southwest Airlines , Inc. (NYSE: LUV), is . . . The third-largest airline in the world by number of passengers carried and the largest in the United States by number of passengers carried domestically. Dallas, Texas Headquarters 63 Destination 472 Fleet size 1971 Founded
  3. 3. Birth of Southwest ... <ul><li>Business </li></ul><ul><li>Concept </li></ul>In late 1966, Rollin King and Herb Kelleher got together and decided to start a different kind of airline Southwest was incorporated in Texas and commenced Customer Service on June 18, 1971 with three Boeing 737 aircraft serving three Texas cities - Dallas, Houston, and San Antonio. Attract passengers by flying convenient schedules, get passenger to their destination on time, make sure they have a good experience, and charge fares competitive with travel by automobile
  4. 4. Company History ... Southwest goes public on the American Stock Exchange 1975 Company is renamed Southwest Airlines Co. 1976 Shares migrate to the New York Stock Exchange 1977 Herb Kelleher becomes Southwest's outspoken new chairman 1978 SWA flies outside Texas to New Orleans 1979 SWA posts first profit and begins RUSH cargo service 1973 Airline launches first route, connecting Dallas, Houston, and San Antonio 1971 Company is incorporated as Air Southwest Co. 1967
  5. 5. Company History ... Morris Air and Arizona One are acquired 1994 Online booking site is launched 1996 SWABIZ corporate booking tool is introduced 2000 SWA enters first ever code share arrangement, with ATA Airlines 2005 Revenues exceed $1 billion, making SWA a major airline 1990 SWA begins flights to West Coast 1982 Kelleher is named company president and CEO 1981
  6. 6. VISION & mission ... <ul><li>Our Vision </li></ul>Dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit Our Mission provide safe and comfortable air transportation in commuter and short-haul markets, from close-in airports, at prices competitive with automobiles and buses and to involve customers and employees in the product and the process, making the airline a fun, profitable and quality experience.
  7. 7. Company Values ... Core Values <ul><li>LUV </li></ul><ul><li>Code word for treating individuals, employees, customers </li></ul><ul><li>Dignity, respect and caring loving attitude. </li></ul><ul><li>Appeared on banners and posters at company facilities </li></ul><ul><li>Fun </li></ul><ul><li>Entertaining behavior of employees in performing their jobs. </li></ul><ul><li>The ongoing pranks and jokes. </li></ul><ul><li>Frequent company-sponsored parties and celebrations. </li></ul><ul><li>> charity benefit games, chili cook-offs, Halloween parties </li></ul>
  8. 8. Company Culture ... <ul><li>Emphasis on Value of People </li></ul><ul><li>Keep Employees Happy – </li></ul><ul><li>then they will keep customers happy </li></ul><ul><li>&quot;Culture is the glue that holds our organization together. It encompasses beliefs, expectations, norms, rituals, communication patterns, symbols, heroes, and reward structures. Culture is not about magic formulas and secret plans; it is a combination of a thousand things.&quot; </li></ul><ul><li>-Herbert D. Kelleher, Co-Founder and Chairman, Southwest Airlines. </li></ul><ul><li>Colorful personalities </li></ul><ul><li>Employees are friendly, creating unique love based atmosphere </li></ul><ul><li>“ Now There ’ s Somebody Else Up There Who Loves You ” </li></ul><ul><li>Airport: Dallas Love Field Route: Love Triangle Planes: Love Birds </li></ul><ul><li>Drinks: Love Potion Peanuts: Love Bites Coupon: Love Ticket </li></ul>
  9. 9. Business Description ... <ul><li>Business Segment </li></ul><ul><ul><li>Service in markets with of frequent, conveniently timed flights and low fares . </li></ul></ul><ul><ul><li>Business travelers who more time-sensitive than price-sensitive and wanted weekday flights at times suitable for conducting business. </li></ul></ul><ul><ul><li>Price-sensitive leisure travelers who wanted lower fares and had more flexibility about when to fly. </li></ul></ul>Product/Services <ul><li>Short haul city pairs, providing single-class air transportation which targets the business commuter as well as leisure travelers </li></ul><ul><li>Customers are able to make flight, car, hotel, cruise, and complete vacation package reservations </li></ul>
