Downloaded 27 times
More Related Content
![UT Dallas CFA IRC Report - 2016 LUV [104644]](https://cdn.slidesharecdn.com/ss_thumbnails/1cd984f1-f2df-4149-bf66-708c92c2bf8f-160308220340-thumbnail.jpg?width=640&height=640&fit=bounds)
Southwest
- 1. MBA â 516 Professorâ Dr. Zelalem Chala Team: Pooja Choudhary Reshma Vadhavkar Munkhtsetseg Baasankhuu Munkhbaatar Ganbold Tuvshintugs Munkhjargal
- 2.
- 3. SOUTHWEST AIRLINES ⢠"LoveIs Still Our Field," "Just Plane Smart," "The Somebody Else Up There Who Loves You," "You're Now Free To Move About The Country," "THE Low Fare Airline," "Grab your bag, It's On!" and "Welcome Aboard." The airline's current slogan is "Low fares. Nothing to hide."- Southwest Airlines Webpage
- 4. MISSION & OBJECTIVES â˘To Our Employees ⢠We are committed to provide our Employees a stable work environment with equal opportunity for learning and personal growth. Creativity and innovation are encouraged for improving the effectiveness of Southwest Airlines. Above all, Employees will be provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Southwest Customer.â
- 5. OBJECTIVE ⢠To Provideaffordable & Low cost flying experience to the customers. ⢠To come up as a Customer friendly aviation company. ⢠To encourage Employees & providing them opportunities for their personal growth. ⢠To open up to the employees for their innovative & worthy ideas & welcoming them to improve the existing picture of the Organization
- 6. SWOT ANALYSIS STRENGTH ⢠LoyalEmployees ⢠Cost Reduction Strategic Plan ⢠Customer Centered Approach ⢠Commendable Reputation with Partner Airlines ⢠Future Oriented Plan Execution WEAKNESS ⢠Priority Services are unavailable for the Classes (Business Class, Economy Class, First Class etc./ Meal or No Meal) ⢠Most of the Aircrafts are old which might come as a risk to the company & at the same time the maintenance cost of such planes are very high.
- 7. SWOT ANALYSIS THREATS ⢠Growing Competition â˘Imitation of Services ⢠Increasing Fuel Cost ⢠Customer Dissatisfaction OPPURTUNITIES ⢠Geographical Market Diversification ⢠Alliances with Country Specific Airlines
- 8. AKNOWLEDGEMENT ⢠Fortune Magazinead included Southwest as Most Admired Company for 22 years continuously. Rank 7 was given to Southwest Company in the list of Most Admired Companies. ⢠Forbes had names Southwest a one of the Top 20 Best Employers in America Region. ⢠Chief Executive Magazineâs had named Southwest under top 10 companies for Best Leaders in 2016. ⢠InsideFlyer Freddie Award was given to Southwest for Airline Program in 2016. ⢠Victory Media had recognized Southwest as Military Friendly Employer. ⢠Recognized as one of the 2016 Best Companies for Leaders by Chief Executive Group. ⢠Express Delivery had named Southwest as the Domestic Airline of the year. ⢠Airforwarders Association had identified as Domestic Carrier for the year. ⢠Identified as one of Americaâs Greenest Companies by Newsweek in 2015. ⢠TripAdvisor has identified Southwest as mostly chosen Airline by Customer. ⢠Premier Traveler had named Southwest as the best low cost carrier of North America region for the third continuous Year.
- 9. ROBUST STRATEGIES ⢠SouthwestAirlines has focused on four main strategies: low-cost, employee-driven, future-minded, and differentiated. ⢠Low Cost Strategy (Came up as Cost Leadership) which was a tremendously successful strategy of this Airline is followed by Employee Driven Strategy wherein the Employees are treated as family members rather than employees & are provided with preferences.
