...Southwest Airlines in 2010 (pages 401-436) Gamble, J. E., Thompson, A. A., Jr., and Peteraf, M. A. (2013). Essentials of strategic management: The quest for competitive advantage (3rd ed.). New York: McGraw-Hill/Irwin. DISCUSSION QUESTIONS 1. What are the key policies, operating practices, and core values underlying Southwest’s efforts to implement its low-cost/no frills strategy? In order for Southwest Airlines to implement its low-cost/no frills strategy, they charge the lowest price possible to make air travel affordable to a wide segment. The lowest fares were usually nonrefundable but could be applied to future travel on Southwest Airlines, while rival airlines charged a change free of $100 to $175. Southwest Airlines also implemented the “Bags Fly Free” policy. Other airlines were charging up to $120 round trip to check bags due to the increase in jet fuel costs, but Southwest chose to let fliers check bags for free, which resulted in a company-record load factor. Southwest also uses dynamic pricing to charge more during peak travel periods. Southwest was able to experience revenue gains from increased ticket sales and passenger traffic. Southwest does not use the hub-and-spoke route systems of rival airlines and instead uses point-to-point scheduling. This allows Southwest to minimize the time aircraft is at the gate to 25 minutes. Southwest’s point-to-point route system minimized connections, delays, and total trip time. Southwest also has no assigned...
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...COMPANY PROFILE Southwest Airlines Co. REFERENCE CODE: DEFBDE99-9B78-4A63-BE9C-7EA7568D476E PUBLICATION DATE: 30 Nov 2012 www.marketline.com COPYRIGHT MARKETLINE. THIS CONTENT IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED OR DISTRIBUTED. Southwest Airlines Co. TABLE OF CONTENTS TABLE OF CONTENTS Company Overview..............................................................................................3 Key Facts...............................................................................................................3 Business Description...........................................................................................4 History...................................................................................................................5 Key Employees.....................................................................................................7 Key Employee Biographies................................................................................10 Major Products and Services............................................................................16 Revenue Analysis...............................................................................................17 SWOT Analysis...................................................................................................18 Top Competitors.................................................................................................23 Company View.............................
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...Case #20 – Southwest Airlines Marisa Melchiorre Amber Harrison Emeka Onyia Company History 1966 Rollin King approached Herb Kelleher’s law office with plan to start low-cost/lowfare airline Ran into legal problems, rival airlines in Texas did everything they could to block new airline Herb Kelleher was determined to start up airline 1971 – Lamar Muse Southwest CEO, background in industry to get it up and starting Raised $7 million in capital and private investors to purchase planes and equipment Flights started between Dallas, San Antonio, and Houston known as the “Golden Triangle” First ever annual profit in 1973 2010 – market share leader in domestic air travel in US, consistently profitable even during down turning economy, profit every year since 1973 Number of passengers increased by more than 28 million 1. Is there anything that you find particularly impressive about Southwest Airlines? One of the most impressive characteristics about Southwest Airlines is their fun, loving, determined company culture that believes first in making employees happy which then results in happy customers. Herb Kelleher was adamant about listening and allowing employees to think and to most importantly be heard. The strong value of the happiness of their spunky employees is their competitive advantage against other rival airlines in the industry. Southwest is able to create a competitive advantage not only with their low prices but also offering a fun and humorous experience...
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...SOUTHWEST AIRLINES CO. 2011 ANNUAL REPORT TO SHAREHOLDERS To our Shareholders: The year 2011 was historic for Southwest Airlines. We celebrated our 40th anniversary of providing low-fare, high quality commercial air service. We launched an all new, industry-leading, frequent flyer program in March. We opened three new cities: Greenville-Spartanburg, South Carolina; Charleston, South Carolina; and Newark, New Jersey. We closed our acquisition of AirTran Airways on May 2, growing our fleet by 140 aircraft, and extending our route network domestically and to the Caribbean and Mexico. In December, we unveiled our fleet modernization plans, which include an agreement with Boeing to serve as the launch customer of the 737 MAX aircraft. And, our operations improved in 2011, closing out the year with our highest December ontime performance in 15 years. Moreover, we reported our 39th consecutive annual profit in a year that endured a $1.7 billion year-over-year increase in combined economic fuel costs. Our 2011 net income was $178 million, or $.23 per diluted share, including special items (primarily noncash, mark-to-market, and other items required for a portion of the Company’s fuel hedge portfolio, as well as costs associated with the acquisition and integration of AirTran). Excluding special items, our 2011 profit was $330 million, or $.43 per diluted share. Our financial position remains strong. Our cash and short-term investments were $3.1 billion, as of December 31, 2011, in...
