Southwest Airlines Business Operations Essay

Southwest Airlines continues growth during challenging times with no its low price, no frills and good customer satisfaction, setting themselves apart from the competition. Organizational change is part of the culture that successfully allows Southwest Airlines to set itself apart. The airline industry is subject to external forces such as fuel prices, labor costs, passenger economic status, and public perception. Southwest Airlines has developed a successful business model based on standardization and efficiency that has allowed them to keep operating costs low and as predictable as possible.There is still a certain segment of the public that needs, or has a desire, to fly as their mode of transportation. Through the use of internal control processes Southwest Airlines continues to increase passenger satisfaction and ridership by fostering a unique organizational culture that is adaptable and open to change.

Southwest Airlines has amazingly been able to do this and “the carrier has enjoyed 37 straight profitable years amid the airline industry’s ups and downs” (Southwest, 2009).Additionally, Southwest Airlines takes pride in setting itself apart from the competition, offering services that make them seem completely different from their competitors. Some of those things are: the use of only one type of aircraft, one type of seating accommodations, upfront pricing without added fees, and not charging for checked baggage. While many air travelers do not like the limited service that keeps Southwest Airlines ticket prices low, others are willing to take less service if they are saving on the ticket price. HistoryFounded in 1971, by Herb Kelleher and Rollin King, Southwest Airlines was originally incorporated as a low cost regional airline that would provide service to three cities in Texas: Dallas, Houston, and San Antonio. They had the idea that if they could offer the speed and convenience of air service at a price competitively near that of driving, or bus service then they could win over customers.

“If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline” (“We weren’t just,”).From the beginning Southwest Airlines business model was to use one type aircraft, flying multiple flights per day into major cities while avoiding the high priced and crowded major airports. “Southwest prospered by offering low fares to leisure travelers whose only other affordable option was a car trip. It flew primarily to America’s secondary airports where costs are low and productivity is high because incoming planes can land, drop off passengers, take on the next group and get back in the air quickly” (Koenig, 2009). Single Type Aircraft The company’s success had been built on a simple business model, operating the same type of Boeing 737 planes at a higher frequency between smaller airports” (Casey, 2010).

The use of one type of aircraft for the entire company has many advantages. First, all of the crews, pilots and flight attendants are only required to be initially trained once. The cost savings of all of Southwest Airlines crews being able to operate the equipment in any part of the country prevents aircraft sitting on the ground due to lack of a qualified crew.

There is a saying among airline pilots that “airplanes don’t make money sitting on the ground”.The single type of aircraft also translates to saving on the maintenance side for Southwest Airlines as well. The mechanics only have to be qualified on a single type of aircraft, and stocking for spare parts is simplified. Second, with the smaller Boeing 737’s they are able to land at smaller airports and use closer parking and jet ways.

Lastly, the ground turnaround times for the smaller airplanes are much faster not only for passenger boarding, but fuel, baggage, and beverage restocking as well. I was recently on a Southwest Airlines flight from Sacramento to San Antonio that had a scheduled turn at Phoenix.I stayed onboard since I was taking it through, the Flight Attendants followed the last passengers to get off by going through the plane picking up trash and cleaning seatback pouches. This little bit of work on their part save time from having special cleaning crews come onboard to do this, and the wage cost associated with them. From the time that the last passenger was off, and the pre-boarding started, was 10 minutes. Standardized seating Southwest Airlines has had success with offering the same type of seat to everyone.

There is no class distinction onboard.Every passenger has the same type of seat so there is no doubt as to what they getting every time they board a Southwest flight. “Our open seating has served us exceptionally well throughout our 36-year history, and, after much research, deliberation, careful evaluation, and significant feedback from our employees and customers, we’ve decided that it is here to stay,” said Gary Kelly, Southwest Airlines’ Chief Executive Officer” (Huffman, 2007). Southwest Airlines feels that the negative of not having an assigned seat as with other airlines is offset by the desire for a lower ticket price. Boarding processThe boarding process with Southwest Airlines is both unique to the airline industry and an efficient process. Passengers are assigned to a boarding group of A through D, and a number based on when they checked in. The check in may be done online up to 24 hours prior to the departure time, or at the airport when checking in their bags. With sign poles clearly posted passengers line up according to their assigned number and board in that fashion.