- 10. ROBUST STRATEGIES ⢠Theyalways term their Employee âUniqueâ as they get this feedback from their customers who fly with them. The Employees being selected at Southwest are the ones who can provide proper care to their customers & can serve them in the best way. That is the reason they call them as their âRight Choiceâ. According to a recent data, in 2015; out of 3,72,925 Resumes only 2% 7459 people were selected as their employees. ⢠The Strategy behind reaching out such professionals is lying into various forms. High School Internships & Partnerships, College Internship Program, Hiring College Graduates & MBA Graduates to follow Strategic Management Path. (Stretched Strategy on employment) ⢠The Management of the Company has developed a Plan for its Employees which is known as âLiving & Working Southwest Wayâ
- 11. SOUTHWEST WAY LIVE THESOUTHWESTWAY Warrior Spirit ⢠Strive to be the best ⢠Display a sense of urgency ⢠Never give up Servantâs Heart ⢠Follow The Golden Rule ⢠Treat others with respect ⢠Embrace our Southwest Family Fun-LUVing Attitude ⢠Be a passionate Team Player ⢠Donât take yourself too seriously ⢠Celebrate successes WORKTHE SOUTHWESTWAY Work Safely ⢠Follow standard operating procedures ⢠Identify and report hazards ⢠Respect and comply with regulations Wow Our Customers ⢠Deliver world-class Hospitality ⢠Create memorable connections ⢠Be famous for friendly service Keep Costs Low ⢠Show up and work hard ⢠Protect our Profit Sharing ⢠Find a better way
- 12. FACTUAL ATTRIBUTES ⢠Thestaff is extremely happy with the Company & do not ever want to shift to any other Venture. ⢠The Confidence built in all its employees is based on the rigorous trainings provided by the Company. The In-house Training Program inculcate the Major objectives of the Company. ⢠MILESTONES FOR EMPLOYEES: (TRAINING PARTICULARS) ďśLeadership Development ďśSafety & Security ďśEmergency Preparedness ďśFront Line ďśEnvironment & Sustainability ďśDiversity & Inclusion
- 13. TRAINING Pilots 27% Flight Attendants 14% Maintenance 9% Ground Operations 38% Customer Support & Services 12% TRAININGHours Pilots Flight Attendants Maintenance Ground Operations Customer Support & Services
- 14.
- 15. FACT ⢠Southwest isa low-cost airline that has concentrated on fast, no-frills service. It doesnât serve meals, does not facilitate with advanced reservations, and flies Boeing airplanes only. Other airlines were cutting costs by lowering down their services and removing large portions of their employees, However, Southwest was able to manage or might had a cutting in the pay but no employee was removed because of the economic issues (in Recession Period). According to a research, it was found that Southwest employees responded that they would work on a less remuneration scale instead of finding work anywhere else. This had proven that Southwest has a property of its Loyal Employees which ultimately helped it to stand in market against competitors serving the best of services in the Industry. ⢠Southwest Employees want to be a lifetime part of the company & are willing to contribute to the success of the company.
- 16. FACT ⢠The EmployeeDriven strategy had helped Southwest to sustain its integrity & work together for same objectives giving strength to their aim. Employees are the first Customer of the Company & if they are happy, it gets easier to satisfy your customers with your services. Employees Productivity is directly proportional to their satisfaction level. Southwest Management has proven to be a ruler in the Employee Management & that has given them a lead over others. ⢠Employees Driven strategy involving Continuous trainings, Good Working Environment, Personal & Professional Growth Support has contributed a lot to this success.
