Case of Southwest Airlines

RUNNING HEAD: OPERATIONS MANAGEMENT
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Operations Management

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Executive Summary
This report aimed to analyze the case of Southwest Airlines as it is a well known company in the
Airline industry because of its business model. The business model of the company was based
on success factors such as no meal, no inflight services, high operational efficiency because of
30 min turnaround time and very good organizational culture. But the company altered its
strategy to sustain itself in the market against its competitors that were Air Asia, Spice Jet,
Indigo, and many more in the US. The company adopted strategies such as the development of
long-distance services, changes in the boarding process, and fuel hedging. All these changes
were done because of changes in economic and political factors. Further, the report suggested
the ways to overcome these challenges some of the suggestions were; the company should
acquire slots and gates at LaGuardia Airport, ensure that its core strategy that is low-cost fare
and Southwest Airline experience retain with the company for the long run. In a nutshell, the
company should focus on its expansion, growth, and financial performance by retaining its low-
cost strategy and Southwest Airlines experience that resultant to operational efficiency.

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Table of Contents
1. Introduction..................................................................................................................................3
2. Case Analysis...............................................................................................................................3
3. Conclusions and Summary..........................................................................................................7
4. References....................................................................................................................................9

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1. Introduction
Southwest Airlines was founded in 1967, the company serves 64 U.S countries and offers
simple, efficient, low fare customer experience with high operating expertise and reliability
(Heskett, and Sasser, 2010). After some time the company changed its strategies and expanded
worldwide. By 2008, the low-cost strategy of the company was adopted by Air Asia, Spice Jet,
Indigo, and many more in the US (Heskett, and Sasser, 2010). Southwest again changed its
business model that included 10 min turnaround strategy and adopted a contrarian approach to
air transportation. In order to offer low-cost services, there was no food served, no first class, no
assigned seats, no use of hub and spoke structure and no code sharing. The model of Southwest
was based on offering low fares, on-time arrivals, reducing turnaround time, and frequent flights.
Further, the main focus of the company was on people and culture, management focused on
recruiting cabin staff or crew members with a positive attitude, innovative spirit and a high sense
of humor. The airline’s culture based on a servant's heart and fun-loving attitude and its
advertisement slogan was “Just Plane Smart” (Heskett, and Sasser, 2010).
Under the leadership of Kelly, the company transformed as he had been recognized for using a
successful fuel hedging strategy that helped the organization to save$ 4 billion and that led to
strengthening financial performance. To face challenges of high fuel prices the company
improved its customer experience added flights, extended to new markets, used technology, and
adopted fuel hedging strategy. Later, Southwest Airlines decided to operate in LaGuardia and
later on faced challenges related to operating low-cost airlines in LaGuardia. In response to
these challenges, Southwest adjusted to a higher cost structure to minimize the underutilization
of aircraft and to maximum profits (Heskett, and Sasser, 2010).
2. Case Analysis
1. Southwest successful than its competitors:
The reason behind the success of Southwest is its low-cost strategy; this strategy was also
adopted by its competitors in order to sustain in the market include Air Asia, Air Deccan,
Spice Jet, and Indigo. But this is not the only reason for the success of Southwest. The

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company was able to compete and succeed because of its organizational culture,
operational efficiency and leadership of Kelly (Heskett, and Sasser, 2010).
Further, Southwest airlines well established in the market with its business model
(Cameron, K., 2017). The company using its low-cost strategy model while operating in
uncongested airports and developed a culture of Fun loving attitude and servant heart.
Through that employee of Southwest remained productive and this led to better customer
experience. Moreover, Southwest Airlines has been successful because of adherence and
awareness of its business model. They designed their model carefully and reinforced
each other in achieving goals of offering low-cost flights, minimizing aircraft turnover
and increasing the number of flights.
The competitors of Southwest copied low strategy model but they could not employ the
cost-cutting operations practices that the company had because it would not apply to their
full flight services business. At last, the pride of the company was its organizational
culture and teamwork amongst its employees. Employees of Southwest are assets of the
company they work in teams to speed up the departure of flights. The company mainly
focused on maintaining good management of employee relations. Southwest Airlines
partners with labor unions in order to ensure a flexible environment and good pay for its
employees that helped the company to increase the productivity of employees and to
ensure minimize lead time and maximum outputs. Hence, the operational efficiency of
Southwest Airlines cannot be imitated by its competitors and due to that the company
stays ahead and gain a competitive advantage in the market against its competitors.
2. Original strategy
Southwest Airlines is well known in the Airline industry over the past two decades and
continue making profits even when most airlines have been struggling to sustain in the
market due to high operating expenses, rising fuel prices, and fluctuating demand. In this
changing environment Southwest had to answer with the changing directives from the
government authorities that included limiting luggage, assigned seats for passengers, and
screening of passengers all these impacted the company on-time performance. The
operational efficiency of the company was affected by government rules and regulations
for safety. All these initiatives affected the ability of Southwest employees to be able to

