Southwest Airlines Operations – Strategic Perspective

Background:

Southwest Airlines is the largest airline, which is measured annually by the number of passengers transported in the United States. It is also known as a & # 145; discount airlines & # 146; as opposed to the big rival in the industry. Rollin King and Herb Kelleher founded Southwest Airlines on 18 June 1971. His first flights came from Dallas Love Field to Houston and San Antonio, a short hopless and simple fare structure. The airline started with a simple strategy: If you get to your passengers to their destination when they want to go in time for the lowest possible price and make sure they feel comfortable, people fly to your airline. & # 148; This approach was key to the southwestern success. Currently, Southwest is serving about 60 cities (31 states), delivering a total of 71 million passengers (in 2004) and a total of $ 6.5 billion in operating revenue. Southwest is publicly available for LUV & # 148;

* The first major airline to fly a single type of airplane (Boeing 737s)

* The first major airline to offer a travel system wide including a frequent flyer program number

* The first airline in 1973 created a profit sharing program for its employees

* The first major airline to develop and offer a website for online booking. In 2001, about 40 percent (2.1 billion dollars) of passenger revenue was generated through online bookings [http://www.southwest.com]. The cost of booking the Southwest website is about $ 1, compared to a $ 6 to $ 8 travel agent reservation.

* Key Performance Benefits

* Low Operational Cost / High Performance

* Award Winning Customer Service

* Human Resource Exercises / Working Culture

Operational Analysis & # 150; Versatile sizes:

Southwest has a clear advantage over other airlines in the industry by implementing an effective and successful operational strategy that is an important pillar of overall corporate strategy. Below are some of the competitive dimensions that will be studied in this study

. Operating Costs and Efficiency

2. Customer Service

3. Employee / labor relations

4. Technology

1. Operational Costs and Efficiency

After all, airlines are generally embarrassed. But how is Southwest Airlines profitable? Southwest Airlines, according to Kelleher, believes the lowest costs and the strongest balance in its industry. The two largest airlines operating at # 150; labor costs (about 40%) and fuel costs (about 18%). There are other ways to keep Southwest low operating costs – selecting flight point-to-point routes, selecting secondary (smaller) airports, maintaining consistent aircraft, maintaining high aircraft utilization, promoting e-ticketing, etc.

Southwestern labor costs typically account for about 37% of their operating costs. Perhaps the most important element in the business model of successful low-cost airlines is to achieve significantly higher labor productivity. According to a recent HBS case study, Southwest Airlines is the most "The American Airline (approximately 81% of the employees belong to a trade union) and its average pay rate is higher than that of the US airline. The advantage of low-priced freight work is much more flexible working methods, the use of the cross-use of all employees (unless licensing and safety standards are allowed) .These cross-use and long-term cooperation culture between workgroups result in lower unit labor costs In 2000, in the fourth quarter of 2000, (ASM) total labor costs were more than 25% less than the United States and the US and 58% less than US Airways

simply because they were working In a 2001 study, the productivity of southwestern employees was more than 45% higher than US and US in spite of the fact that these networks are considerably longer and have a larger average flight size. Consequently, Yugoslavia's continued efforts to reduce the lowest wage costs, Southwest is able to positively influence basic incomes

Fuel costs

Fuel costs are the second-largest labor cost for the airlines and 18 percent of the carrier's operating costs. Airlines that want to prevent huge fluctuations in operating costs and choose basic profitability to cover fuel prices. If airlines are able to control fuel costs, they will more accurately estimate budgets and projected revenue. As a result of increasing competition and aviation as commodities, price competitiveness was key to the survival and success of airlines. It was difficult to pay higher fuel costs for passengers by raising ticket prices due to the highly competitive nature of the industry.