- 17. POLICIES AND PROCEDURESFOR IMPLEMENTATION OF STRATEGIES ⢠STRATEGIC RECRUITMENT ⢠EMPLOYEEâS INVOLVEMENT IN DECISION MAKING PROCESSES ⢠EMPLOYEES PRIORITIZATION ⢠EMPLOYEES EMPOWERMENT ⢠ON JOB TRAINING ⢠EMPLOYEEâS SATISFACTION ⢠EFFECTIVE GRIEVANCE HANDLING MECHANISM
- 18. EFFECTIVENESS OF THESTRATEGY ⢠VRIO FRAMEWORK ⢠LONG TERM FINANCIAL PERFORMANCE ⢠STOCK PRICE ⢠REVENUE ⢠NET INCOME ⢠NUMBER OF THE FLEET ⢠NUMBER OF THE EMPLOYEES
- 19. VRIO FRAMEWORK The Questionof Value: ⢠The Southwest has both fleet and financial capability to compete The Question of Rarity: ⢠Boeing and Airbus are only aircraft supplier but Southwest has bargaining power due to its size and operations The Question of Imitability: ⢠Initially LCC model was difficult to imitate but many duplications are available. ⢠Employee first strategy is hard to imitate The Question of Organization: ⢠Southwest is well organized and good corporate culture
- 20. NYSE Performances Retrieved fromhttps://www.google.com/finance?q=NYSE:LUV
- 21. FINANCIALS Revenue in Millions $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 19941995 1996 1997 1998 1999 2000 2001 2002 2003 Year Net Income in Millions 0 100 200 300 400 500 600 700 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Year Source: Southwest Airlines, Annual Report (2003)
- 22. FLEET SIZE Total Fleetas of Dec 31, 2015 Age Total Owned Leased 737-300 22 118 78 40 737-500 24 11 9 2 737-700 11 471 397 74 737-800 2 104 97 7 12 704 581 123 Fleet Size 0 100 200 300 400 500 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Year Number of Airplanes Source: Southwest Airlines, Annual Report (2003) Source: Southwest Airlines, Annual Report (2015)
- 23. EMPLOYEES 25% 43% 21% 8% 1% 1% 1% 0% 0%0% 0% 0% Employee Pilots Flightattendent Ramp operations Mechanics Clerks Dispatchers Aircraft technician Facility technicians Simulator technicians Crew instructors Meteorologists Support rep Number of Employees 0 5000 10000 15000 20000 25000 30000 35000 40000 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Year Source: Southwest Airlines, Annual Report (2003)
- 24. AVIATION AND SOUTHWESTAIRLINE ⢠Technological innovation by Wright brothers ⢠Acceleration of global business through aviation ⢠Speed of air-transport 600mile/1000km per hour ⢠Innovations in safety systems, airport construction, traffic control systems, navigation control and aircraft manufacturing with continuous technical development in aviation industry encouraged founders to invent Southwest Airline.
- 25. SOUTHWEST AIRLINE &TECHNICAL IMPACT ⢠Founder Herb Kelleher & Rollin King-1971 ⢠Fifteen to Twenty minutes Turnaround ⢠Convenient Schedules and on Time arrival Technology at Southwest ⢠One type of Aircraft â Boeing 737-blended winglet ⢠Eco-power engine wash service would save more than $20million in fuel cost ⢠Online ticket booking and reservations and Frequent flyer programs
- 26. SOUTHWEST AIRLINE &TECHNICAL IMPACT ⢠Technical initiative began in 2003. ⢠Automation in overall business. ⢠Computer generated tags to capture luggage for customers. ⢠Rapid check-in kiosk made the check in easier for travelers. ⢠Southwest as first to launch its own website for booking. The website provided boarding passes before going to airport. ⢠Frequent flyer program is a great example of using IT for Porterâs five forces. It reduced buyer power and customers were less likely to switch to another airline. High switching cost reduced substitute product threat for product and service. ⢠Emerging technology has been used for permission marketing for special offers. Mobile applications are now in use to quick air-travel bookings. ⢠Patent for fare and schedules, web monitoring, mobile data reading
- 27. SOUTHWEST AIRLINE &TECHNICAL IMPACT IMPACT ⢠One aircraft strategy made Southwest reduce the maintenance cost, lowered the inventory material maintenance, helped keep easier records, training was easier with single technical manual. ⢠Use of Eco-power engine wash improved on range of aircraft, saved fuel, reduced take off noise and lowered engine maintenance cost. ⢠Technology adoption by Southwest airline for booking and reservations contributed to maximize the airtime for aircraft and ultimately earned extra trip a day. ⢠Loyal human capital with technological know-how became intellectual property with learning curve for southwest providing Economies of Scale and Cost leadership for 46 years. ⢠Continuous technical advancement: Southwest is first customer for Fuel efficient Boeing 737-MAX ⢠Have a look at this video : https://www.youtube.com/watch?v=f7ZDiYANYU8