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“do whatever it takes to get flights on schedule”. All this impacted negatively on the
perception of the company’s performance while the competitor’s performance improved.
Originally, the company was growing 10%-15% on an annual basis. As in 1999, the
revenues of Southwest were S4.7million and in 2007 revenues were $9.8 million. But
after 2011, government initiatives for the safety of passengers led to a change in strategy
of Southwest. The company pushed for expansion, increased debts and liabilities as total
liabilities in 1999 were $1.8 million and in 2007 it was $4.9 million. This led to the fact
that the company focused on the expansion of its services and changed its strategy as per
the dynamic environment. All these changes affected the key factors of the company that
includes employees, organization culture and on-time performance. Due to recent
changes, employees of Southwest were not performing to the best of their ability, the
freedom of employees got affected and operational efficiency reduced. Hence, due to the
changing environment economic risk and political risk led to the alternation of the
strategy of the company and these alternations by the company affected the success
factors.
3. Southwest leadership
The competitive advantage for Southwest Airlines was its teamwork and skilled staff
members. Although the strength of the company was its closely tied workforce (Voigt
et.al,2017). The leadership control goes wrong as in order to maintain the strategy of low-
cost fare the company reduced the pay of its employees. Before that leaders should
analyze the consequences of the decision. Further, a sudden increase in market share
resultant in the change in labor contract and an increase in the pay of its employees.
Rather the company should balance their response by retaining the passion and trust of
their workers and by maintaining the profitability both of these were an important
element of a company’s strengths (Slack, 2018).
Because of government regulations after 2001, areas where the control of leader goes
wrong included flight departure, on-time performance, employee performance, and
profitability. All these factors earlier were under the leader's influence. But later on, these
were affected by government actions and changing environments. And accordingly, Kelly
decided to shift its strategy to low-cost strategy to expansion strategy and adopted a
higher cost structure in order to operate in the areas such as LaGuardia.

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On the other side, despite directives from the government, some areas were in leadership
control. That is the geographical location of its partner airports. As the decision of where
to expand their fleet and to whom to make partners for operation is taken by the leader.
The leader should able to select where these flights should be located in order to compete
with other airlines without sacrificing their main point of differentiation which included
low cost and on-time air travel. It is recommended leader should not ruin its core strategy
and develop new alternatives along with it so that the foundation of any organization is
maintained. Further, the leader can improve their decision by analyzing negative as well
as positive outcomes in a situation in order to ensure efficiency and effectiveness
company’s operations (Nicolae et.al,2017).
4. Southwest’s leadership can get control over operations of the company in the face of
generic economic conditions and competitive moves as the management of the company
can focus on maintaining the core strategy that is the low-cost strategy by operating
planes in the places where operating cost is low for the company. This will help the
company to expand and operates in areas where other airlines are not operating which
would lead to a competitive advantage for Southwest Airlines (Bozarth, and Handfield,
2019). Further, the leader should have a proactive attitude and ability to innovate this
would help Southwest to gain the advantage of opportunities that can arise because of
economic changes and accordingly the company can change its operating model by
identifying risk in advance and then formulating strategies that help in to improve the
operations.
Further, in the face of competition from well-established players the company would
develop a unique selling proposition from its skilled workforce and try to sustain the
“Southwest experience for its customers” (Gudmundsson,2019). The leader needs to
change its approach of transforming the whole strategy of Southwest rather the company
should focus on developing competitive advantage with it such as Southwest Airlines
mission is “to offer the highest quality of customer services delivered with friendliness,
sense of warmth, pride and company spirit” (Harvey and Turnbull, 2020). Hence, in
order to compete and sustain in the dynamic environment, the leader should continue
with its participation approach or consultative approach, not a transformational approach.

