Southwest Airlines began in 1967 with an idea sketched on a cocktail napkin. It officially incorporated on March 15, 1967 to provide air service between three Texas cities. Southwest faced legal challenges from established carriers but ultimately prevailed, helping deregulate the airline industry. Through strategies like the 10-minute turnaround and offering free liquor with tickets, Southwest established a low-cost leadership model. It has grown to be the largest carrier in the U.S. based on number of passengers by focusing on point-to-point routes, secondary airports, and differentiation through its culture and frequent flyer program.

1. A Marketing Management Presentation

2. Group IV
o Ankit Uttam
o Rahul Raju
o Saurabh Kumar
o Shobhit Deo
o Sweta Chouhan

3. Lets start something!
o Sitting in a San Antonio bar with Herb Kelleher in
1967, Rollin King grabbed a cocktail napkin and
sketched out a simple triangle while posing this
question: What if we were to create a small, local
airline that connected these three cities? Herb
Looked at that napkin and after a long pause said:
Lets run this shit.
o On March 15, 1967 Southwest Airlines was
incorporated.

4. David vs. Goliath
o Braniff Airways and Trans-Texas Airways provided services between these
cities.
o Both the airlines obtained a temporary restraining order from Travis County
District Court prohibited TAC from delivering Southwest’s flying certificate.
o Two went as high as the United States Supreme Court, which ultimately
upheld Southwest's right to fly in Texas. December 7, 1970, the date of the
Supreme Court decision, is considered by many to be the beginning of
deregulation in the airline industry.
o June 18, 1971: Southwest Airlines begins service to DAL, SAT, and IAH.

5. The ten-minute turn
o “Airplanes only make money in the air,” Kevin Frieberg, author of Nuts!
o In 1972, fledgling Southwest was facing turbulent times.
o To meet costs, one of the company’s four planes was sold.
o The birth of the 10-minute turn meant passengers and baggage were
unloaded, the plane was cleaned and restocked, and the new passengers got
on, all in the set time limit.
o He slammed his hand on the table and bellowed out, ‘If you can’t do it I’ll fire
you and keep firing and firing until I find people who can do it,” said Bill
Franklin, former Vice President of Ground Operations.

6. Sir, would you like have some free liquor?
o Southwest offers "half-fare" sale to San Antonio on all flights, $13 one-way,
$25 roundtrip.
o Braniff begins the $13 Fare War offering a $13 fare from DAL to HOU—
Southwest's only profitable route.
o Southwest responds by offering Customers the choice of a $13 fare or a free
bottle of premium liquor with every full fare ticket ($26). (Southwest becomes
the largest distributor in Texas of Chivas, Crown Royal, and Smirnoff for the
following two months.)
o The battle turns out to be the famous $13 Fare War—one of the most widely
reported and publicly watched conflicts of aviation history.

7. Malice in Dallas
o When Stevens Aviation realized that rival company Southwest Airlines had
inadvertently infringed on their slogan, they could have easily taken them to
court. But Stevens Aviation CEO Kurt Herwald had the same thought so many
of us do every single day: “Why involve lawyers in this when we could just as
easily ________?”
o A hilarious series of letters to rival CEO Herb Kelleher later, the _______
between the two unlikely bicep fight participants was set. The winner would
get the slogan; the loser would pay $5,000 to the charity of the winner’s
choosing.

8. We dare you to look at this photo without humming
“The Final Countdown.” - Dallas Morning News

9. Southwest’s Quirky Ways

10. Fun Facts
o Served more than 1.5 billion Customers since inception.
o Operated more than 22 million flights since inception.
o Carried approximately 134 million onboard Customers during 2012.
o Received 114,845 Resumes and 2,499 New Hires.
o During first quarter 2013, 79 percent of passenger revenues were booked
via southwest.com.
o Southwest has 1,355 married couples.
o In 2012, Southwest's Founder and Chairman Emeritus, Herb Kelleher,
was named to Fortune's list of "The 12 Greatest Entrepreneurs of our
Time."

11. Its all about Laxmi!
o Nearly 46,000 People work to deliver exemplary Customer Service
throughout the Southwest and AirTran systems.
o Beginning in the fourth quarter 1976, Southwest Airlines paid its first
of145 consecutive quarterly dividends to our Shareholders.
o Net income in 2012: $421 million
o Net income, excluding special items in 2012: $417 million
o Total revenue passengers carried in 2012: 109 million
o Average passenger load factor in 2012: 80.3 percent
o Total operating revenue: $17.1 billion

12. Cost leadership
strategy
o Southwest strive to be the new generation of flight transportation while
providing luxury at a price anyone can afford.
o Southwest Airlines is already providing low fare customer services in
64 different cities, in 32 states in America.
o It is also showing most consistently profitable record in the world’s
airline industry since its 1st flight took off in 1971.
o It is also Boeing’s best customer, since it bought overproduced Boeing
737 twin Jet at lower rates, and also utilizes only Boeing 737s and
537.