The complaint by many, mostly non-Southwest passengers is it is a “cattle call”, but the process is efficient and allows Southwest Airlines to turn their aircraft faster than the competition. Southwest says that if its boarding times increased by 10 minutes per flight, it would need 40 more planes at a cost of $40 million each to run the same number of flights as it does currently” (Lewis & Lieber, 2005). Southwest Airlines has continually looked for ways to improve this process in response to the customer feedback.

Passengers used to have to arrive at the boarding gate to get their boarding number, and then board in groups, not necessarily sequential. This penalized many business travelers who were arriving just in time to board. The next step was checking in online starting at midnight.When many passengers complained about staying up late trying and get a better number for an early morning flight, Southwest Airlines again shifted to meet consumer’s desires. Now passengers can log on 24 hours prior, and even pay an extra $10. 00 to guarantee an earlier boarding number. Fuel price containment Airline profitability and even its survival depend on controlling costs. Of all the external forces that the airline industry faces, oil price fluctuations have one of the most significant effects on their profitability.

After labor, jet fuel is the second largest operating xpense for airlines. Due to the competitive nature of the airline industry, it is almost impossible to pass on this fuel cost to the passengers in the form of higher ticket prices. If an airline could control the cost of fuel, they could more budget and forecast earnings in a more accurate manner, and give themselves a competitive advantage during rising fuel prices. Southwest Airlines chose to lock in fuel prices as a hedge against future higher fuel prices. “Hedging brings the benefit of stability to one of an airline’s key and potentially volatile costs” (Dunn, 2009).This fuel hedging strategy paid off for Southwest Airlines in 2007 when fuel costs skyrocketed.

By limiting the impact of this external force they were able to keep their ticket prices competitive and still show a profit margin. Southwest Airlines has initiated organizational changes to further help control fuel costs. Each night they perform an engine wash on all of their Boeing 737’s four engines. “This has increased engine efficiency, and, from April 2008 through December 2008, saved 1.

6 million gallons of fuel and reduced emission by 15,000 metric tons of carbon dioxide equivalent” (“Southwest cares”).Additionally, when the aircrafts are parked at the gate they “plug in” to an electrical outlet that allows them to shut down the aircraft auxiliary power unit (APU), which is a small jet engine all large aircraft have in their tail section. Customer service “Herb Kelleher … used to say: “We’re in the customer-service business. We just happen to fly airplanes.

” (Ahles, 2009). This statement speaks volumes about the organizational culture at Southwest Airlines. From its inception, Southwest Airlines realized that they needed to find ways to attract potential customers.These ways had to be those that would make them standout from the existing competition.

Southwest Airlines continues this culture of doing things that will deliberately set themselves apart from the other airlines, and they make a point of emphasizing those differences in their advertising campaigns. Southwest airlines goal is to offer low fares for short-distance flights. They feel that this is especially appealing to customers on a personal level in an age of divorced parents and an affordable way to handle childcare, grandparents to see their grandchildren more often, and for college students to go home during short school breaks.In appealing to these kinds of customers Southwest Airlines has turned them into stakeholders. “If leaders are successful at aligning the interest of multiple stakeholders—shareholders, employees, customers, suppliers, the host community and so forth–they can contribute to outstanding performance” (Spector, 2010, p. 33). Southwest Airlines uses “horizontally linked structures to coordinate value chain activities in order to provide customers with a unique experience and their companies with a unique competitive edge”. (Spector, 2010, p.

