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Southwest Airlines 2002 An Industry Under Siege

Solution Id Length Case Author Case Publisher
2841 1846 Words (8 Pages) James L. Heskett Harvard Business School : 803133
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Herb Kelleher and Rollin King founded Southwest Airlines in 1967. Southwest Airlines has always conducted its operations focusing on two objectives, i.e., reducing expenses and prioritizing punctuality. To fulfill these goals, Southwest Airlines eliminated in-flight meals and saved time before and after flights. To further minimize costs and improve turnaround times, Southwest avoided the hub-and-spoke model, reducing delays and potential passenger and baggage issues. Southwest Airlines started with a strong brand identity by focusing on the "love theme" and offering intrastate flights from less congested airports. The company followed an LLC model (Low-Cost Carrier). The low-cost flights with the maximum number of daily flights and minimized aircraft turn-around time assisted the company in obtaining financial success. The profitable strategy adopted by the company's management, using a point-to-point route system to speed up flight turnaround times, assisted in the financial success. Southwest Airlines acquired Morris Air in 1993, whose operating stations were distinctive to Southwest Airlines. This assisted the company in expanding its operations network and extending to the Northwest.

Following questions are answered in this case study solution:

  1. How does the company make money when other airlines do not? What are the most important contributors to its financial success?

  2. How should management respond to the fact that SW Airlines has fallen next to last place among major airlines in on time performance as of Sept 2002?

  3. Once operations are stabilized would you recommend to the management that it resumes its historic growth rate of 10 % to 15 % per year? Why? If you recommend resumption of previous growth rates what form should this growth take? For example, should it be achieved within the current network or through an expanded network? By means of a greater proportion of long haul flights (over three hours in length) or not? Why?

  4. If you do not recommend a resumption of previous growth rates, how would you suggest dealing with the consequences of reduced growth?

  5. What are the implications for SW Airlines of the actual or threatened bankruptcies of other major US airlines?

Case Study Questions Answers

1. How does the company make money when other airlines do not? What are the most important contributors to its financial success?

Southwest Airlines started with a strong brand identity by focusing on the "love theme" and offering intrastate flights from less congested airports. The business model of Southwest Airlines has been one of the most important contributors to its financial success. The company followed an LLC model (Low-Cost Carrier). The low-cost flights with the maximum number of daily flights and minimized aircraft turn-around time assisted the company in obtaining financial success. Additionally, focusing on one type of aircraft, flying from low congested airports, and partnering with labor unions contributed to the company's financial success.

The operations of Southwest Airlines are focused on two objectives:

1. Reducing expenses

2. Prioritizing punctuality 

To achieve these objectives, Southwest Airlines implemented multiple measures, such as eliminating in-flight meals and saving time before and after flights. The company also trained its employees to be highly adaptable to keep flights on schedule. To further minimize costs and improve turnaround times, Southwest avoided the hub-and-spoke model, reducing delays and potential passenger and baggage issues. Moreover, the operations of the company gave it a competitive advantage in the industry. The profitable strategy adopted by the company's management, using a point-to-point route system to speed up flight turnaround times, assisted in the financial success. Point-to-point service refers to consistent traveling by reducing connections and the total time of the trip. 

Additionally, Southwest Airlines acquired Morris Air in 1993, whose operating stations were distinctive to Southwest Airlines. This assisted the company in expanding its operations network and extending to the Northwest. The growth strategy of Southwest Airlines was steady, which became famous in the cities as "the Southwest effect." Therefore, the policies introduced by the dynamic management of Southwest Airlines helped the company to gain a competitive advantage in the industry. 

2. How should management respond to the fact that SW Airlines has fallen next to last place among major airlines in on-time performance as of Sept 2002?

The management of Southwest Airlines should analyze the company's and its competitor's performance to identify the loopholes that led to the decline. The company should conduct SWOT and PESTLE analysis to identify the factors which led reached Southwest Airlines' performance from next to last place among major airlines in the country. Southwest Airlines offered a maximum number of daily flights and minimized aircraft turn-around time, leading to customers catching up on the flights at the last moment. Additionally, the revised policies implemented by the government on security searches and inspection of the items of baggage resulted in flight delays. To respond to this issue, the management of Southwest Airlines must respond to this issue constructively by critically analyzing the factors which led to the airline's fall from next to last place among major airlines in on-time performance as of September 2002.

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