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Southwest Airlines Presentation
Transcript of Southwest Airlines Presentation
Southwest Airlines "You are now free to move
about the country" Where It All Began Over Drinks Rollin King meets with Herb Kelleher Initial combined investment of $560,000 Proposition: Open an airline between
Houston, San Antonio, and Dallas But Wait! There are Barriers to Entry! Other airlines do not want Southwest to share the market Braniff, Trans-Texas, and Continental Airlines take Southwest to court Herb Kelleher's law background helps win the legal battles, which last 3 years Southwest begins operations officially in 1971 “Southwest Airlines would not be in existence today had not the other carriers been so rotten, trying to sabotage us getting into business, and then trying to put us out of business once we got started. They made me angry. That’s why Southwest is still alive. I’m not going to get beaten, and I’m not going to let anyone take advantage. They were too stupid to realize the psychology of the situation, so they just kept plowing ahead" Herb Kelleher's Reflection Started flying between chosen 3 cities
Dallas, San Antonio, and Houston
Used 3 Boeing 737 aircraft
The original company president was Lamar Muse
Flight attendants were all women and uniforms were rather suggestive: "hot pants"
Started making a profit as of 1973 Southwest Airlines Early Life
Sued by the cities of Dallas and Fort Worth to move their airline to the Dallas-Fort Worth Airport in accordance with agreement signed by other airlines in 1968, even though Southwest did not exist to sign it!
Southwest argued to stay in Lovefield, Texas, their original base of operations 1970s Controversy
1978 congress passes Airline Deregulation Act
Southwest given opportunity to expand
Expands to first state outside of Texas by operating in New Orleans, Louisiana Deregulation and Expansion 1988 Kelleher announces plan to
double company size by 1994 Say What?! 1. More frequent flights between current destinations
2. Open new routes to California and the Midwest
3. Buy more airplanes to increase the number of flights 3 Steps
1990 turned an overall profit
1991 had very large expansion; 30 more planes than the prior year along with 5 more cities
1995 reached $2.8 billion in operating revenues Success! Intermission Please fasten your seatbelts as we will be arriving shortly! Please take your seats and prepare for take off! Herb Kelleher The Department of Transportation Triple Crown Awards Won in 1992, 1993, and 1994 How did Southwest actually respond? The only airline that managed to turn a profit at the end of the year Was able to avoid massive layoffs Born: March 12, 1931 in Camden, NJ
Parents: Harry and Ruth Kelleher
Worked in Campbell’s soup factory with father
Formed special bond with mother
Biggest influence on his development of a work ethic Herb's Early Life Wesleyan University
Met future wife Joan Negley
Persuaded to try a career in law
New York University Law School
Stayed up all night drinking and partying College Years Jokes in the workplace
Hires individuals with a sense of humor
Avoids a rigid or strict company atmosphere
Affection for cigarettes, bourbon, and bawdy stories
Will stay awake until 4 in the morning to find out what is wrong, and then fix it Patented Personality “Offering low fares provides the largest return to our shareholders” Fair Pricing and no hidden fees 15 minute turn arounds Kelleher reads and responds to customer mail “A happy employee is a productive employee” Upside-down Hierarchical Pyramid Every person and every job is worthy just as much as any other person and any other job 'Everybody pitches in' theory Gives certain departments vetoing power
Employees can send ideas to him
Employees can send ideas to each other
Does not allow suggestion boxes
Gives supervisors the job of listening to frontline employees opinions Encourages Flow of Ideas What do we think of
our CEO? “True charismatic leader” - Pilot
“He really cares to let people know he cares” -Pilot
“Genuinely interested in creating jobs” – Flight Attendant
“If I didn’t work at Southwest, I would not work in this industry” – Agent at Phoenix station Employees on Kelleher Accomplishments Fought through lawsuits and judgment on deregulation on Airline Industry
“CEO of the Year” 1999 and 2001
“CEO of the Century” by Texas Monthly
President and CEO 1981-2001
Executive Chair 1978-2008 Intermission Prepare for another landing! Airline Deregulation Act "An Act to amend the Federal Aviation Act of 1958, to encourage, develop, and attain an air transportation system which relies on competitive market forces to determine the quality, variety, and price of air services, and for other purposes" Essentially removed government's role in airfare pricing and entry into the industry by airlines like Southwest The Wright Amendment The controversy led to a new law which prohibited any air carrier from offering direct service from Lovefield to any place beyond Texas, Oklahoma, Louisiana, Arkansas, and New Mexico It was officially passed to encourage the use of the Dallas-Fort Worth Airport, but underhandedly targeted at stopping Southwest from expanding There is good news for Southwest! Don't Worry! Herb Kelleher's Management Style
The 7 S Model Structure Strategy Systems Superordinate Goals Skills Staff Style “Top-down” pyramid
Task tribe Relational Coordination
Effective Communication of Ideas
Departments granted power for veto when hiring Unique Niche
Air Traffic Control
and Fun Flexible Jobs
Bridging the Work/Family Divide Informality
Credibility and Caring
Athena Goddess Profit
Commuter flight for the masses
Primary Goals So What's Next? Southwest Today Flies about 70 million people per year Largest airline based on the number of passengers 60 distinct destinations across the country Still manages to keep employee productivity high Boeing 737s are still the only planes the company flies The New Guy Kelleher's successor: Gary Kelly Southwest Today $17 billion in revenue
United, Delta, and AMR have larger revenues
Share price: approx. $9.00
Grown and stayed stable
'Nuts about Southwest' Employees Customers Criticism of Kelleher and Southwest Low Pay
"The Southwest Way"
Longer hours than competition Forced to buy a second seat
No first class or "frills"
Herb Kelleher says "employees come first" Outside
Critics Conservative financial policy
Elimination of bureaucracy Now it's your time to shine! Concept Questions Which ethical lens do you think best describes Herb Kelleher? Ethical Lens Reputation Lens: Be compassionate and virtuous Concept Questions How does Kelleher compare to Jack Welch?
What are his similarities and differences?
Consider the 7 S model as well as managerial style, personality, goals, etc. Cut costs
Creativity and innovation
Professional informality culture
Passion Similarities with Jack Welch Layoffs
Reaching out to other businesses
Focus on community Dissimilarities with Jack Welch Concept Questions What would Peter Drucker think of Herb Kelleher? Marketing Concept Questions What factors of Cohesion make Southwest Airlines successful? Factors of Cohesion Get Ready, it's time for a Mini Case Analysis! What would you do as CEO of Southwest Airlines after September 11, 2001? No baggage fees Businesses did not shut down Took a hit for the short run to maintain long term growth Gary's first opinion of Southwest?
"This company is toast" Relationship Lens: Be fair and consider those with no power Family atmosphere Superordinate goals Shared attitudes and values Increased interactions Low external interactions Are there more? Innovation Productivity Creative
Knows what customer wants Convenient
More economic Greatest output for the smallest effort So...
What's your opinion of Herb Kelleher? Questions? Southwest Airlines Thank you for your attention during our flight!
Enjoy the rest of your day! Fair to Employees Fair to Customers Job Security and
No Layoffs Able to maintain the Southwest model Kelleher becomes CEO in 1981 Southwest eventually wins the court case