This case analysis explains how Southwest Airlines Company culture and intellectual assets adapt, changes and grows as the environment of the airline industry changes. Southwest Airlines Co. was established on March 15, 1967, by Herb Kelleher. The company was originally named Air Southwest Co. but was changed in 1971. According to the Southwest Airline Co website their culture purpose and vision is to provide a friendly, reliable and low-cost travel while becoming the World’s most loved, flown and profitable airline. The airlines’ industry as mentioned by Porter the creator of the Five Forces Model is not profitable so why is Southwest Airlines still in business?
Who is Southwest Airlines?
Southwest Airlines Co. has grown from a small airline carrier in the state of Texas back in 1971 to the third largest airline in the United States as of 2018. Southwest Airlines Co has since its beginnings has become a leader in low fare cost and employee and customer friendliness. The airline has been known for having a higher turnaround of planes thus reducing the cost to increase the profit. Culture of fun people creating an environment where employee loyalty is high even though the pay is low as compared to other airlines.
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Adaptation, Changes, and Growth
Southwest Airlines Co has experienced leadership changes, culture changes and cost of fuel and wage changes. The case study discusses the leadership changes from Kelleher to two of his close aides (Dess, 2019). While Kelleher was the leader, he kept a close relationship with its employees but when management changed, the increase in the number of employees made it harder for new management to carry-on Kelleher’s bond with all of the employees. Employees were not happy with new management and Unions were introduced. Unions created a higher tension in the relationship between management and the employees, therefore, creating a challenge to keep the original culture of the company intact (Bailey, 2019). An increase in fuel and wages also affected the company. In 2006, the average seat mile (ASM) went up from 7.07 cents in 1995 to 8.8 cents.
Southwest Airlines Co encounter all the above-mentioned changes but was able to adapt and recognize at all times what their market focus was in the airline industry. Their market focus was smaller airports, point-to-point between cities trips, and maximizing their profits rather than expanding into a bigger city or to international flights. The airline was dedicated to searching for ways to lower their costs so productivity and quality could be increased. The company started to cut costs by putting an end to meal service and instead of serving beverages and snacks to passengers during the flight. The cut of costs allowed Southwest Airlines Co to strategized and generate the shortest turnaround time of flight thus allowing longer fly hours used in a better efficient way.
Online services have been a huge success in the growth of the company as the industry changes. “It’s 10 times cheaper to deliver to customers through the online service than through a travel agent, Kelly said, and costs 5 times less than using Southwest’s own reservation staff” (Essay, 2018). Southwest has invested its funds in the training of its employees with the belief that by satisfying its employees they will, in turn, satisfy its customers. The offering to customers of “a free bag” has been a game-changer for most consumers as this will benefit the customer’s pockets and it is a competitive advantage from the competitors.
Recommendations
Southwest Airlines Co’s priority should be to treat the passengers as best as they can because this will increase the number of passengers. An increase in the number of passengers will increase the liquidity, therefore, increasing the profits. Management should come forward to work in a team as that will give motivation to the employees and this would lead to the growth of the company. At last, the airline should research for help from its financial team to make a better capital structure for the company.
References
- Southwest Airlines, 2019. Culture Southwest. Retrieved from https://careers.southwestair.com/culture
- Dess, G. G., McNamara, G., & Eisner, A. B. (2016). Strategic management: text and cases (8th ed., pp. 428-429). New York: McGraw-Hill Education.
- Sawe, Benjamin Elisha. (2018, January 31). The Largest Airlines in the US. Retrieved from https://www.worldatlas.com/articles/the-largest-airlines-in-the-united-states.html
- McGee, W. (2017). How to Get the Cheapest Airfares When Booking Flights for Several People. Retrieved from https://www.consumerreports.org/air-travel/get-cheapest-airfares-when-booking-flights-for-several-people/
- Evans, L. (2019). Strategic Analysis of Southwest Airlines Case Study Management Essay. Retrieved from https://www.panmore.com/southwest-airlines-generic=strategy/
- Bailey, J. (2019). How Southwest Pioneered the Low-Cost Carrier Model. Retrieved from http://simpleflying.com/southwest-lcc-model/
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