- 28. SOUTHWEST AIRLINE &TECHNICAL IMPACT ⢠Cash Flow as of Dec 31, 2016 (Edgar, 2017). ⢠Income increased by 60 million YOY. ⢠Net cash available for Operations increased by One billion in 2016. Single domestic airline earning profits every year despite of every other storm for 46 years. Consolidated Statement of Cash Flows - USD ($) $ in Millions 12 Months Ended Dec. 31, 2016 Dec. 31, 2015 Dec. 31, 2014 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,244 $ 2,181 $ 1,136 Adjustments to reconcile net income to cash provided by (used in) operating activities: Depreciation and amortization 1,221 1,015 938 Impairment of Intangible Assets, Indefinite-lived (Excluding Goodwill) 21 0 0 Unrealized Gain (Loss) on Derivatives (200) 113 279 Increase (Decrease) in Deferred Income Taxes 455 (109) 501 Changes in certain assets and liabilities: Accounts and other receivables (50) (88) 54 Other assets (119) 103 142 Accounts payable and accrued liabilities 226 961 36 Air traffic liability 125 94 326 Cash collateral received from (provided to) derivative counterparties 535 (570) (233) Other, net (165) (462) (277) Net cash provided by operating activities 4,293 3,238 2,902
- 29. LEADERSHIP OF THECORPORATION Facts: ⢠The first major airline to fly a single type of aircraft (Boeing 737s) ⢠The first major airline to offer ticketless travel system wide including a frequent flier program based on number of trips and not number of miles flown. ⢠The first airline to offer a profit-sharing program to its Employees (instituted in 1973). ⢠The first major airline to develop a Web site and offer online booking. In 2001, about 40 percent ($2.1 billion) of its passenger revenue was generated through online bookings at www.southwest.com. Southwestâs cost per booking via the Internet is about $1, compared to a cost per booking through travel agents of $6 to $8.
- 30. Leadership of thecorporation Key competitive advantages: ⢠Low Operational costs / High Operational Efficiency ⢠Labor cost (37%), Fuel cost (18%), Point-to-point service, Secondary Airports, Consistent aircraft, E-ticketing ⢠Award winning customer service ⢠The Mission âWarmth, friendliness, individual pride, and Company Spiritâ. ⢠Human Resource practices / Work culture ⢠Hiring (2 steps), Equal opportunity and stable work environment
- 31. Leadership of thecorporation ⢠Challenges: ⢠Reserved seating ⢠Due to increasing security guidelines since September 2001, Southwest would need to prepare for assigned (reserved) seating to track its in-flight passengers. This change will involve large technology investments and may impact its gate operations negatively since the current way of unassigned seating has helped in quick gate turnarounds. ⢠Passenger demand ⢠Customer relationship management (CRM) techniques and has applications to get insight into customerâs wants and dislikes. ⢠In-Flight Entertainment ⢠JetBlue ⢠60% of its service is still very short haul
- 32. Personal leadership example Service - Profit Chainmodel LEADERSHIP IMPACT Employee satisfaction Customer Loyalty Shareholder value ⢠Creating a vision ⢠Established an organizational culture HERB KELLEHER
- 33. ETHICS CENTRIC MODELOF LEADERSHIP Ethics Influence Change Org. values ⢠Process of influencing and inspiring people to change ⢠Ethics is in center ⢠Establish and reinforce organizational values
- 34. RECOMMENDATION ⢠Expansion toSouth East Asian Market ⢠Fleet renewal ⢠Service upgradation ⢠Provide a full service operations in international destinations ⢠Paid seat reservations and in flight amenities at charge in domestic market
- 35. REFERENCES: ⢠https://www.swamedia.com/channels/Corporate-Fact-Sheet/pages/corporate-fact- sheet#about ⢠https://www.southwest.com/html/aboutsouthwest/index.html?clk=GFOOTER- ABOUT-ABOUT â˘http://reader.mediawiremobile.com/Southwest/issues/101853/viewer?page=43 ⢠http://teamsparksouthwest.blogspot.com/2012/04/southwests-competitive- advantage.html ⢠Edgar FS Client. (2017, Mar). Retrieved on Mar 3rd, 2017 from https://searchwww.sec.gov/EDGARFSClient/jsp/EDGAR_MainAccess.jsp?search _text=technology&sort=Date&formType=1&isAdv=true&stemming=true&numRe sults=10&queryCo=southwest%20airlines&fromDate=03/03/2016&toDate=03/03/ 2017&numResults=10 ⢠Southwest Airlines, Annual Report (2003) ⢠Southwest Airlines, Annual Report (2015)
- 36.