Southwest has successfully implemented its fuel-saving strategy to greatly save fuel costs with the largest hedging position among other carriers. In the second quarter of 2005, the unit costs of Southwest units decreased by 3.5%, even though jet fuel costs increased by 25%. During the financial year 2003, Southwest has much lower fuel costs (0.012 ASMs) compared to other airlines except JetBlue, as shown in Exhibit 1. In 2005, 85% of airlines' fuel needs were covered by $ 26 a barrel. The world's oil reached $ 68 per barrel in August 2005. Only in the second quarter of 2005, Southwest reached $ 196 million in fuel savings. The state of the industry also suggests that covered airlines have a competitive advantage over non-covered airlines. Southwest announced that it will increase its performance-boosting Blended Winglets in 2003 at Boeing 737-700 & # 146; to its present and future fleet. Visually distinctive Winglets improve performance by increasing the range of the aircraft, saving fuel, reducing engine maintenance costs, and reducing take-off noise.

Point-to-Point Service

Southwest operates a flight point service to maximize operational efficiency and cost-effectiveness. Most flights are short-term, on average about 590 miles. It uses a strategy to keep airborne flights more frequently and to achieve better capacity utilization

Secondary airports

Southwest flies to secondary / smaller airports to reduce travel delays and therefore provides excellent service to its customers. That led the industry on site. Southwest has also been able to reduce airport operating costs relatively better than rival airlines

Consistent aircraft

In the heart of Southwest's success is the only airplane strategy: its fleet is exclusively Boeing 737 jet. The common fleet significantly simplifies scheduling, operations and maintenance of the flight. The training costs of pilots, ground crew and mechanics are lower because only one aircraft is learned. Purchasing, purchasing and other operations are also considerably simplified, reducing costs. Consistent aircraft allow Southwest to use the pilot more efficiently.

E-Ticketing

The idea of ​​a ticket-free journey was a great advantage in the Southwest because it could reduce your allocation costs. Southwest became electronic or airless until mid-1990s and today 90-95% non-licensed. Customers using credit cards are eligible for online transactions, and today's Southwest.com bookings account for about 65% of all revenue. CEO Gary Kelly believes that this idea will continue to grow and it will not be surprising if e-ticketing made up 75% of South-South-South revenue by the end of 2005. In the past, when you paid 10% agency fee, your booking was about $ 8. However, South West currently pays 50 cents and $ 1 per reservation for electronic transactions, which is a huge cost savings

. Employee and Labor Relations

Southwest was highly valued by the innovative management style. It maintains a strong emphasis on high-performance relationships, and its folk practices are key to the unmatched success of airlines.

Mission Statement

For Our Colleagues

& # 147; We are committed to providing our employees with a stable working environment with equal opportunities for learning and personal development. Creativity and innovation are encouraged to improve Southwest Airlines efficiency. First of all, employees receive the same concern, respect, and caring attitudes within the organization that they expect to share from each other with each and every southwest customer. According to the southwest mission statement, the company has a strong commitment to its employees. The company gives its employees the same respect as their customers. The statement of the southwestern mission is unique as it recognizes the importance of its employees within the broader business strategy, which highlights excellent customer service and operational efficiency. Employees return the respect, loyalty and confidence shown by Southwest. Southwestern employees are known for their loyalty, commitment, attitude, and innovation. Employees differ in the rest of the southwest and in the aviation sector.

Letting

Western letting policy is unique not only within the aviation industry, but is also wider and is looking for conditions that will go to the southwestern culture. There are wide-ranging procedures for positive attitudes and engagement. Those who do not have these qualities will die. Colleen Barrett, an operational officer outside the Southwest, states that leasing is critical, as it is not possible to institutionalize behavior. Instead, you need to identify people who are already practicing the behaviors you are looking for. Then you can allow your employees to make themselves and make decisions based on common sense and natural tendency. 1

Recruiting and interviews in Southwest are a two-stage process. The first step is a group interview led by staff assessing potential candidates' communication capability. The next steps in the process are in an interview where the attitudes of the candidates and the service of others are valued. These admission criteria apply to all workflows, as all Southwest employees have a customer service role. A critical part of the southwest operational strategy is that every southwestern workplace is a customer service position, regardless of whether it is directly related to the customer or internal.