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As with that the core strategy that is low cost can be maintained and a unique selling
proposition along with that can be developed.
5. LaGuardia Decision
It is recommended that Southwest Airlines should acquire the slots and gates available at
LaGuardia Airport. Because Southwest might get a slot for a small investment
(recommended bid $7.5 million), this could help the company to generate more revenues
by investing less amount. It takes only 8 flights to cover the daily cost incurred by the
company and return on investment could be 25.4%. Further, in the long run, Southwest
cannot merely depend on Islip airport in order to serve New York customers. Expansion
of the company to LaGuardia resultant in long term benefits as the company cannot
depend on a single route to target the New York market. Further, that Southwest would
offer its services to the New York market which has high potential growth. By accepting
this deal and acquiring LaGuardia gates and slots the company can get the advantage of
route network traffic that helps the company to increase its market share (Ren, 2020). At
last, in order to solve the problem of delay in flight departure and due to that the
competitive advantage of on-time performance was affected, the operations at LaGuardia
can be isolated to ensure that this problem does not flow through the network. Hence, it
is recommended that Southwest Airlines should acquire slots and gates available at
LaGuardia Airport.
3. Conclusions and Summary
From the case analysis, it is identified that Southwest Airlines is well known in the Airline
industry and has a competitive advantage of offering low-cost carriers and on-time performance.
The business model of the company is based on, on-time arrivals, offering low fares, reducing
turnaround time, and frequent flights. Along with that, the focus of the company was on people
and culture, management focused on recruiting cabin staff or crew members with a positive
attitude, innovative spirit and a high sense of humor. The airline’s culture based on a servant's
heart and fun-loving attitude and its advertisement slogan was “Just Plane Smart”.

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It is known that the company is struggling to continue with its low-cost strategy model and to
maintain its competitive advantage of on-time performance. Because competitors like Spice jet,
Air Asia and Indigo tried to imitate the low-cost strategy of the company. Along with that, the
company is facing issues related to changes in laws and regulations by the government impacted
on operational efficiency (Reid, and Sanders, 2019). At last, it is identified that under the
leadership of Kelly, the company is transforming and developing a high-cost structure in order to
compete with full flight service providers in the industry.
It is recommended that the company should adopt an expansion strategy in order to compete and
sustain in the market for that Southwest should acquire slots and gates at LaGuardia Airport.
Further, it is suggested that the company should ensure that its core strategy that is low-cost fare
and Southwest Airline experience retain with the company for the long run because this is the
unique selling proposition of the company that can help Southwest Airlines to compete in this
ever-changing environment. In a nutshell, the company should focus on its expansion, growth,
and financial performance by retaining its low-cost strategy and Southwest Airlines experience
that leads to operational efficiency.

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4. References
Bozarth, C.C. and Handfield, R.B., 2019. Operations and Supply Chain Management. Pearson.
Cameron, K., 2017. How Southwest Airlines challenged a global crisis. The Business &
Management Collection.
Gudmundsson, S.V., 2019. Limits to the low-cost niche? Sustainable strategies for low-cost
long-haul airlines.
Harvey, G. and Turnbull, P., 2020. SOUTHWEST AIRLINES. Case Studies in Work,
Employment and Human Resource Management, p.80.
Heskett, J.L. and Sasser, W.E., 2010. Southwest airlines: in a different world. Harvard Business
School Entrepreneurial Management Case, (910-419).
Nicolae, M., Arıkan, M., Deshpande, V. and Ferguson, M., 2017. Do bags fly free? An empirical
analysis of the operational implications of airline baggage fees. Management Science, 63(10),
pp.3187-3206.
Reid, R.D. and Sanders, N.R., 2019. Operations management: an integrated approach. John
Wiley & Sons.
Ren, J., 2020. Fare impacts of Southwest Airlines: A comparison of nonstop and connecting
flights. Journal of Air Transport Management, 84, p.101771.
Slack, N., 2018. Essentials of operations management. Pearson UK.
Voigt, K.I., Buliga, O. and Michl, K., 2017. Pioneer in the Skies: The Case of Southwest
Airlines. In Business Model Pioneers (pp. 171-184). Springer, Cham.