Our people fuel our planes

Presented By: Sachin Bajaj, Ankur Sethi, Ajit Kumar, Ayush Garg, Harsh NarulaDileep Kumar

WARRIOR SPIRIT – SERVANT HEART – FUN-LOVING ATTITUDE

About SouthWest• Started operations in 1971 with just 3 aircrafts

• SouthWest was conceptualized to save customers time and money

• The idea was to keep productivity high and fares low

• “Wright Amendment” was passed in 1971 as a result of the legal battle between “SouthWest” and rival airline “Continental” which resulted in curtailing some of SouthWest’s operations

• Expanded operations in in California in 1989

• Became leading airline in passenger boarding in 1993

• Achieved 70% market share in California in just 6 years

• At end of 1994 the company operated 199 Boeing 737

The mission of SouthWest is dedication to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride,and company spirit

Mission

Growth Of SouthWestFleet Size Net Income ($ 000s)

Passenger carried / per employeeAircraft Utilization (Hrs)

Source: 1994 Annual Report

Success Criteria For Airlines

• On Time Performance

• Fewest Lost Bags

• Fewest Customer Complaints

Having success in each of the above three criteria requires:

Highly efficient, proactive, motivated and committed staff

Critical Success Factors Driving SW PerformanceSecrets to the success

SECRET NO. 1 Stick to what you’re good at.

Since 1971, SouthWest Airlines has offered single class service on lots of short-to-medium range flights to convenient airports. It’s an idea that has propelled SW to new heights.

SECRET NO. 2 Keep it simple

SouthWest Airlines honours some simple no-no’s: No assigned seats. No meals. No hassles. No problems. You could say they’re simply nuts about it!

SECRET NO. 3 Keep fares low, costs lower

SouthWest Airlines believes in low fares by philosophy. The only way to keep fares low is to keep costs even lower. It’s the primary goal.

Critical Success Factors Driving SW Performance

SECRET NO. 4 Treat Customers like guests

SouthWest Airlines has won the annual Triple Crown four times: Highest Customer Satisfaction. Best On-time Record. Best Baggage Handling.

SECRET NO. 5 Never stand still

SouthWest Airlines provides quick turnarounds at gates. Respond quickly to changes in the business environment. Which helps keep one step ahead of the competition.

SECRET NO. 6 Hire great People

SouthWest Airlines is a People Company. Spirited, altruistic, fun-loving Employees who work hard, follow The Golden Rule, and provide the best Customer Service in America. Team Work and trust further increases cohesiveness amongst each other.

How SouthWest Did it ?

SouthWest strategy – Concentrates on flying to underutilized airports and close to metropolitan areas

Inducting fuel efficient air carriers 737s (Fleet size increased to more than 200)SouthWest Services:

Frequent on-time departuresLow cost faresEmphasizes point-to-point routes, with no central Hub

By avoiding hub and spoke system, SouthWest avoided flight delays associated with connecting flights

Short turn around times ( In 1991, 70 percent of flights had 15 mins ground time) and higher equipment use

SouthWest aircraft spent average of 11 hours in air daily vs to industry average of 8 hours

SouthWest started with business strategy to compete with road transport not other airlines

SouthWest used low fares and frequent flights to increase passenger volume by 2-3 times

1984, Average passenger fare were $49 for 436 miles1993, Average passenger fare were $60 for 500 miles1994, round trip fare from Oakland to San Diego were $135 for 1000 milesPassengers flying weekly between Louisville and Chicago rose from 8000 to 26000 when SouthWest lowered fares and increased frequency of flightsSimplified fare pricing policy - Two fares on a route

1. a regular coach fare (no first or business class)2. An Off-peak fare

-All fares were same within a state (Currently $69 fly anywhere within California)

-Never been part of other airline carriers or be part of other airlines reservations system

-Less dependence on travel agents for booking of tickets-SouthWest’s frequent flyer club (“The Company Club”) which entitles

a member to travel free after completing specified number of round trips in an year

How SouthWest Did it ?

How People Contributed To The Success ?Putting “Customer First”. Motivating employees to focus on importance of customer service

SW management offered stable environment, personal growth resulting in employee loyalty and retention despite lower salary package VS other airlines

Employees are empowered and made part of the company’s success

Peer hire peer policy, led to employees sense of belonging and ownership

Even rejected people were dealt carefully – Customer Focus

Focus on extensive training to ensure future readiness

Kelleher’s ability to maintain harmonious relations with his trade unions resulted in only one six day walkout by the workers over a long period.

Accessibility and frequent interaction with top management

How People Contributed To The Success ?

SouthWest Culture: To create culture of happiness and fun at work

“Culture” is the Key To SouthWestCulture is the key to success of SouthWest

SouthWest has a unique culture to keep morale of employees high

SouthWest is committed to keep costs low which is made part of the culture of the company

Culture is the glue that holds the employees and company objectives together

Emphasis on creativity: employees have been allowed to work in pajamas for a day

Focus is on ‘Attitude’ and not on technical skills

Initiatives like ‘Day in the field’ to encourage seniors have exposure to field job experience

SouthWest Future Plans For Fleet Additions

The company expecting a growth on year on year basis for next 10 years

Source: 1994 Annual Report

SWOT Analysis

• Strong Culture• Low operation

cost• Creative and

genuine people

• No backup for CEO

• Increasing workforce

• Overconfidence in employees

• Emerging competition from new and existing airlines

• Higher oil prices

• New markets• Increasing the

fleet size

Strength Weakness

ThreatOpportunity

The Competitive ThreatContinental Lite:

A low cost service (even lower than SW) started in 1993 with 171 departures from 14 cities, cutting fares by over 60%

Continental followed SW best practices related to cost minimization, employee engagement

Continental’s performance despite imitating SW practices was very poor. For example flight turnaround time 30 mins vs 15 for SW, in addition there were many customer complaints and lost bags

Though profits were weaker than expected but it witness sharp increase in market shareUnited Shuttle:

In 1994, United too announced an airline with in a airline, having direct competition to SW

With lower fares, it was all out war between continental lite, SW and The shuttleDespite such severe competition, SouthWest succeeded due to its organization culture, committed employees and impeccable top management team

The Future Challenge

Threat of competition:

The competition is severe, that requires SouthWest to maintain its competitive advantage. “Its People”

Maintain its market share to ensure profits does not go down and company can remain cost competitive

Succession plan for top management

With 14,000 employees and growing, it will be difficult to maintain same level of culture and employee engagement

The CEO, Mr. Kelleher has been leading the company for over 22 years, there is a need to look out for new leader for future transition. Also, the top management has been with the company for many years, there is need for succession planning for each management position

What Should SouthWest Do ?

Induct more and more cost saving initiatives

Continue with the same highly selective process for recruitment

Increase operations by expanding operations or through M&As

Focus on technology which helps increasing fuel efficiency

Not compensate safety for frugality

Maintain the same operating efficiency

Work on more and more reward initiatives

Not let the people be overconfident of the success and keep motivating them

Maintain the same culture and employee satisfaction

Keep customer service as their main motto

Thank You…