southwest airline case study
Post on 24-Nov-2014
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Southwest Airlines Act II – An Airline in Trouble ?
Presented By Swagat Sen Gupta 48-B Akshat Jain 60-B Pooja Katiyar 31-B Namit Kewat 23-B Amit Tripathi 6-B
Presented To Prof. Hitesh Manocha
Background
• In 1966, Herb Kelleher, Rollin King and John Parker formed the company.
• Initially called Air Southwest Co. but name changed to Southwest Airline Co. in 1967.
• Commenced operations in Texas connecting Houston, Dallas, San Antonio.
• Jan 1971, Lamar Muse was appointed first CEO. • 1973 was its first profitable year. • Kelleher became chairman in 1978. • Southwest started flying out of Texas to New Orleans in
1979.
Background
• After September 11 attacks, Southwest was the only airline to remain profitable while others grounded 240 planes and 70,000 workers.
• In 2001, Kelleher stepped down as CEO and was succeeded by Parker
• In 2004, Southwest had 34000 employees and flew to 58 cities.
• In 2004, Parker resigned and Kelly became CEO.
Southwest’s Success Story
• Southwest was one of the biggest success stories in America.
• Despite a no frills service, it was able to take away market share from competitors in most markets.
• It was able to achieve low fares by eliminating unnecessary costs.
• Employees experienced a great work culture at Southwest
Features of Low Cost Airlines
• Operate only one kind of aircraft. • One class carriers offering standardized treatment. • No frills services • Refreshment is limited to light snacks. • Seats not allocated to passengers on flight. • Faster turnaround of planes • Used low traffic secondary airports which are cheaper. • Fly in short haul point to point routes. • Operate planes with minimum possible employees. • Cross utilize employees. • Major portion of ticket sold over internet.
Problems at Southwest Labor Problems
– Pay received at Southwest was much lower than competitor airlines though Southwest was most profitable airline in US.
– Flight attendants demanding better terms of working.
– Remuneration for all the work they did and not just for official duties.
– Payment for 4 week training period.
– Special compensation for working on holidays.
– Competitor airlines giving more frequent raises.
Problems at Southwest
Customer Relations
– Few staff at airport made it difficult to get tickets fast and people had to stand in line for a very long time.
– Airline refused to accept e-mail inquiries.
– Southwest asked customers with a question to call airline’s customer service number.
Problems at Southwest
Rising Costs
– Rising fuel prices.
– Increasing labour costs.
– Shifted flights from non-profitable routes to profitable routes.
Problems at Southwest
Competition
– Rise of several low cost competitors.
– Main competitors are JetBlue and AirTran.
– Competitors offer more frills than Southwest.
– JetBlue was most punctual in industry, offered lowest prices, best record in baggage handling.
• Low costs
• Service innovation
• Technological expertise
• Financial Position
• No-frills service
• Image
• Safety record
• Customer Service
SWOT Strengths
• Multi-country coverage • No baggage transfer
outside southwest system
Threats
• Growth Opportunities for smaller urban airport destinations
• Societal Values in the changing economy
• Rebound opportunity as a result of 9/11 decline in market size
• Long-term industry growth
Opportunities
• Costs: Aviation fuel, labor
• Terrorist attack on an aircraft
• General economic downturn
• Number of rivals and their relative size.
• Communication technology and e-commerce
• Extent to which rivals use economy of scale
• Declining consumer confidence
• Diminishing pool of qualifies employees
Threats
PEST ANALYSIS Political
• Deregulation in 1978.
• Post 9/11 attacks, government helped major airlines get out of financial trouble.
Economic
• No layoff
• Under unfavorable economic conditions
– People looking for cheaper travel options.
– Low cost airlines are better option.
Social
• People trust southwest
• Employee trust southwest
Technological
• Use of e-tickets.
• Use internet to compare prices and find best options for trips.
• Other planes can be used with better technologies.
Porter’s 5 Forces model
Competitive Rivalry within
Industry = High
Threat of New Entrants = Low
Threat of Substitute
Products = High
Bargaining Power of
Customers = High
Bargaining Power of Suppliers
•Food & Drinks = Low
•Fuel = High
Recommendations
• Introduce continuous learning programs that will be used to retain current employees.
• Create a promotional campaign like buy one ticket and get discount on the return ticket.
• Improve turnaround times.
• Improve employee-management relations.
• Provide meals for sale on flights.
• Provide seat numbers to the passengers.
• Provide more legroom and comfortable seats to the passengers.
THANK YOU
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