Southwest Airlines

SECTION 3 GROUP 15
APURV MITTAL FT153025
SURVESH CHAUHAN FT153047
NAVEEN K. FT153066
MUKESH SHAH FT153090
SUMIT ARORA FT153107
GAGANDEEP - FT153114

Background

Southwest Airlines Background

1967: Herb Kelleher and Rollin King founded SW

1970: management team built.

June 18,1971: 1st fly in Texas-Houston, Dallas, San Antonio

(Golden Triangle) with 3 Boeing 737s aircrafts and 25 employees

Operation focus: short-distance flights (>500 miles), point-topoint flights, only 737 Boeing, high frequency flights, low fares,
no international flights

21 years of continuous profit.

Southwest stock earned the highest compounded return of over

21000 percent.

What does it take to make money

in this business/industry?

Cost cutting methods:

Fuel Hedging

Using one kind of plane

Cheaper airport fee

Using one kind of seating

Having short haul and direct flights

Offering fewer cabin amenities

Implementing direct ticket selling

What is Southwest's strategy?

Low cost with low fares and short journey time and more
frequency.

Flies to airport that are underutilized and close to metropolitan

area.

Uses 200 fuel efficient 737, it doesnt uses any other aircraft, as a
result it saves on maintenance and user training cost.

Point to point routes with no central hub, it reduces the delays

involved in connecting flights.No Meal, no assigned seating,
reusable boarding pass.

Due to its shorts flight time, many users who previously drove to
the destination started using the southwest airlines.

Simple fares like regular fares and off peak fares, same fare with
in the state

They compete with themselves and not with other airlines

Why has Southwest been so

successful this long?

Low Cost structure

20 to 30 % LESSER cost per mile

Pilots earn less(50 %) but flies more(40 %).

Faster turnaround time of 15 min vs industry average of 35 min.

Uses 200 fuel efficient 737, as a result it saves on maintenance and

user training cost

Customer Friendly culture

On time Performance

Fewest lost bags, least number of customer complaints.

Increased efficiency due to use of less congested airports and

Point to point strategy.

What is the source of its

competitive advantage? Is it
sustainable?

Low-cost, employee-driven, future-minded

15 minute turnaround

Differentiated - Rapid Rewards frequent flyer program

Fast, no-frills service

Use less congested airports

No meals served

No advanced seat reservations

High employee engagement

What is the source of its

competitive advantage? Is it
sustainable? (contd..)

Flies only Boeing-737 airplanes - reduced training and maintenance cost

Innovative hiring and training program

Highly motivated employees and high retention ratio

Focus on Triple Crown

Source of competitive advantage lies in its people, and since its employees
are highly motivated and engaged, there is no reason to believe Southwest
will loose it advantage over its competitors. Same has been proven over
time. Thus, their Competitive advantage is sustainable.

What questions should Ann be

raising in the meeting?

Can the competitive threat from united and continental low cost
airlines seriously damage Southwest airlines?

Can United and Continental realy imitate the southwest

approach?

Southwest is no longer small, can these threats affects the family

feeling of the firm

How can we avoid Overconfidence that can ruin the southwest.

Tricky succession issue

Competitive advantage are the people, Insuring that these are

managed properly

Thank You!!