Editor's Notes
- #5Â Retrieved from https://www.southwest.com/html/aboutsouthwest/index.html?clk=GFOOTER-ABOUT-ABOUT
- #14Â Retrieved from: http://reader.mediawiremobile.com/Southwest/issues/101853/viewer?page=39
- #15Â Retrieved From: file:///C:/Users/Raja/Downloads/2015SouthwestOneReportbd7700f0f49593843777e2dbc2075555f822a02d%20(1).pdf
- #26Â Southwest 737 25 minute turn around in time lapse video: https://www.youtube.com/watch?v=M6HKbTxbSkk
- #29Â Reference : Edgar FS Client. (2017, Mar). Retrieved on Mar 3rd, 2017 from https://searchwww.sec.gov/EDGARFSClient/jsp/EDGAR_MainAccess.jsp?search_text=technology&sort=Date&formType=1&isAdv=true&stemming=true&numResults=10&queryCo=southwest%20airlines&fromDate=03/03/2016&toDate=03/03/2017&numResults=10
- #30Â Evaluate the leadership of the corporation. Assess the overall failure or success of the leadership today.
- #31Â According to a recent HBS Case Study, southwest airlines is the âmost heavily unionizedâ US airline (about 81% of its employees belong to an union) and its salary rates are considered to be at or above average compared to the US airline industry. In a study in 2001, the productivity of Southwest employees was over 45% higher than at American and United Airlines that want to prevent huge swings in operating expenses and bottom line profitability choose to hedge fuel prices. If airlines can control the cost of fuel, they can more accurately estimate budgets and forecast earnings. Southwest operates its flight point-to-point service to maximize its operational efficiency and stay cost-effective. Most of its flights are short hauls averaging about 590 miles. It uses the strategy to keep its flights in the air more often and therefore achieve better capacity utilization. Southwest flies to secondary/smaller airports in an effort to reduce travel delays and therefore provide excellent service to its customers. It has led the industry in on-time performance. At the heart of Southwestâs success is its single aircraft strategy: Its fleet consists exclusively of Boeing 737 jets. Having common fleet significantly simplifies scheduling, operations and flight maintenance. The training costs for pilots, ground crew and mechanics are lower, because thereâs only a single aircraft to learn. The Mission of Southwest Airlines 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. Customer Service is through emphasizing the customer and employee that Southwest is able to differentiate itself from others in the airline industry. On a more technical level, each employee or group within Southwest has his or her own customer. This means that every employee âservesâ in one way or another despite not being directly involved with the passenger. The mechanicâs customer is the pilot and the catererâs is the flight attendant. Mission Statement To Our Employees âWe are committed to provide our Employees a stable work environment with equal opportunity for learning and personal growth. Creativity and innovation are encouraged for improving the effectiveness of Southwest Airlines. Above all, Employees will be provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Southwest Customer.â The first step is a group interview, conducted by employees, where communication skills of potential candidates are evaluated. The next steps in this process are one on one interview, where the candidatesâ attitudes and orientation toward serving others are evaluated. These hiring criteria apply to all job functions since all Employees at Southwest play a customer service role. A critical part of Southwest operational strategy is that every job at Southwest is a customer service position, whether it directly applies to the customer or whether it is internal.
