Southwest Airlines in 2010: Culture, Values and Operating Practices 1.

Has the AirTran acquisition make good strategic sense for Southwest? For the past 40 years Southwest Airlines has been known as the market share leader in domestic flight travel in the United States. The company has always been known for excelling in differentiating themselves among other low-fare carriers by providing a reliable product and an excellent customer service. Moreover, Southwest has also proven to be a profitable company ever since 1973, and is also one of the most recognized airlines in the world for its commitment to performance, people, and planet. After analyzing Southwest overall strategy, I believe that the AirTran acquisition has been not only a good strategy, but it seems to be the best one that Southwest has put into place. After the acquisition, the company had 685 aircrafts available to operate and serve more than 100 locations; it now has more than 100 million users and 43,000 employees. The reasons why I believe that the acquisition was beneficial and a good strategic move for Southwest are: they were able to acquire a competitor and therefore grow their business by acquiring new resources, procedures, capabilities and knowledge from AirTran. The acquisition will also allow Southwest to expand their route networks and to serve major airports such Hartsfield-Jackson in Atlanta as well as Mexico and the Caribbean. Also, this strategic move will allow Southwest to be even more profitable they estimated that the acquisition would generate over $400 million after the complete integration of

both companies. Lastly, another benefit of this acquisition is that they will be able to continue the expansion of their Southwest Effect which involves bringing in more competition, providing lower fares and stimulating passenger traffic. 2. What strategic issues and problems did Gary Kelly and Southwest executives need to address as they proceeded to close the deal with the AirTran acquisition and integrate AirTrans operations and employees into Southwest? It is certain that the major issues that will rise from the acquisition of AirTran by Southwest will be the integration of both companies operations and employees. Regarding Operations, the main issue will be the cost of integrating both of the companies operations. Also there will be a need to eliminate process overlapping and waste. Southwest will likely need to sell off some aircrafts, eliminate or modify some routes, and terminate some previous AirTran contracts. There will be the need for licensing agreements, landing fee renegotiations, and a consolidation of maintenance and service activities for the aircrafts. There will also be issues with supply chain and logistical support that will eventually need to be modified in order to have a better fit within the new company structure. Regarding their employees, Southwest cannot simply lay-off all of AirTran employees or immediately expect them to perform the way they want them to. There are a multitude of integration issues and problems that can result from an acquisition such as the clash of corporate culture, operational and managerial that can occur. There will be trust issues and misunderstandings related to the merging of the two companies, particularly among those from AirTran and mainly because they might

feel overpowered by Southwest. There will be considerable resistance to change even though change will be required to adjust to the new organizational structure, policies, procedures, and specially regarding the maintenance of Southwests service standards. There will be some tension as a result of the stress associated with the changes. Additionally, there will inevitably be issues concerning the integration of the employees especially concerning rules, policies, seniority, salaries, Wages, Benefits, and training are concerned 3. What recommendations would you make to Gary Kelly and Southwest executives as the company moves through 2012 and into 2013 that deals with the issues the new larger airline is now facing? How does the recent merger of American Airlines with US Airways impact their strategy? I think my main recommendation to Kelly and Southwest executives would be to make sure the transitioning to the much bigger airline is as smooth as possible. I believe that it was a very smart decision to make sure that the acquisition took place happened more as a transition than a takeover form Southwest. In my opinion a smooth transition can be possible as long as they prepare both companies employees for it. By progressively informing and introducing the changes to the employees and ensuring that the executives and higher-level managers are communicating and transmitting their expectations a successful integration can be possible. The built-in preparation will allow Southwest to ensure that the Southwest Standards that they are know for such as: their great customer service and satisfaction, Bags Fly Free, Regarding the recent merger of American Airlines and United Airlines, I don no think that this merger will have a direct impact on Southwest strategy, simply because 3

they will be a much bigger company and also because Southwest and the new American Airline group will focus in two different market segments. Southwest focus is to provide good service while also providing low-cost cheap flights to people who are frequent users and that all they want is to get from point A to point B within the United states. On the other hand, the new merger of American Airlines and US Airways will still be focused on all the comfort and in customers that are not as price conscious as those from Southwest Airlines. Additionally, this merger will also provide international flights, which are not a specialty of Southwest.

References

http://www.huffingtonpost.com/2010/09/27/southwest-airlinesairtran_n_739975.html

http://www.airtranairways.com/about-us/corporate_info.aspx http://southwest.investorroom.com/?int=GFOOTER-ABOUTINVESTOR