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Southwest Airlines

How a small Texas start-up became the nation's most profitable airline.

Ben Ricard

on 31 March 2011

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Transcript of Southwest Airlines

Brandon Lin
Brian Pearson
Ben Ricard
Scott Essen In 2010, Southwest flew more than 86 million passengers to 69 domestic cities, operating more than 3,200 flights a day. How was Southwest able to have 31 consecutive
years of profitability from 1972 to 2003? Market Penetration Low prices and creative advertisement In 1972, Southwest caused
a fare war in Texas forcing
competitors to slash prices
and offer more services
such as free beer, hot/cold
towels, dollar drinks, and
more-frequent flights. Southwest Timeline 1967
Founded by Rollin King 1968
Lamar Muse appointed CEO; Herb Kelleher obtained CPCN 1971
began services 1979
Muse resigns, Kelleher replaces 2001
Kelleher steps down,
James Parker replaces 2004
Gary Kelly becomes CEO So, what are your thoughts on Southwest? Southwest started with only... Flying only to Dallas, Houston, and San Antonio How is that profitable? LOGISTICS To further increase their competitive advantage, Southwest became known for its "quick turns" by not allowing a plane to stay grounded for more than 10 minutes. Flights at 75 minute intervals (Dallas-Houston; 12 round trips a day)
150 minute intervals (Dallas-San Antonio; 6 round trips a day) Southwest's Strategy "short-haul, point-to-point"
no-frills, low-cost flights to and from secondary airports.
"spider-web" system Successful Marketing Texas International
was too dull Braniff Airlines was
too conservative Southwest created a
"fun image" with bright
pants, "LUV" potions/bites,
and of course "Shamu One" Personnel "find the right people to hire, at all levels within the organization, and spend time training them" Culture "family-friendly"

"Fuel from the Heart" Program What challenges is Southwest facing in
the future and how should they meet
those challenges? Discussion Question 1 Challenges Risky Business Iraq war, SARS, weak economy, high energy costs, terrorist threats New demands of the 21st Century Turnover in Senior Management Intense labor issues Post 9/11 security New low-cost carriers forced Southwest to rethink no-frills policy July 30, 2004; Southwest employees ratified a new contract that gave them an average of 31% pay raise over 6 years. This new contract settled a two-year labor dispute Increased Competition In 2001, Southwest began renewing the interiors and exteriors June 2003; Southwest outfitted their Boeings with winglets. Gave Southwest planes a distinctive look and improved performance of planes. Other technological improvements include rapid-check kiosks to check-in bags and obtain boarding pass. Also the use of southwest.com Discussion Question 2 Will Gary Kelly, the new CEO, be able to maintain the profitability of Southwest Airlines while insuring the continuation of their unique culture that former CEO Herb Kelleher built? Gary Kelly has been involved with Southwest since 1986 as a controller, and served as Southwest's executive vice president and CFO since 2001. Kelly became CEO in 2004. The answer is Yes. ...but can he be as successful as... Since 2004, Southwest has been consistently profitable. Gary Kelly was voted CEO of the year in 2008 and 2009. Can anyone name another company with a similar culture to Southwest? is a company with a similar focus on providing a positive and constructive management style that emphasizes employee welfare. 10 Insight From 11 Months of Working At Google
by Avinash Kaushik
Analytics Evangelist for Google Marketing Empowering FUN INSPIRING IMPACTFUL SUPRISING INSIGHTFUL Three Key Reasons Empowering
Food and Facility Thoughtful and Caring executive chefs
healthy creative personalized environments
open layouts encourage collaboration micro efficiencies
tech support
hardware depots
touch of extra people sit together
cross functional teams
holistically responsible groups
scale of impact

"If you treat your employees exceptionally and give them room to breath, then they will reward you exceptionally." Avinash Kaushik
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