13. o Even when the airline had to sell one of its 4 planes (at
a profit) to survive the first year, it turned this this deal
into a eventual strategy by lessening the turnaround
time , 10 minutes, proving that time is money.
o As a result of management’s decision to maintain its
flight schedule and staff, Southwest’s revenues declined
less than 2% in 2001.It emerged as highest valued stock
of any US airline after 2001.
o Operated only one model of aircraft Boeing
737,medium range narrow body commercial passenger
jet aircraft. Easy to replace parts and ground support
equipment.

15. o Using secondary airports,
Fly short routes, No meals,
No reserved seats, No travel agent reservations,
on-time arrivals, more easily accessible to business travelers were
the factors that also contributed to cost leadership of Southwest
airlines.
o CFO Kelly himself (who later became CEO in 2004 and President
and Chairman in 2008 ) instituted a fuel hedging strategy, that
saved Southwest airlines more than $4 billion between 2000 and
2008.

16. PROFITABILITY
o Fuel Hedging
 Purchased fuel options for years in advance to smooth out fluctuations
in fuel costs.
 Substantially increased its hedging in 2001 in response to projections
of increased crude oil prices.
 Advantaged after Sep.11, 2011 attack, the oil shock from Iraq war,
and Hurricane Katrina.

17. Contribution of Fuel hedging strategies in
financial objectives
1-Plan toward profitability –
 It acted like a form of insurance
and reduced the risks against
volatile swings and rising energy costs.
2-Plan cash flows-
 It helped in managing cash flows such that SW has enough cash in
the bank to cover bills and maintain liquidity.
3-Lower overall fuel expenses.

18. Differentiation Strategy
o One of the company’s main focuses is on differentiation.
o This is an interesting strategy choice because differentiation is usually seen
in high-price and/or unique product companies (such as BMW or
Starbucks).
o Still, this is one of Southwest’s key choices, and they are making it work.

19. Rapid Rewards frequent flyer
program

20. Rapid Rewards
frequent flyer
program.
Emphasis on
flexibility
separates them
from the rest
of the pack.
Chase® Visa
credit card to
help customers
earn and redeem
points.

21. o Southwest’s other key differentiation strategy is what they call “aggressive
promotion.”
o They take their key messages, put them into easy-to-understand
commercials, and let the strategies themselves do the talking.
o For example, Southwest Airlines approach to frequent flyer rewards is
based on number of trips taken; in contrast, other airlines reward people
based on miles flown (Southwest Airlines Annual Report, 2002).

22. Unlike other
airlines, SWA
does not rely
wholly on travel
agents to
distribute their
products.
Travel bookings
on Southwest
Airlines are done
primarily through
direct marketing:
by phone and the
Internet without a
middleman.
Southwest also
does not interline
or offer joint fares
with other airlines,
nor does it have
any commuter
feeder
relationships.
Product Distribution Strategies

23. Focus Strategy
 This dimension is not a separate strategy per se, but describes the
scope over which the company should compete based on cost leadership
or differentiation.
 Does not depend on traditional “HUB & SPOKE” model. Uses “POINT-
TO-POINT” operating model.
 Southwest Airlines’ strategy is to offer their customers low fares.
Southwest continues to be the least expensive airline in its market.
 The airline usually lands at small & secondary airports to steer clear of
the congestion at competitors' larger hubs.

24.  According to the Jupiter Airline CORE, Southwest is one of top airlines
that scored the highest on online sales performance.
 These airlines are best at moving their customers to the online channel.
o Southwest Airline’s third strategy is their devotion to their employees and
customers. SouthWest has created a culture where employees feel like
part of an extended family.

25. SWOT Analysis

26. Pyramid of Primary Focal Strategies
NUMBERS
CULTURE
SCHEDULING
STRATEGY
F
O
C
U
S
CULTURE
SCHEDULING
STRATEGY
NUMBERS
F
O
C
U
S
OTHER CARRIERS
South West Airlines built numbers on its culture where as most
competitors let the culture to shape up by their focus on numbers.