  10. 10. Business Description ... <ul><li>Geographical Segmentation </li></ul><ul><ul><li>Southwest flies to 62 cities in 32 states in America </li></ul></ul><ul><ul><li>In selecting cities, Southwest looked for city pairs that could generate substantial amounts of both business and leisure traffic. </li></ul></ul>  San Antonio Orlando Manchester Houston (Hobby) Cleveland   Salt Lake City Orange County Lubbock Hartford/Springfield Chicago (Midway)   St. Louis Ontario Louisville Harlingen/South Padre Island Burbank West Palm Beach Sacramento Omaha Los Angeles (LAX) Ft. Myers/Naples Buffalo Tulsa Reno Oklahoma City Little Rock Ft. Lauderdale/Hollywood Boise Tucson Raleigh-Durham Oakland Las Vegas El Paso Birmingham Tampa Providence North Virginia (Dulles) Kansas City Detroit (Metro) Baltimore/Washington Spokane Portland Norfolk Jacksonville Denver Austin Seattle/Tacoma Pittsburgh New Orleans Jackson Dallas (Love Field) Amarillo San Jose Phoenix Nashville Long Island Corpus Christi Albuquerque San Diego Philadelphia Midland/Odessa Indianapolis Columbus Albany
  11. 11. Business Description ... <ul><li>Route Map </li></ul>
  12. 12. Building Capable Organization ... Staffing the Organization Core Competencies and Competitive Capabilities Matching the Organization Structure to Strategy Southwest ’ s Capability
  13. 13. Staffing ... <ul><li>“ Employee come first and Customers come second ” </li></ul><ul><ul><li>Hired employee for attitude and trained them for skills </li></ul></ul><ul><ul><li>Analyzed each job category to determine the specific behaviors, knowledge, and motivations that job holders needed and with the desired traits </li></ul></ul><ul><ul><li>A trait common to all job categories was teamwork </li></ul></ul>Recruiting, Screening, and Hiring <ul><ul><li>80 to 90 % of Southwest’s supervisory positions were filled internally </li></ul></ul><ul><ul><li>Developing leadership and communication skills for low level management </li></ul></ul><ul><ul><li>Up and Coming Leaders received training in every departments over sixth-month period </li></ul></ul>Putting Together a Strong Management Team
  14. 14. Core Competencies & Competitive Capabilities ... <ul><li>Developing a set of competencies and capabilities </li></ul><ul><ul><li>Operate one type of aircraft. </li></ul></ul><ul><ul><li>Make reservations and purchase tickets at the company’s website. </li></ul></ul><ul><ul><li>Tried to steer clear of congested airports, stressing instead serving airports relatively near major metropolitan areas and in medium-sized cities. </li></ul></ul><ul><ul><li>Using point-to-point scheduling of flights. </li></ul></ul><ul><ul><li>There is no reserved seat for each passenger. </li></ul></ul><ul><ul><li>No first class section, no fancy clubs at terminal and no meals. </li></ul></ul><ul><ul><li>No baggage transfer services to other carriers. </li></ul></ul><ul><ul><li>Convert from cloth to leather seats </li></ul></ul>Low Operating Cost
  15. 15. Core Competencies & Competitive Capabilities ... <ul><li>Developing a set of competencies and capabilities (cont.) </li></ul><ul><ul><li>Make sure passengers had a positive, fun flying experience. </li></ul></ul><ul><ul><li>Presenting a happy face to passengers and displaying a fun loving attitude. </li></ul></ul><ul><ul><li>Complaint letters were seen as learning opportunities for employees and reasons to consider making adjustments </li></ul></ul>Focus on Customer & Customer Satisfaction
  16. 16. Core Competencies & Competitive Capabilities ... <ul><li>Updating and revising this set as external conditions and strategy change </li></ul><ul><ul><li>Gradual expansion into new geographic markets. </li></ul></ul><ul><ul><li>Adding flights in areas where rivals were cutting back service. </li></ul></ul><ul><ul><li>An attractive frequent flier program. </li></ul></ul><ul><ul><li>Adding longer nonstop flights to the route system. </li></ul></ul><ul><ul><li>Putting strong emphasis on safety, high-quality maintenance, and reliable operations. </li></ul></ul>
  17. 17. Core Competencies & Competitive Capabilities ... <ul><ul><li>Designed and conducted by Southwest’s University for People </li></ul></ul><ul><ul><li>Courses for new recruits , employees, and leadership training program for both new and experienced managers </li></ul></ul><ul><ul><li>Leadership course emphasized a management style based on coaching and courage, rather than supervising or enforcing rules and regulations </li></ul></ul><ul><ul><li>Courses on safety, communications, stress management, career development, performance appraisal, decision making, and employee relations </li></ul></ul><ul><ul><li>Orientation program included videos on Southwest ’ s history, overview of the airline industry, and competitive challenges that Southwest faced, and introduction to Southwest culture and management practices </li></ul></ul>Training and retraining employees as needed to maintain skill-based competencies