- #32Â According to a recent HBS Case Study, southwest airlines is the âmost heavily unionizedâ US airline (about 81% of its employees belong to an union) and its salary rates are considered to be at or above average compared to the US airline industry. In a study in 2001, the productivity of Southwest employees was over 45% higher than at American and United Airlines that want to prevent huge swings in operating expenses and bottom line profitability choose to hedge fuel prices. If airlines can control the cost of fuel, they can more accurately estimate budgets and forecast earnings. Southwest operates its flight point-to-point service to maximize its operational efficiency and stay cost-effective. Most of its flights are short hauls averaging about 590 miles. It uses the strategy to keep its flights in the air more often and therefore achieve better capacity utilization. Southwest flies to secondary/smaller airports in an effort to reduce travel delays and therefore provide excellent service to its customers. It has led the industry in on-time performance. At the heart of Southwestâs success is its single aircraft strategy: Its fleet consists exclusively of Boeing 737 jets. Having common fleet significantly simplifies scheduling, operations and flight maintenance. The training costs for pilots, ground crew and mechanics are lower, because thereâs only a single aircraft to learn. The Mission of Southwest Airlines 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. Passenger Demand The keep-it-simple philosophy has served Southwest well. But as its own business grows and grows more complex, with plans to purchase dozens of new aircraft and an expected upsurge in passenger traffic to about 80 million boardingâs a year, the simplicity strategy that has been reflected in the airlineâs IT philosophy is evolving. The CIO Tom Nealon says that âItâs time to adapt our business processes for efficiency. As our airline scales for us to provide the same kind of high-touch customer service, we have to automate a lot of things weâve been able to do without technology previously. The challenge is doing that without conceding the customer touch.â Southwest is also aggressively pursuing customer relationship management (CRM) techniques and has applications to get insight into customerâs wants and dislikes. According to an interview with its CEO Gary Keller, Southwest has its focus on improving in two areas â customerâs airport experience and in-flight experience. In-Flight Entertainment In an overall effort to improve customerâs in-flight experience, in-flight entertainment is something that Southwest is currently evaluating and which JetBlue has been very successful at already because of its introduction in its long-haul flights. In comparison, Southwest has 415 airplanes to consider and that represents an investment decision at a whole new dimension. Additionally, Southwest has to consider how things may fit into their environment. At this point, 60% of its service is still very short haul. Southwest needs to be mindful of the fact that a certain approach that has been successful for its competitor may not be necessarily work to its advantage. Summary: Southwest has long been regarded as a benchmark in its industry for operational excellence. Southwest Airlines is a fine example of a company that is committed to its core competencies â efficient operations to drive its low cost structure, outstanding delivery of customer service and innovative HR management practices. We hope this paper provided a good insight into Southwest operations, as part of its overall strategy, to achieve success and gain competitive advantage.
- #33Â Herb Kelleher has motivated his employees, by: (1) creating a vision where employees experience a sense of calling that provides meaning and inspires to make a difference, and (2) established an organizational culture that is based on core values, beliefs, and assumptions. Â This type of leadership has enabled the creation of the service-profit chain (SPC) model, which is comprises of employee satisfaction, customer loyalty, and shareholder value. Based on this model, Kelleher believes profit and growth are stimulated by customer loyalty, customer loyalty is the result of customer satisfaction, and customer satisfaction is created the value employees create products and services to customers.
- #34Â Herb Kelleher, he has developed a process of influencing and inspiring people to change. In this process, ethics is central to leadership and he has helped to establish and reinforce organizational values.