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Southwest Airlines Case Brief


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Southwest Airlines Case Brief

  1. 1. Irtaza Ishtiaq MBA 30 (B) International Islamic University, Islamabad. SOUTHWESTAIRLINES CASE’S BRIEF Southwest airlines ranked as a national airline in America. It has a large fleet of 400 Boeing 737 airplanes and is operational in almost 59 cities of United States of America. It is a financially stable airline with cost leadership in the airline industry. However, after 9/11 incident their profits are going down and new security rules implemented by aviation authorities, which are becoming a hurdle in their ''free to fly'' services to their customers. In my opinion, Southwest should continue its operations with the point-to-point system. This system is the competitive advantage of Southwest against its competitors and making it a cost leader in its airline industry. Following are the reasons, which support my opinion. 1. Fuel Hedge. 2. Share price. 3. Cost effectiveness. 4. Innovativeness in customer services. 5. Effective human resource department. Should Southwest airlines adopt hub-&-spoke system rather than continuing to the point-to-point system after the occurrence of 9/11? The point-to-point system gives customers a freedom to fly anywhere without waiting for long hours for a plane to come and take them to their destination. Fuel hedging used by Southwest airline to control the prices of fuel so that they can offer low fare to their customers. Southwest was paying 1.18 cents for their fuel charges per seat in 2001. The share price of Southwest has fallen after 9/11 from $22.85 in 2000 to $18.48 in 2001, but their balance sheet is strong and it can support short-term recessions. Cost effectiveness is the key point to get success in airline business; Southwest is offering low fare and better quality to their customers against their competitors. Southwest can reduce their marketing and public relation cost by targeting large city markets with their goodwill and brand name. Southwest should use innovative techniques to provide better services to their customers. In a point-to-point system, speed is everything, Southwest should increase ticket counters and encourage their customers to use online booking and ticketing system. They should increase security spot check as well as airport staff so that customers can enjoy full benefits of the point- to-point system. Effective human resource department also plays an important role in implications of point-to-point. Southwest says that their employees are first and the customer comes second, which means that they love their workforce and choose a right person who can work with their family member (colleagues) as one team, but not as an individual. They train their managers to be a leader rather than a supervisor or rule enforcer.