Southwest Airlines was founded in 1966 and began operations with three Boeing 737 aircraft serving Texas cities. It pursued a strategy of point-to-point flights to underutilized airports close to cities, using a single aircraft type to reduce costs. Southwest also emphasized excellent employee engagement and a fun workplace culture. It achieved high aircraft utilization and turnaround times, along with low fares, to gain a competitive advantage in the airline industry.

1. Southwest Airlines
- Venkatesh K.G

2. Introduction
 Came into existence in 1966 when Herb Kelleher and Rollin King sketched out
the plan.
 Headquarter at Love Field in Dallas.
 Started operations with 3 Boeing 737 aircraft serving the Texas cities of Dallas,
Houston and San Antonio.
 Initial competitors were Texas International and Braniff and Continental.
 Present major competitors are Continental and United
 They concentrate on flying to airports that are underutilized and close to
metropolitan area . Eg: Love field in Dallas (Cost cutting. Expensive in busy
airports.)
 Company used a single aircraft – Boeing 737 which is fuel efficient. This was
also done to minimise the training/skill set required for pilots.
 They have the highest equipment usage in this industry – 11 hours in the air
daily as compared to the industry average of 8 hours.
 Southwest airlines tried to increase volumes by targeting busy routes at a lower
price and because of their low fare, they increased the traveller count (8,000
people used to fly weekly from Louisville and Chicago before their inception. It
has now increased to 26,000. )

3.  Operational and financial strategy:
1) Simple fare system - Without peak/off-peak ,business/economic class.
2) Focus on core activities – Eliminating food, no seat assignment,
encourage online booking facility.
3) Reduce the idle time of flight
4) Point-to-point service instead of hub and spoke model
5) Reusable boarding passes
6) Cost cutting – Not affiliated with outside flying programmes since
commission has to be shared with them.
7) Customer retention – Club card, after 16 travels, passengers get 1
complementary ticket
 Blur ocean strategy:
1) Fun time in air.
 Other strategy:
1) Employee engagement – Individuality of employees not touched and
make sure have fun activities
2) Cultural committee – 65 member committee across geographical
division meet 4 times a year to ensure preserve and
enhance the southwest spirit.
Strategy

4. Strategy cntd..
3) HRD department renamed as People development department
considering employees as customers emphasising employee
engagement and motivation .
4) Recruiting –
A. Rigorous selection process.
B. Engagement of employees in selection process to check if the
gets along with the organization culture.
C. Engagement of customers for cabin crew recruitment.
D. Innovativeness of candidates assessed by asking them to draw
using crayons.
E. Attitude precedes skill/experience. The later can be developed.
5) Training –
A. Customer centric training
B. New hires are exposed to the history, principles, values, mission
and culture of the company
C. Emphasis on teamwork and teambuilding in all training (Not
encouraging external training so that people get to
interact with all team members.)
D. Climb program – 2.5 days outbound training without mobile phones
or other connections so that employee tend to interact with one
another better.

5.  Southwest spirit
 Dedication , fun and belongingness by encouraging employee referral
and family members at work.
 Transparency / Trust is preserved by constantly sharing information
with employees.
 Family spirit: $ 500,000 voluntarily raised by employees as catastrophic
funds to help other Southwest airlines employee at the time of trouble.
 Organization citizenship: $130,000 voluntarily raised by employees to
help Southwest airlines at the time of oil crisis.
 People working their don’t think of Southwest airlines as a business.
They think it as a crusade.
Strategy cntd..

6. Competitive advantage
 Remarkable productivity of employees – Very low turn around period. (15
minutes. United and Continental have turnaround period of 35 minutes.)
 Fun in air
 Cost cutting by not focusing on non-core activities.
 Low salary for pilots because they use only Boeing- 737 and not much
training is required.
 Efficient cost structure that they can achieve break even point at smaller
volumes.
 Use of less congested airports helping lesser fuel wastage for landing
and take-off.

7.  What does it take to make money in this business/industry?
 Airlines industry is in mature state. So not much product/ service
differentiation is possible. So efficient cost model is sustainable.
 Since the competition is very high in this industry, we will have to follow
multiple strategies which makes it difficult for competitors to imitate.
 Ultimately employees bring revenue for the organization. So proper
employee engagement and motivation is required to enhance their
productivity.
 Why has Southwest been so successful this long?
 Cost cutting
 Blue ocean strategy – Created their own segment in the market by targeting
short distance travel segment at a cheaper rate and eliminating differentiated
pricing
 Service differentiation – Fun activity in air
 Superior employee engagement and motivation to have high employee
productivity.
 Followed multiple strategies like fun in air, superior cost cutting , on time
service, good brand image built over period which is difficult for competitors to
imitate everything at a stretch.
Questions

8.  What is the source of its competitive advantage? Is it sustainable?
 Explained
 What is Southwest's strategy?
 Explained.
 What questions should Ann be raising in the meeting?
 How long will the competitive advantage of Southwest airlines sustain ?
 How long will Southwest airlines will remain unimitated?
 Southwest airlines is having its service across different geographical
culture. How to maintain the underlying culture of the organization?
Questions cntd..

9. Thank You