How does one grow a major airline whose revenues exceed $12. 1 billion in 2010, and whose year-end results marked its 38th consecutive year of profitability? The answer: merge with another low-cost rival to become a top contender in the domestic travel market. The merging of two companies, however, doesn’t come without a price. This memo analyzes how the existing and proposed systems will need to be utilized to ensure a successful merger of Southwest Airlines (SWA) and AirTran. Based on this study, the following conclusions have been reached:
1. SWA needs to ensure proper training to support and maintain AirTran airplanes. 2. The conversion of AirTran employees to the SWA culture will be challenging but necessary. 3. SWA must remain true to their culture of “Keep It Simple” to ease the assimilation of other companies. 4. It is recommended that Southwest Airlines merge with AirTran given the above four topics are implemented. Additional Aircraft The Boeing 737 has been the only type of aircraft in the Southwest Airline fleet since its origins in 1971.
The use of one aircraft has contributed significantly to lowering the bargaining power of suppliers by: •Reducing Operating Cost•Minimizing spare parts inventory •Simplifying training for maintenance & repair•Simplifying scheduling •Increasing efficiency and speed of maintenance Although SWA has dealt with differences between the 737 classes, the addition of AirTran brings yet another fleet of aircraft, the Boeing 717. This aircraft is drastically different than the 737 in all aspects.
SWA will have to ensure through Boeing that the dated 717s will be able to be supported in the fleet for repairs and maintenance when needed. It would be advantageous of SWA to partner with Boeing so that they can incorporate additional training programs for employees to ensure a seamless addition of aircraft. The training must be done if they want to maintain their pursuit of lowest operating costs. Addition of a new fleet of planes is imperative to SWA’s growth, as they provide more flexibility for SWA to serve different cities.
Ensuring proper management of the 717s and the markets they serve will be a key component to the merger’s success. Employee Engagement SWA is known for their unique customer relations. Their friendly, fun-loving spirit to customers is their key competitive advantage that sets them apart from their competitors. SWA’s recruiting strategy focuses on attitude – whereas AirTran focuses on skills. With the acquisition of AirTran, SWA would absorb 8,000 AirTran employees whom they did not have the ability to select based on their hiring criteria.
To avoid a clash in assimilating new employees, the SWA culture must be instilled and followed by all new employees. To ensure this, suggestions would be to: •Hold University for People training for AirTran employees at a more frequent rate •Develop a course for AirTran Leaders to instill the SWA culture to their work habits •Develop a specific culture-building course to ease transition to SWA culture No other airline or industry (i. e. car or boat) provides the low-cost reliable service that SWA does. SWA must keep their employees as their number one asset. Conclusion and Recommendations
As SWA enters more congested airports, especially in the Northeast, it may suffer the same performance shortfalls and issues that afflict its rivals. With the addition of AirTran, SWA will expand to larger cities and new locales, such as Atlanta, LaGuardia and the Caribbean and smaller markets such as Bloomington, Illinois. These locations are very different than SWA’s strategy of focusing on the midsize towns and secondary airports but are they key markets for SWAs continual growth? AirTran’s locations have been using business class cabins, which will be removed by SWA.
SWA must remain focused on their customer service strategy before entering into new markets. With an entrance into a larger scale market with AirTran’s routes, SWA should analyze the following before accepting the AirTran merger: •If the AirTran hubs add substantial business and leisure traffic •SWA operating costs can sustain flights into small airports such as Bloomington •There will be at least 8 flights per day out of added hubs •The clientele will adjust to the SWAs strategy of no business class seating It is recommended that SWA keep its current corporate culture and ensure that AirTran completely adapts to these philosophies.
There are many new entrants, such as Delta Express and United Shuttle, who are trying to break into SWAs strategy of low cost and efficient operations, but SWA has grown to be a force to be reckoned with due to their exemplary customer service, employee engagement and operational efficiencies. If they change any of this, their foothold on the U. S. Airline Industry could crumble.
i. http://www. blogsouthwest. om/news/southwest-airlines-reports-fourth-quarter-profit-and-38th-consecutive-year-profitability ii. http://www. usatoday. com/money/industries/travel/2010-09-27-southwest-airtran-merger_N. htm? csp=obnetwork iii. Gamble, John and Arthur Thompson. “Southwest Airlines in 2008: Culture, Values, and Operating Practices. ” (Page 62). iv. http://www. businessweek. com/news/2010-09-28/southwest-risks-keep-it-simple-focus-to-spur-growth. html