Business Decision Analysis: Downsizing Dilemma in Southwest Airlines

This report evaluates the downsizing dilemma in Southwest Airlines and proposes decision models for the scenario. It discusses the evaluation of the decision model and provides recommendations for downsizing. The report also highlights the importance of transparency, involvement of employees, and assistance in seeking unemployment benefits during downsizing.

SBM1108 Business Decision Analysis
Name of the Student
Name of the University
Author Note

Table of Contents
Part 1: Comparative Review Report...........................................................................................3
1.1 Introduction.....................................................................................................................3
1.2 Overview of the case problem.........................................................................................3
1.3 Evaluation of Decision Model..........................................................................................4
1.4 Conclusion........................................................................................................................5
Part 2: Decision Model Proposal................................................................................................6
2.1 Introduction.....................................................................................................................6
2.2 Evaluation Decision Tree approach..................................................................................6
2.3 Linear programming Approach........................................................................................9
2.4 Decision Tree vs Linear Programming..............................................................................9
Part 3: Decision Model application..........................................................................................11
3.1 Model Overview.............................................................................................................11
References................................................................................................................................14

Part 1: Comparative Review Report
1.1 Introduction
In the field of the management, Management Decision Making is known as a subjective
procedure, which results in an accumulation of a lot of activities from current numerous
options. Sooner or later, decision – making is the procedure which is performed by each
person in everyday life; it's not possible for anyone to deny it. As to, Management Decision
Making is a customary procedure or just a propensity. Management Decision Making is a
standout amongst the most basic procedures in each association. Fruitful and powerful basic
leadership gives gainful results, while ineffective basic leadership causes an extraordinary
misfortune (Brickley, Smith and Zimmerman, 2015). The utilization of a few apparatuses and
procedures is conceivable in the whole procedure, as the supervisory group needs to pick
one useful choice from a scope of many. In addition, a few recognitions can likewise
recognize and explain any issue. Moreover, a couple of directors additionally prefer to settle
on choices all alone or offer need to an aggregate choice. As Management Decision Making
is a hard procedure, so now and then, it includes disappointment of another gathering. For
averting all the real clashes and obstacles in Management Decision Making, chiefs ought to
pursue the expert procedure of settling on administrative choices. Coming up next is the
whole procedure of Management Decision Making (Van Knippenberg et al. 2015).
The very basic purpose of this study is to evaluate a given case study and associated
Management Decision Making. To be more specific, the researcher will perform an
investigation and present a report on the business case, the decision-making process or
model, the value added to the business, any relevant assumptions and advantages and
disadvantages by the application of the model to the business scenario. Considering this, in
this case, the researcher has considered the “Southwest Airline: Decisions about whether,
when and how to downsize (restructure)” case study.
1.2 Overview of the case problem
This case depicts a difficult strategic choice about downsizing in Southwest Airlines. From
one perspective, the organization must lessen costs (all things considered, it is a low cost
aircraft) and is displayed a chance to do as such because of the achievement of its e‐
commerce activities while then again, the organization is committed to give its employees a

steady workplace and has a culture of professional stability and treating representatives
well.
Hence, the case study is indicating one issue, “After providing customers with the
opportunity to book tickets online, Southwest Airlines found that it had too many call centre
agents and hence whether can they decide to downsize without affecting the job security
image?”
1.3 Evaluation of Decision Model
Prior to stating whether Southwest Airlines went for downsizing or not, it is essential to
understand the perspective that leads the decision made by the management of Southwest
Airlines. The study has shown that the organisation did not go for downsizing even though
they had found that a significant employee base will be unutilized because of the online
presence. It has seen that there were three different pillars based on which the decision was
taken (Havig, 2017). The first one is cost argument, the second one is Strategy argument
and the final one is cultural argument.
While analysing the cost aspect, it has found that the introduction of online booking system
disintermediate the requirement for call centre agents. Under such circumstances, the need
for call centre agents become nil and it was nothing but the extra cost. On the other hand,
the strategic argument has shown that southwest is a large low-cost airline. Airlines rely on
key inputs such as aircraft, fuel and labour in order to operate (Seamster, and Redding, 2017).
Like any airline it is sensitive to jet fuel prices and other operating costs. So, withdrawing the
decision of downsizing will further lead loss towards the organisation. It has seen that the
organisation believes in, "On the off chance that you don't treat your own employee well,
they won't treat other individuals well."
The organisation generally trust that their employee came as first priority. A portion of the
business colleges viewed that as a problem. They would state: Which starts things out, your
kin, your clients, or your investors? However as per the CEO of Southwest Airlines, it is
anything but not a problem.
The organisation concentrated on their representatives as individuals. They needed them to
realize that they're essential to the organisation not on the grounds that they're grinding
away uh, similar to they were gear-teeth in a machine. So they gave a great deal of