  18. 18. Matching the Organization structure... <ul><ul><li>There were only four layers of management between a frontline supervisor and the CEO </li></ul></ul>Designing an organization structure that facilitates good strategy execution <ul><ul><li>Decentralized organization structures </li></ul></ul><ul><ul><li>Employee-led initiatives were common </li></ul></ul><ul><ul><li>Employees have substantial authority and decision-making power </li></ul></ul><ul><ul><li>Candid meetings of frontline employees and managers </li></ul></ul><ul><ul><li>Managers were expected to spend at least one-third of their time out of the office, walking around the facilities under their supervision, observing firsthand what was going on, listening to employees and being responsive to their concerns. </li></ul></ul>Deciding how much decision making authority to push down to lower-level managers and front line employees
  19. 19. SWOT Analysis ... <ul><li>Strengths </li></ul><ul><li>Low price tickets </li></ul><ul><li>Low operating costs </li></ul><ul><li>Good customer service </li></ul><ul><li>High frequency service </li></ul><ul><li>Productive pilots & ground crews </li></ul><ul><li>Opportunities </li></ul><ul><li>Ability to add scheduled flights </li></ul><ul><li>Low prices enable market share </li></ul><ul><li>growth </li></ul><ul><li>Threats </li></ul><ul><li>Big companies emulate Southwest ' s </li></ul><ul><li>low cost model </li></ul><ul><li>Difficulty securing new gates at </li></ul><ul><li>existing airports </li></ul><ul><li>Weakness </li></ul><ul><li>Doesn’t serve international flights </li></ul><ul><li>One type of airplane </li></ul>
  20. 20. Five Forces Analysis ... Rivalry among Competitor (High) Substitute Products (train, bus) Customers Potential New Entrants Suppliers (fuel, snacks, beverages) Low Low Supplier’s bargaining power LOW Customer’s bargaining power MEDIUM
  21. 21. Market Share ... Year 2006 : Market Share
  22. 22. Financial Performance... Financial Summary 0.67 0.31 0.56 0.40 0.70 EPS 511 241 442 313 548 Net Income 631 417 483 554 820 Operating Income 4,924 5,105 5,454 5,976 6,764 Operating Expenses 5,555 5,522 5,937 6,530 7,584 Revenues 2005 2004 2003 2002 2001   (In millions, except EPS)
  23. 23. Financial Performance... Stock Chart
  24. 24. 9/11 Black September ... <ul><ul><li>September 11, 2001, terrorists attacked the World Trade Center and the Pentagon, shook the whole country. </li></ul></ul><ul><ul><li>20 % falloff in airline traffic in the fourth quarter of 2001 </li></ul></ul><ul><ul><li>Unprecedented three-day shutdown of flights, the sudden erosion of passenger traffic, and strict new security measures threw major airlines into a financial crunch of huge proportions and triggered a struggle to revamp flight schedules and respond to sharply lower passenger travel. </li></ul></ul><ul><ul><li>Investor worries about almost empty flights, higher costs from added security measures, and a clouded financial future for the whole airline industry caused airline stock prices to plunge. </li></ul></ul>
  25. 25. 9/11 Impacts ... Many scrambled to institute a host of security measures Many scrambled to institute a host of security measures Fare sales in January, March, April, July, August, October and December 2002 Speculation on how much to cut fares to induce passenger to fly and on low long traffic might stay depressed Negotiated a revised delivery schedule for the 132 Boeing 737 jets on order The delivery of new aircraft on order deferred or cancelled no employees were laid off Temporary freeze on hiring until Jan 2002 Employees laid off No flights were cut The number of flights were cut by around 20 percent Southwest Airlines Airline Industry
  26. 26. Conclusion ... <ul><ul><li>To reduce their losses, the airline industry cut the number of flights by 20 % and laid off 16 % of their workforces. </li></ul></ul><ul><ul><li>One airline had its own unique approach to the crisis. Southwest avoided layoffs (no-layoff policy) and stuck to its mission of caring for its employees . It was felt that avoiding layoffs in the face of a dramatic decline in demand would jeopardize short-term prospects. </li></ul></ul><ul><ul><li>&quot; It ' s part of our culture . We ' ve always said we'll do whatever we can to take care of our people. That ' s what we ' ve tried to do.“ </li></ul></ul><ul><ul><li>Southwest Airlines was able to operate their business relatively undisturbed. It was only in the poor economic conditions that suddenly Southwest Airlines ' method of operation became the ideal model for its competitors. </li></ul></ul>
  27. 27. Future Improvements ... <ul><li>It is essential for Southwest Airlines to expand on their existing achievements. </li></ul><ul><li>Better serve customers by improving their routing system. </li></ul><ul><li>Offering enhanced accessibility and minimizing delays. </li></ul>
  28. 28. Key People of SWA...
  29. 29. By: Barry, Cynthia, Dedy, Fitrie, Indah, Made, Novita, Rival Thanks … Dedicated to the fallen victims of 9/11, 5 years ago September 11, 2006

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