Case Study - Southwest Airlines in a Different World (Service Operations)

Why has Southwest been so much more successful than its competitors?

Success of Southwest originates from its simplicity of operations and organizational culture that is clearly evident by its mission statement[1]. The simplicity of Southwest helps it to drive down cost, maximize shareholder value and improve customer experience. Following are the success drivers of Southwest.

Fleet Standardization: Fleet standardization is one of the biggest strength of Southwest that helps it to keep the cost down. By only adapting Boeing 737 in its fleet Southwest saves millions of dollars on maintenance, training, and inventory holding cost. This feature gives Southwest a high degree of flexibility to reconfigure/rearrange planes across routs.

Point-to-Point Transit: Unlike traditional network carriers that operate by hub-and-spoke system (a system where airlines collect passengers from spoke cities bring them to central hub and redistribute to their destinations), Southwest operates via point-to-point transit i.e. nonstop direct flights from one destination to other destination. This helps Southwest minimize lead time and increases plane utilization by avoiding plane waiting at the airport.

Simple in Flight Service: Southwest keeps it in flight services very simple. As most of Southwest flights are very short (90 minutes), there is no class distinction, no assigned seating, no interlinking of bags and no food. This feature help Southwest drive cost down by reducing unloading time and cleaning time, which reduces lead time between two flight (at present approximately 30 min Vs 60 min of industry).

No Frills, No Fees: Southwest keeps all it’s offering very simple and transparent. Unlike other airlines that are reducing their value proposition to customers (by cutting perks) Southwest has maintained its offerings. For example, Southwest tickets are all inclusive and it still allows two free check-in bags.

Capable Management & Happy Work Force: Southwest has capable and strong management. Organizational structure is relatively simple and there is a strong emphasis on Customer, Organization and Employees. Southwest way i.e. Warrior Spirit, Servant’s Heart and Fun-LUVing Attitude is the driving force for everyone in Southwest. This has helped Southwest to reduce cost by keeping very low level of employee turnover (5%).

Fuel Hedging Strategy: Fuel cost is significant portion of airline’s operation cost. Southwest follows a very effective fuel hedging strategy. Till date this strategy has helped Southwest to save approximately $4 billion.

How has the original strategy been altered in recent years? How, if at all, have theses changes affected Southwest’s key success factors?

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Would you recommend that Southwest Airlines acquire the gates and slots available at LaGuardia Airport? Why or why not?

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[1] The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride and Company Spirit.