Case Study on Southwest Airlines
As of Year 2004, the American Airline industry stood at around 783 Million USD/year in terms of operating revenue with American Airlines, United and Delta being the biggest players. Southwest was the 6th largest player in the market. Since 2001, the airline industry on the whole has been suffering he losses annually. The seat-miles flown have increased manifold over the long term (from 1989 to 2004) indicating increase in adoption of air travel among the population while the revenue per mile has stayed almost constant over these years. The passenger load factor has also jumped from low 60s to high 70s for most airlines.
Ever since the deregulation of the airline industry in 1978, the US airline industry has seen the entry and exit of several players. The industry on the whole has the worst net profit margin of any industry owing to its high fixed costs.
Southwest has always focused on being a “no frills” airline. SouthWest primarily depended on short haul, point to point flights rather than maintaining a hub and spoke model like most of its competitors. SW flew only small planes and offered low costs. Operationally, SW extracted most from all its resources. SW had the least turnaround times allowing them to operate more flights per day. Also, they had a comparatively new fleet which resulted in lower maintenance costs. SW did not use computerized reservation system and depended mainly on travel agents. Going further, they were the first to launch an internet site which further reduced cost of booking tickets. They also introduced a frequent flyer program based on the number of flights a customer booked rather than the miles flown. Since, SW flew short haul flights, this was more beneficial for the airline.
SW was a desired place of work in the airline industry owing to its engaging work culture. It had low employee turnover and employees were loyal to the company and its CEO. Most of SWs employees were unionized but they were separate unions from those of
Ever since the deregulation of the airline industry in 1978, the US airline industry has seen the entry and exit of several players. The industry on the whole has the worst net profit margin of any industry owing to its high fixed costs.
Southwest has always focused on being a “no frills” airline. SouthWest primarily depended on short haul, point to point flights rather than maintaining a hub and spoke model like most of its competitors. SW flew only small planes and offered low costs. Operationally, SW extracted most from all its resources. SW had the least turnaround times allowing them to operate more flights per day. Also, they had a comparatively new fleet which resulted in lower maintenance costs. SW did not use computerized reservation system and depended mainly on travel agents. Going further, they were the first to launch an internet site which further reduced cost of booking tickets. They also introduced a frequent flyer program based on the number of flights a customer booked rather than the miles flown. Since, SW flew short haul flights, this was more beneficial for the airline.
SW was a desired place of work in the airline industry owing to its engaging work culture. It had low employee turnover and employees were loyal to the company and its CEO. Most of SWs employees were unionized but they were separate unions from those of