The table below shows that, despite Southwest being the most union-based airline, about 80% of the contractual negotiations between the unions and the southwest are much shorter than other major carriers. This shows how Southwest is in the relationship with its colleagues and the trade unions they represent.

Culture

Southwest was created as a different type of company and has raised a unique culture since its inception. In 1990 Colleen Barrett formed the Southwest Culture Committee. This is unique in the industry and among all major companies. The committee also has a mission statement:

& # 147; This group aims to help the southwestern spirit and culture as needed; enrich and improve if it already exists; and to live in places where "floating" can be. In short, this group seeks "whatever it is" to create, strengthen and enrich the special spirit and culture that created such a wonderful company / family.

This is a unique approach to corporate values ​​that have created a culture that differentiates themselves from others. Southwestern culture is the reason for being successful.

3rd Customer Service

The mission of Southwest Airlines

Southwest Airlines mission is the highest level of customer service commitment, warmth, friendship, individual pride, and corporate spirit.

Approach

Herbe Kelleher, founder of Southwest, said, "We are in our customer service, we only deliver airlines." 2 Winning customer service is the distinctive feature of the southwest and the "Positive Outrageous Service". This means that from top to bottom everyone will do their best to satisfy the customer. It also includes Herb Kelleher, who helps baggage managers during Thanksgiving. By emphasizing customers and employees, Southwest is able to differentiate airlines from others. At the technical level, every employee or group within the Southwest has its own client. This means that every employee # 146; in such a way that the passenger is not directly involved. The caretaker client is the pilot and the host is the flight driver.

Results

It can be said that the "positively outrageous service" unique to the southwest is not a class, program or management mandate. This is not a secondary product; this product. & # 148; This approach creates the conditions in which employees are more likely to handle customers in a way that differentiates the company from others. There are a number of accounts for passengers who have received exceptional treatment from Southwestern employees.

The question is how do you answer the southwest customer service and why? Is it common for customers of other airlines to provide a special service? The answer is that it is not. While Southwest does not have a monopoly on the kind people who are willing to satisfy the customer and beyond to satisfy the client, such behavior is fed much more widely in the southwest.

Then we can conclude that the customer service that lies in the southwestern part is part of the culture. This culture is supported by encouraging employees to meet the customer. This approach encourages people who usually just run away on their way to help someone permanently entertain those who always provide exceptional service. Southwestern employees distinguish their customer service from other airlines

. Technology

Southwest uses its business goals in many ways and maintains its effective operation. According to the CEO, technology is equal to productivity. Started in 1996, the ticketless journey was first Southwest. On May 1, 2000, Southwest Airlines introduced "SWABIZ" to assist the company's travel managers through booking and tracking through its website [http://www.southwest.com]. There are a number of new technology initiatives currently under way, and some are already underway.

Barcodes in Boarding Cards

Southwest Airlines has invested $ 12 million over the past three years for enterprise and terminal equipment by 10,000 Dell OptiPlex and Latitude notebook computers by company executives. Southwest wanted to replace its famous, bright colored plastic decks with an electronic system with bar-code paper boarding. Thus, approximately 350 touchscreen readers are installed on Dell OptiPlex desktops. The bar code provides more information to Southwest to automatically align the number of boarding passes with the number of passengers actually on board the aircraft.

Although technology will help make Southwest Airlines more efficient by consolidating passengers' information about the company's 3000-day flights, it may be a cause for concern to extend the travel time of travelers. However, it was found that scanning each barcode for boarding cards did not increase or shorten the boarding schedule, but it took minutes from administrative processes, eg. With the new paper barcode system, Southwestern ticket agents are able to meet customer records by rolling over and signing in to multiple software screens. The process is much more automated. Once the bar code on the boarding pass is scanned at the terminal's terminal, the list of passengers is verified in real time by the person.

The old process was manual, aimed at finding information on board. Barcode hardware for embarkation cards has been installed. The company deals with the exchange of customer service storage devices at airports, including the Dallas Center.