consideration to their own lives. The laments, the delights that their experience. The
organisation perceived those on the off chance that they're genuinely sick. They speak with
them, send them care bundles. They need them to realize that the organisation value them
as people, not as a feature of a working environment (Dantzig, 2016).
Hence, when the issue raised whether to downsize or not as the call centre agents are no
longer adding value to that extent, the organisation followed the model of overlooking short
term profit over employee. Southwest has never had an automatically cutback in its thirty-
multi year history. Commonly they have yielded productivity amid the awful occasions so as
to give their kin employer stability since that is another part of how they value them.
According to Vanderbei (2015), it gives a proportional trust in what their centre is. In this
way, they have never had a downsizing in the entire history of Southwest Airlines. Not only
has that the organisation never had a leave of absence. They could have gotten more cash-
flow on the off chance that if they could furloughed individuals amid various occasions in
the course of the most recent 40 years, yet they never have.
Their aim was to think differently and grow the market by overlooking the short term profit.
The cost favorable position is significant in light of the fact that they began with a theory
that they were going to charge low fares, no matter what. They would empower more
individuals to fly. It didn't make a difference whether they had rivalry or not. At the end of
the day, they just stay as the first choice to fly (Choi and Jang, 2018). When they got a heap
factor that gets into the 70 or 75 percent range over a considerable timeframe, they did not
increase the fares. They introduced flights and put extra seats in. So it has rightly pointed
out by (), “in the event that you originate from that essential position, this is the thing that
you are, at that point obviously you must have low expenses.”
1.4 Conclusion
Thus, to conclude this report, it can be said that the organisation is the most unionized
carrier in the business, and they have never regarded the worker's organizations as foes,
they have constantly regarded them as accomplices. Supposing that the kayak goes down
they will go down with it. It does not imply that in a careless, shallow manner'; they hold
organization occasions and they welcome all the trade guild pioneers to come to them as
they are a piece of the organization, as well. On the off chance that they have an issue we

deal with it as fast as possible. Being exceptionally cognisant of their needs, and they
respond. They react to that exceptionally great.
Part 2: Decision Model Proposal
2.1 Introduction
The aim of this section is to consider the findings in the above section and propose two
different business decision models that can be applied in the selected scenario. As the
researcher has chosen aviation industry with specific reference to Southwest airlines and
their downsizing dilemma, the following two decision model can be applied here:
[1] Decision Tree approach
- Do Nothing
- Forced redundancies and closure of X call centres/ forced relocations
-Voluntary
[2] Linear programming Approach
-minimize the loss
2.2 Evaluation Decision Tree approach
A choice to downsize a division - and regularly wipe out employments - ordinarily isn't one
the organisation make delicately or effectively. In any case, it is conceivable to scale back
effectively and limit hard or hurt sentiments, paying little mind to whether the choice is
because of a changing economy or a vital advance in accomplishing long haul objectives
(Dantzig, 2016).
At the point when an organization downsize its employee, regardless of whether because of
monetary trouble and the risk of liquidation, or basically to take an alternate way in
business, redundancies can be utilized to accomplish its points. Now and again making
redundancies mandatory might be the main choice – where organizations are to be
exchanged, for instance – yet in different circumstances deliberate redundancies bundles
could be offered to individuals from staff as an elective technique for streamlining the
business. This could possibly prompt obligatory redundancies at a later stage, however it
very well may be a decent method to lessen your finance liabilities if some staff are ready
and monetarily ready to take up your offer. There are two unique sorts of redundancies

process, the two of which at last include the end of a representative's agreement (Saifullah,
and Sajjad, 2016). Various procedures are executed, notwithstanding, and results as to
redundancies pay can be unique. There are various reasons why you may need to consider
staff redundancies – maybe you've put resources into innovation and some worker jobs are
never again required, for example, or you might be compelled to rebuild to escape
indebtedness.
Deliberate redundancies for the most part portrays circumstances where a business chooses
it needs to make redundancies and requests volunteers. More often than not, if there are
inadequate numbers, the business will choose who to make excess on a mandatory
redundancies premise. In constrained conditions it is feasible for work to be fired by
common understanding among manager and worker, which would imply that there is no a
rejection by any means (Nwoye, 2017). Be that as it may, by and by such cases are
uncommon; the more secure methodology is to respect end of a volunteer for redundancies
as an expulsion as opposed to end by shared understanding. This implies staff expelled in
the wake of volunteering for excess will be qualified for the more noteworthy of their
statutory or legally binding notification period or to instalment in lieu. Those with two
complete years' administration will likewise be qualified for a statutory redundancies
instalment in any event (Brickley, Smith and Zimmerman, 2015).
Clearly, in this specific case, use of decision tree has shown three choice and the first choice,
that is, do nothing will lead maximum loss followed by voluntary redundancies and then
forced redundancies.
As referenced before, downsizing causes a lot of negative attention and cripples the
workers. It very well may be incredibly distressing for the individuals who are laid off. Lay-
offs regularly involve incredible injury and pain for the workers and their families (Van
Knippenberg et al 2015). Thus, the entire exercise of decreasing the workforce ought to be
embraced with incredible reasonability and affectability. Also, a downsizing strategy done
recklessly will give space for allegations of partiality and segregation based on sexual
orientation, race, age and so forth.
A portion of the things that ought to be borne as a top priority while undertaking
downsizing are:

