Southwest Airlines Act - II
An Airline in Trouble?
A Presentation by Group-3
Team Members of “Group - 3”
• Abhishek Mishra (03 A)
• Bhoopendra Tiwari (13 A)
• Javed Qureshi (23 A)
• Prashant Mishra (33 A)
• Rohan Tondon (43 A)
• Sushant Kumar (53 A)
Features of Low Cost Airlines
• Operate in only one kind of aircraft.
• Standard treatment for all passengers.
• Not serving of meals or drinks.
• Faster turnaround of the planes.
• Operates with minimum employees
possible.
• Sell major part of tickets on Internet.
Southwest Airlines
A Brief Overview
• In 1966, Herb Kelleher along with Rollin King
conceptualized the idea of low cost airline
service.
• After battling with initial legal problems, started
operations in 1971.
• Started its operation in Texas State.
• In 1973, posted first profit year.
• In 1977, the airline stock traded in NYSE.
• It remained a benchmark for low cost airlines
and a successful brand in US.
Vision of Southwest Airline
• To provide the best service and lowest fares
to the short haul, frequent-flying, point-to-
point, non-interlining traveler.
Mission of Southwest Airline
• The mission of Southwest Airlines is
dedication to the highest quality of
Customer Service delivered with a sense of
warmth, friendliness, individual pride, and
Company Spirit.
Southwest’s Success Story
• Since its inception, it posted profit for
continuous for 31 years up till 2003.
• Despite,being a low cost fair airline, it became
fifth largest airline in terms of number of
passengers in US.
• After, 9/11 attack in US,it was only major
airline, to remain profitable.
• Main reason to remain successful was its
culture helping to cut down its unnecessary
costs.
Kehellher’s role
• He was a dynamic and charismatic
leader for the airline.
• Developed employee oriented culture.
• He resolved issues even after his
resignation from the CEO post.
Troubles Surging Ahead
• Labor Problems.
• Customer Relations.
• Rising Costs.
• Looming Competition.
• Filling in Kehellher’s shoes.
Labor Problems
• Remain “one of the best companies” to work.
• Relationship between management and
employees were cordial.
• However, in 2002, flight attendant’s union
protested against pay and working conditions.
– New contract.
– But it increased operating costs.
Customer Relations
• In the wake of securities after 9/11, first
come first serve service was aborted,
creating a bad image of airline.
• Less staffed airport system also
resulted into difficulties in getting tickets.
Rising Costs
• Competitive Advantage - Cost at
minimum level and faster turnover.
• Labor’s costs, rising fuel prices.
• In response, airline decided to shift its
service over more profitable routes.
Looming Competition
• New entrants in industry - JetBlue,
AirTran - providing better services.
• The gap between low cost airlines and
full service airlines was closing down
resulting into increase in competition.
Imitating Kehellher’s Legacy
• Difficult to match iconic image.
• Resulting in less cohesion between the
employees.
PEST Analysis
• Political & Legal -
– Strict safety regulations post 9/11
• Economical -
– Rising price of ATF.
PEST Airlines
• Social -
– Dissatisfied customer with strict safety
regulations.
• Technological -
– Greater use of Internet for ticket selling.
SWOT Analysis
• Strength -
– Brand Image
– Experience of providing best low-cost airline
service
• Weakness -
– Loss of charismatic and dynamic leader
– Difference of top-level management and
employees union
SWOT Analysis
• Opportunities -
– Can look for market other than US.
– Can find way to provide better service at lower
cost.
• Threats -
– Increasing competition.
– Increasing costs.
– Strict security regulation.
Porter’s 5 Forces Model
• Threat of New Entrants - Low
– Requirement of high capital investment.
– High brand image to overcome.
• Power of Buyer - High
– Low cost of switching.
Porter’s 5 Forces Model
• Power of Supplier - Low to Med
– Low power of airplanes provider.
– High power of ATF provider.
– Planes landing not on the main airports.
• Threat of Substitutes - Med
– Rail/roads services.
• Extent of Competitive Rivalry - High
– Many competitors providing better services at lower costs.
Recommendations
• Help of Kehellher in improvising the
image of Kelly in front of employees.
• Grooming of “potential” candidate by
Kehellher.
• Expand service out of US.
THANK YOU