Software Updates

Software applications, such as software used by officers for controlling passengers, are exchanged. Southwest Airlines, an internally-written "Airport Application Suite", is expected to be launched next year when the company switches from green to Window-based user interface. Similarly to Wal-Mart Stores Inc., Southwest Airlines believes it is developing its own software. The company uses very few off-the-shelf software. There are about 75 to 100 projects per year, of which approx. 900 IT staff support.

RFID

Radio Frequency Identification Technology, which is a good alternative to bar coding for packet identification, is also on the Southwest radar. Try to test RFID technology in 2006. Although southwest converges a bit with other airlines, such as Air Tran, Alaska and Champion Airlines, they are in many cases capable of more sophisticated applications so they can wait longer.

Challenges:

Southwest has proven to be extremely successful at the most difficult times in the airline market. However, it faces new challenges compared to other low-cost airlines such as JetBlue, ATA airlines, and America West.

Sustained Meeting

As a result of increasing security guidelines since September 2001, Southwest must be assigned (reserved) seats to track post-flight passengers. This change involves large-scale technological investments and can negatively affect the gate operations as the current mode of unsuitable seating has helped to speed up the gate.

Passenger Demand

The Keep It Simple philosophy served southwest. But as its business is becoming more complex and complex, with the aim of buying dozens of new aircraft and passenger traffic expected to rise to about 80 million years of entry, the simplification strategy is reflected in the airline's IT philosophy. CIO Tom Nealon says, "It's time to better adjust the efficiency of our business processes because our airline is considering us to provide the same high-quality customer service, so we have to automate a lot of things without the technology before, and the challenge without accepting customer contact. "Southwest is also aggressively following Customer Relationship Management (CRM) techniques and has applications to gain insight into customer desires and non-affections. According to an interview with Gary Keller's CEO, Southwest focuses primarily on two areas: customer airport experience and flight experience

Aircraft Entertainment

Aviation Experience 146, aviation amusement is something that Southwest is currently evaluating and JetBlue has been very successful since the introduction of long-distance flights. For comparison, Southwest needs to consider 415 aircraft, and this is a completely new dimension investment decision. Additionally, Southwest needs to consider how things can fit into the environment. At this point, 60% of its service is still very short. Southwest must acknowledge the fact that a certain approach that has been successful for a competitor does not necessarily work for its own benefit.

Summary:

Southwest has long been considered as the industry benchmark for operational excellence. Southwest Airlines is a good example of a company that is committed to its core competencies – efficient operations with low-cost structure, outstanding customer service and innovative HR management practices. We hope that this article provides a comprehensive picture of southwest operations as part of their overall strategy to achieve success and reach a competitive advantage.

References:

[http://www.southwest.com] (official homepage of Southwest Airlines)

2. Southwest continually simply & # 148; – Air Transport World, April 2005, page 36

3. Around the world about $ 48 (ie So): how high are the affordable low cost residential flights to fly? & # 147; Strategic Management Knowledge @ Wharton Newsletter Oct. 2005 5.

4. TechWeb – [http://www.techweb.com/wire/ebiz/173601227]

5. Southwest: Success of Success: Consolidate! & # 148; – Oracle Magazine (September / October 2004) http://www.oracle.com/technology/oramag/oracle/04-sep/o54swest.html

6. Southwest Airlines: High Tech, Low Costs & # 148; – Eweek.com, April 2005

7. & # 147; Jet Fuel Protection Strategies: Opportunities for Airline and Industry Exercise Assessment & # 148; & # 150; Kellogg Management Research Paper, spring 2004

8. Winning Behavior: The Most Successful, Most Successful Companies Differently, Terry R. Bacon and David G. Pugh, 2003

9. Time Magazine, October 28, 2002 edition, Vol. 160, p. 45 [19659002] 10. "Wing of Changes", Information Week, March 28, 2005,

11. Labor contract negotiations in the aviation sector, Monthly Labor Review, July 2003, page 24

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