1. Use of target criteria: Using target criteria to decide the post that need on be
downsized causes the administration to stay away from abstract ends which might
be one-sided and dependent on shallow suppositions and ideas.
2. Transparency about the criteria: Being straightforward about the criteria and the
procedures dodges misguided judgments and shields the organization against
troublesome charges.
3. Involvement of the representatives: Taking the workers on board the basic
leadership board gives them a feeling of "possession" and comprehension.
4. Downsize positions and not representatives: Always choose which presents need on
go, never on which need workers to be hacked out. Continue sending the message
that downsizing is about positions and not about workers.
5. Independence of the assessing group: Independence of the assessing group gives a
feeling of validity and objectivity. At the point when the assessment is finished by an
individual near the administration, there is degree for nepotism and predisposition.
6. Assistance in looking for joblessness benefits: Ensure that the laid off workers get
quick joblessness help from the administration. Brief implication of the lay-off to the
concerned specialists is important to accomplish this (Havig, 2017). Data relating to
the worker, for example, address, date of cutback and the reasons and so on ought
to be given to the experts.
7. Giving severance benefits: Though not made obligatory by law, severance bundles
are at times standard in organizations because of set up strategy. These bundles can
be settled on specially appointed criteria, for example, term of residency, order of
employment profile and the dimension of compensation.
As said before, utilization of target criteria is basic to a powerful downsizing procedure. A
portion of the means prompting a lot of predictable downsizing criteria are:-
- Identification of the imperative abilities which are essential for the survival of the
organization ought to be done. The general population who have these aptitudes ought to
be held, since, they are difficult to supplant.
- Retain representatives who are difficult to supplant and who will influence the
organization in the event that they began to work for a contender.

- The zones and divisions which are unimportant can be re-appropriated.
- Identifications of poor entertainers.
2.3 Linear programming Approach
As noted before, distinguishing underutilized resources is vital for assessing the monetary
possibility of downsizing. Notwithstanding, recognizable proof of these resources is maybe a
standout amongst the most troublesome and basic parts of downsizing (Dantzig, 2016). A
quantitative strategy that might be utilized to distinguish possibly useless resources is linear
programming (LP). LP might be utilized to gauge asset use and other financial characteristics
of the association's tasks. For firms not mulling over downsizing, this data may likewise be
conceivably helpful for making the board mindful of an association's underutilized resources
just as their expense to the firm.
LP is utilized to display a company's objectives and its working limitations. A calculation is
then used to discover a portion of the association's rare resources that expands the
objective determined in the LP model. As noted before, reduced item request is a limitation
confronting numerous organizations today and is one of the essential reasons firms choose
to downsize. Thusly, limited interest should be entered in LP as a limitation to decide an
ideal generation blend. At the point when the subsequent LP is fathomed, unused
resources, assuming any, will be inferred as a major aspect of the ideal arrangement. LP may
likewise be utilized to decide divisions that are right now understaffed. Distinguishing these
offices should forestall work power decreases that would be hurtful to the firm. Similarly
significant, distinguishing understaffed offices speaks to open doors for reallocating the
ineffective resources of different offices to applications that improve the association's
monetary presentation (Vanderbei, 2015).
2.4 Decision Tree vs Linear Programming
Considering the evaluation of both models in the context of aviation industry, it can be
concluded that LP will be much more effective approach over here. Further, the case
scenario also indicates that Southwest Airlines opposed the decision of employee
downsizing and they decided not to do anything. Under such circumstances, without
downsizing modelling loss minimization would be the priority. Hence, the researcher will
apply LP model simulation in the next section.

