SBM1108 Business Decision Analysis: Southwest Airlines Case Report

This report analyzes the business decisions of Southwest Airlines, specifically focusing on the challenges and choices related to downsizing. The study begins with an overview of the case, highlighting the ethical dilemmas and the impact of online booking on call center agents. It then evaluates the decision model used by Southwest Airlines, which prioritized employee job security over short-term profits, and proposes two alternative decision models: a decision tree approach and a linear programming approach. The report evaluates these models, considering factors like the impact of downsizing on employees and the importance of minimizing losses. Finally, the report applies these models to the Southwest Airlines scenario, using financial data to assess potential outcomes and strategies to maximize occupancy rates. The goal is to minimize loss by focusing on occupancy rate changes and other key factors.

SBM1108
Business
Decision
Analysis

Part 1: Comparative Review
Report
Introduction
Management Decision making is essential
irrespective of any industry;
The very basic purpose of this study is to
evaluate a given case study and associated
Management Decision Making.
The researcher has considered the “Southwest
Airline: Decisions about whether, when and how
to downsize (restructure)” case study.

Part 1: Comparative Review
Report
Overview of the case problem
Ethical dilemma: whether can they
decide to downsize without affecting
the job security image
Booking online lead less job
opportunities for call center agents

Part 1: Comparative Review
Report
Evaluation of Decision Model
 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.
the introduction of online booking system
disintermediate the requirement for call
centre agents.
southwest is a large low-cost airline. Airlines
rely on key inputs such as aircraft, fuel and
labour in order to operate

Part 1: Comparative Review
Report
Evaluation of Decision Model
 Southwest airlines needed them to realize that they're essential to
the organization not on the grounds that they're grinding away uh,
similar to they were gear-teeth in a machine.
 Southwest has never had an automatically cutback in its thirty-multi
year history.
 The organisation followed the model of overlooking short term profit
over employee.
 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.

Part 2: Decision Model
Proposal
 Introduction
 To propose two different business decision models that can be
applied in the selected scenario;
 [1] Decision Tree approach
 - Do Nothing
 - Forced redundancies and closure of X call centres/ forced relocations
 -Voluntary
 [2] Linear programming Approach
 -minimize the loss

Part 2: Decision Model
Proposal
 Evaluation Decision Tree approach
 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;
 The business will choose who to make excess on a mandatory
redundancies premise.
 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.

Part 2: Decision Model
Proposal
 Evaluation Decision Tree approach
 Downsizing causes a lot of negative attention and cripples the
workers;
 The entire exercise of decreasing the workforce ought to be
embraced with incredible reasonability and affectability;
 Use of target criteria
 Transparency about the criteria
 Involvement of the representatives
 Downsize positions and not representatives

Part 2: Decision Model
Proposal
 Linear programming Approach
 Distinguishing underutilized resources is vital for assessing the
monetary possibility of downsizing;
 LP might be utilized to gauge asset use and other financial
characteristics of the association's tasks;
 Reduced item request is a limitation confronting numerous
organizations today and is one of the essential reasons firms choose
to downsize

Part 2: Decision Model
Proposal
 Decision Tree vs Linear Programming
 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.

Part 3: Decision Model
application
 The aim of the Southwest airlines is to minimize the loss due to
stick to the decision of not downsizing by prioritizing employee;
 Due to cutthroat competitions in the low cost carrier market, the
average ticket price cannot be increased;
 To minimize loss or maximize profit, the only option is change in
occupancy rate.

Part 3: Decision Model
application
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

Part 3: Decision Model
application
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

Part 3: Decision Model
application
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