144).The company has an open door policy with their employees that make it faster and easier to solve problems. To further encourage their employees to “think outside the box” and try out new ideas, Southwest always provides any explanation to the individual when an idea is rejected, rather than an automated form reply. As a result of their open door policy Southwest does not feel that they need to conduct surveys or use consultants to determine what they are doing wrong or well. “High employee commitment exists when employees sense a strong overlap between individual goals and the shared goals of the organization” (Spector, 2010, p. 4).

Southwest Airlines feel that their employees will tell the company directly how they feel. Southwest Airlines is one of those companies that hire people using the “person-organization fit” model that “looks beyond the specific skill demands of a task, focusing instead on the values of an individual” (Spector, 2010, p. 119), for their attitude and feels that they can train them for the skills needed. Southwest Airlines has a unique view on customer service. They feel that their employees are the company’s first customer priority.

That way if they can effectively make employees feel good about their work on a daily basis, as satisfied employees, they will pass on that same sense of friendliness and care to the passengers. Southwest Airlines culture is also one of ownership. They feel that ownership both externally and internally, and if they can commit the employees to this sense that they are real stakeholders in the success of Southwest Airlines, then the employees’ will put forth more of an effort in their day to day business. Limited FeesOne thing that is almost universally disliked by customer is additional fees added to the sales price. In the case of airlines this comes in the form of fees that are now charged for what used to be expected service.

Airlines started dropping meal service as a result of the severe down turn in travel following 9/11. In 2008 American Airlines was the first to start charging for checked baggage. This was advertised as a needed fee to offset the rising fuel cost, as it directly contributed to the aircraft fuel burn. All airlines followed soon afterwards, with the exception of Southwest Airlines.When world oil prices began to drop the airlines kept these fees, and is now such a huge source of revenue for the airlines that they will not drop it, “Major airlines now clearly consider baggage fees the holy grail of revenue treasure,” (Barth, 2010). Southwest has used this situation as a chance to gain new customers. They has rightly guessed that most customers would be angry at being charged $25. 00 per checked bag each way, effectively adding $50.

00 to $100. 00 to each passenger ticket. “Low-cost operator Southwest Airlines is the only major carrier that allows each passenger two free bags.The carrier touts its “bags fly free” business model to gain competitive advantage over other carriers” (Giovis, 2009). Southwest Airlines has had a long history of “drinks and snacks only” on all of their flights. With all the other airlines dropping their meal service this has closed the gap between Southwest Airlines and their competition in a favorable manner for Southwest. During all flights the Flight Attendants bring drinks and snacks on hand held trays, which does not clog up the aisle with drink carts, adds a personal touch, and increases efficiency on their turn-around times at the gate.

All of these changes came from employee suggestions as a way to improve their company. Stakeholders Southwest Airlines has enjoyed a long history free from labor disruption. This has largely been due to the previously mentioned organizational culture of believing that their employees are the most important customers. “Southwest also has the highest labor rate in the industry because it was the only big airline that had not demanded deep wage concessions from workers” (Bailey, 2007). By taking care of their most important stakeholders they have entered into a partnership of sorts that has a synergistic effect for profit and growth.Southwest Airlines has fostered a high degree of “organic controls” (Spector, 2010, p. 92) as a part of their company culture, which they readily share with the passengers and results in a high degree of satisfaction and repeat business. “The pilots have been willing to tie our pay increases to the success of Southwest Airlines”, (“SWAPA “, 2010).

This organizational design has created multiple stakeholders for Southwest Airlines who have a vested interest in the success of the company. ConclusionSouthwest Airlines has a deeply ingrained organizational culture that invokes taking care of their employees and empowering them to make change and address problems at the lowest levels. Carefully hiring the right type of person by focusing on attitude and believing that skills can be taught has been a key to success for the company. Additionally, teaching the company’s philosophy to new employees and its open door policy has help Southwest airlines stand apart from its competition by initiating changes quickly.Southwest Airlines continues growth during challenging times with no its low price, no frills and good customer satisfaction, setting themselves apart from the competition. Organizational change is part of the culture that successfully allows Southwest Airlines to set itself apart.

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