Part 3: Decision Model application
3.1 Model Overview
As mentioned in the above sections, the aim of the Southwest airlines is to minimize the loss
due to stick to the decision of not downsizing by prioritizing employee. Hence, they had the
only choice to increase the occupancy rate of their available fleets. The reason is that due to
cutthroat competitions in the low cost carrier market, the average ticket price cannot be
increased. Further, since they are using hedging strategy for fuel price, there is no possibility
of reduction of fuel price. Hence, to minimize loss or maximize profit, the only option is
change in occupancy rate.
Considering the above criteria, the researcher has gathered data related to Southwest
Airlines operations and performed a LP analysis as mentioned below:
Aircraft Type Total number of flights Seat Capacity
Boeing 737-200 62 143
Boeing 737-300 195 143
Boeing 737-500 25 143
Boeing 737-700 514 143
Boeing 737-800 207 175
Boeing 737 MAX 7 6 175
Boeing 737 MAX 8 36 175
Total 1045 157403
Total daily
departure
Average daily
available seat Occupancy Rate
Maximum
Capacity
Boeing 737-200 248 35464 100% 100%
Boeing 737-300 585 83655 100% 100%
Boeing 737-500 125 17875 100% 100%
Boeing 737-700 2056 294008 100% 100%
Boeing 737-800 828 144900 100% 100%
Boeing 737 MAX 7 30 5250 100% 100%
Boeing 737 MAX 8 144 25200 100% 100%
4016 606352
Average ticket price $ 151.00
Total Revenue $ 9,15,59,152.00
Average fuel cost per day per flight $ 25,000.00
Total Flight cost per day $ 10,04,00,000.00
$ -88,40,848.00

Total Employee 58803
Per day average salary per employee $ 115.07
Total Labour cost $ 67,66,372.60
Loss $ -1,56,07,220.60
Initially it was assumed that the occupancy rate will be 80%. However, to minimize the cost,
they have to increase the occupancy rate to 100%.
Cell Name Original Value Final Value
$I$14 Loss
$ -
3,39,19,051.00
$ -
1,56,07,220.60
Cell Name Original Value Final Value
Intege
r
$E$1
5 Boeing 737-200 Occupancy Rate 80% 100% Contin
$E$1
6 Boeing 737-300 Occupancy Rate 80% 100% Contin
$E$1
7 Boeing 737-500 Occupancy Rate 80% 100% Contin
$E$1
8 Boeing 737-700 Occupancy Rate 80% 100% Contin
$E$1
9 Boeing 737-800 Occupancy Rate 80% 100% Contin
$E$2
0
Boeing 737 MAX 7 Occupancy
Rate 80% 100% Contin
$E$2
1
Boeing 737 MAX 8 Occupancy
Rate 80% 100% Contin
Cell Name Cell Value Formula Status
Slac
k
$E$1
5 Boeing 737-200 Occupancy Rate 100% $E$15<=$F$15
Bindin
g 0
$E$1
6 Boeing 737-300 Occupancy Rate 100% $E$16<=$F$16
Bindin
g 0
$E$1
7 Boeing 737-500 Occupancy Rate 100% $E$17<=$F$17
Bindin
g 0
$E$1
8 Boeing 737-700 Occupancy Rate 100% $E$18<=$F$18
Bindin
g 0
$E$1
9 Boeing 737-800 Occupancy Rate 100% $E$19<=$F$19
Bindin
g 0
$E$2 Boeing 737 MAX 7 Occupancy 100% $E$20<=$F$20 Bindin 0

0 Rate g
$E$2
1
Boeing 737 MAX 8 Occupancy
Rate 100% $E$21<=$F$21
Bindin
g 0

References
Brickley, J., Smith, C. and Zimmerman, J., 2015. Managerial economics and organizational
architecture. McGraw-Hill Education.
Choi, J.I. and Jang, Y.J., 2018. A Study on Job Anxiety, Turnover Intention and Job
Satisfaction of Aviation Security Search Employees. International Journal of Pure and
Applied Mathematics, 120(6), pp.5703-5717.
Dantzig, G., 2016. Linear programming and extensions. Princeton university press.
Havig, P.R., 2017. Book Review: Decision Making in Aviation.
Nwoye, C.C., 2017. Retaining Employees After Downsizing.
Saifullah, A. and Sajjad, S., 2016. Intra Organizational Factors that Impact Employee's
Loyalty. Journal of Business Strategies, 10(1), p.129.
Seamster, T.L. and Redding, R.E., 2017. Applied cognitive task analysis in aviation.
Routledge.
Van Knippenberg, D., Dahlander, L., Haas, M.R. and George, G., 2015. Information,
attention, and decision making.
Vanderbei, R.J., 2015. Linear programming. Heidelberg: Springer.