Southwest Airlines’ successful and profitable business model has been driven by several strategies: high aircraft utilization; standard fleet; charismatic leadership; low fare carrier; excellent customer service practice; attractive frequent flier program; innovative and creative marketing program; performance focused organizational culture; strategic human resources management and a lean operations.
Southwest fleet is made up of mainly Boeing 737 fuel efficient airplanes which spent an average 11 hours in the air daily compared to an industry average of 8 hours and average 10. flights per gate versus 4. 5 which yields more income by virtue of more flight available. By using a single type aircraft, the company has save on maintenance and training costs, which also has contributed to the company’s immaculate safety record. Southwest’s strategy of short-haul, point-to-point flights using less congested airports have contributed greatly to the airline’s efficiency. A significant cost saving factor is the productive and motivated workforce.
In 1991, with reference to industry standards, Southwest had fewer employees per aircraft (79 versus 131), flew more passengers per employee (2,318 versus 848) and had more available seat miles per employee (1,891,082 versus 1,339,995). Unlike other large airlines, Southwest did not buy into the expensive computerized reservation systems. It sells essentially a product with a higher level of service, offering more frequent departures, low airline fares with a low frills approach.
Incorporated and developed directly under the charismatic and motivational leadership of founder Herb Kelliher, the airline’s distinctive corporate culture and human resource management practices are an essential part of the business foundation. There are several reasons for the workforce productivity, which include a rigorous selection process; an average compensation package with significant non-monetary awards including high stock options; ongoing training and employee development program. The human resources practices have created shareholder value by means of low turnover, high productivity and excellent job satisfaction level.
Southwest has designed cross function work coordination whereby once the airline reaches a destination, every member of the flight and ground crew does everything necessary to get the next flight out on time. Remarkably the airline achieved a turnaround rate of 70% of their flights had an average fifteen minutes ground time in 1991. This lessens labour costs, significant productivity advantage in terms of equipment utilization, avoidance of long delays and makes flying with Southwest attractive to the travelers.
Southwest has an organizational culture that emphasizes “LUV” and “FUN” which is aligned to the airlines business strategy creating an additional advantage. “LUV” refers to the company’s core values of respect for individuality and genuine concern for others. “FUN” refers to the company’s belief in employees enjoying themselves at work and creating an atmosphere, which allows customers to have fun. The word “Customer” is consistently capitalized in the company’s corporate communications and practiced in its customer service performance.
Southwest business model have resulted in the achievement of consistent on-time performance, having the fewest lost bags, and fewest number of customer complaints resulting in winning the airlines’ Triple Crown. Without a doubt Southwest passengers who experience the airline’s excellent service have repeatedly extended commendation and this in turn attracts more business. Southwest has created a successful and profitable product in the tough airline industry year-on-year, resulting in creation of value and high return on investment for its shareholders.