Southwest Airlines - Case Study

Southwest Airlines - Case Study

Southwest airlines has the lowest operating costs of any U.S. airlines largely due to the operating strategies that lead to the faster turnaround times between flights and fewer total employees per aircraft. Southwest also has one of the best overall customer service records. This allows Southwest to be a low cost carrier while still remaining profitable.

One of the main reasons for the low operating cost is the logistics where Southwest offers point to point service that allows for more direct nonstop routing than the traditional hub and spoke system, which minimized connections, delays and total trip time. The point-to-point system enables Southwest to offer frequent, conveniently timed flights to the airport. To maintain the fast turnaround of the flights Southwest mainly uses secondary airports which are less congested than the larger airports. Southwest boarded 509.8 passengers per employee which helps the company save on wage and compensation expenses. As a result of this, Southwest's operating margin is higher than its competitors.

Southwest should make 2 changes to their operating procedure simultaneous. Firstly, revamp its schedule to improve its reliability by adding more minutes to all its flight times. It should build more minutes on the ground so that a late arrival wouldn't mean a late departure for the same airplane. Secondly, it should change its boarding policy. Southwest should require passengers to arrive at the gate with greater lead time to accommodate for the extra security procedures after 9/11.

By looking at the past, important insights about the company's culture and philosophy can be discovered. The company has been very careful about its expansion even though it had opportunities to have double digit growth in the past. Many airlines have expanded to fast, lost control, and going under. Southwest decided to take a more conservative approach, "go-slow," a philosophy which comes from Herb Kelleher. The company has a policy that even if a city offers money to the company they cannot enter that market. Rather, the only way Southwest will enter a market is if conditions are favorable to the company, including, but not limited to weather and economic conditions. Southwest should definitely continue with the same strategy of sustained growth of 10% to 15% since the conditions after 9/11 are uncertain to some extent.

The way Southwest handles their growth brings up two important points about the company. The first is that the company does not want the growth of their organization to get out of hand. They have watched other companies in the past and have learned from their mistakes this efficient growth strategy is evidenced by the fact that the top 100 most profitable markets for airlines account for 75 percent of Southwest's profits.

Southwest Airlines strategy has