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...Balanced Scorecard Southwest Airlines Steven Richardson September 20, 2012 Executive Summary Southwest Airlines is the largest domestic carrier for 106 million passengers and has been a strong growth company over the last 39 years. To guarantee its future achievements, Southwest Airlines needs to preserve its cost advantages and find new growth opportunities. The price of fuel has risen considerably and is the number one source of rising cost in the airline industry. Therefore, I recommend that Southwest Airlines continue to seize opportunities to improve the fuel efficiency of its fleet. I recommend that Southwest Airlines examine the consideration of purchasing new Boeing 737-700s and 727-200’s to stay competitive in this ever changing market. Southwest Airlines should consider using cash reserves to upgrade on-board amenities such as in-flight WiFi and offer live sporting games such as NFL & MLB during the flight. These upgrades can make a direct impact on generating additional revenues for Southwest Airlines. Labor costs are also an opportunity for Southwest Airlines to shift its focus to ensure that they maintain their competitive edge on the competition. As Southwest Airlines begin to make future improvements union wages could pose a threat to the cost of labor demanding magnanimous wage packages. Southwest Airlines has always been on the forefront of maintaining an open and great relationship with its employees. They should leverage the relationship...
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...terms of airlines, Southwest is brilliant. Southwest started out as a small company, with a positive attitude and low price, and then eventually grew into one of the largest airlines in the world, with the same positive attitude and low prices. Southwest’s founders and employees knew what passengers were looking for when it came to flying, low prices and a hassle free experience and became committed to delivering both of those qualities to their customers. However, when it comes to delivering those qualities to thousands of customers all over the country daily, a company needs to be meticulous. It is my opinion that Southwest Airlines acquired AirTran too quickly, and therefore Southwest’s reputation of providing customers with low prices and a hassle free experience might compromised if the same values and positive attitudes aren’t instilled within the newly acquired AirTran employees. Analysis: I believe this is a key problem for Southwest, because Southwest built its company on its reputation. If this reputation becomes tarnished because AirTran doesn’t follow the same protocols or have the same positive attitudes that Southwest has, customers might start flying with competing airlines that provide low cost, such as JetBlue. Because Southwest spent so much money acquiring AirTran (1.4 billion dollars), if the acquisition fails, it’s not something that Southwest can just write off. Recommendation: I believe that before Southwest airlines buys AirTran, the companies should...
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...Introduction and Purpose The term merger and acquisition refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given industry grow rapidly without having to create another business entity (Ben and Li, 2014). According to “Corporate Innovations and Mergers and Acquisitions,” almost two-thirds of all public mergers in the United States are a result of technological innovations, innovative post merger improvements, and cultural synergy (Bena and Li, 2014). Additionally, the strategic planning and implementation of creating this synergy creates one of the biggest challenges for Human Resources....
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...LUV – Southwest Airlines: Financial Analysis Wilmington University MBA 7200: Financial Management Bruce Martin The airline industry is a highly competitive market, and given the competitive nature of this business it is all the more important for a company in this industry to stand out and be noticed and prevail over its competition. Southwest is such a company; within the airline industry it continues to stand tall, this Dallas- based company is currently in its 45th year and has sought out ways to differentiate itself; particularly so in customer service. (About SouthWest). The Mission Statement 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. (About SouthWest). I believe by striving to do so and keeping their customers Southwest has able to maintain its dominance in the airline industry. In fact in 2015 per Forbes Magazine Southwest was ranked 7 in the World’s Most Admired company list (Southwest Airlines 2015). Furthermore, Southwest always manages to bag the top most rank for Customer service by the US Department of Transportation. In May 2011, Southwest completed the acquisition of AirTran Holdings Inc. as a result of this acquisition of Southwest was able to further increase its ability to spread more low fares to more consumers, it experienced a significant domestic network expansion, this merger in...
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...FINANCIAL ANALYSIS: Southwest Airlines EXECUTIVE SUMMARY: Southwest Airlines (NYSE: LUV), a major US airline, established in 1967, based out of Dallas, Texas principally operates a point-to-point rather than a hub-and-spoke service. Southwest is the nation's largest carrier in terms of originating domestic passengers boarded, boarding in excess of 100 million passengers each year. The airline also operates the largest fleet of Boeing aircraft in the world. 2013 was Southwest’s 41st consecutive profitable year earning $754 million in net income. Using a model of selecting the most profitable point-to-point routes and operating them efficiently and with great customer service, Southwest has been able to sustain solid growth year after year. Currently the airline serves 93 destinations in 40 states, the District of Columbia, the Commonwealth of Puerto Rico, and five near-international countries, producing annual revenues of over $17.7 billion dollars. As Southwest continues expanding, including the ongoing integration of AirTran’s operations, it is important that they maintain the low cost structure that has made them so successful in the past. As larger and more congested destinations are added to Southwest’s routes, they must focus on customer service as the on-time arrivals and other metrics may be impacted, and they cannot afford to lose market share. Furthermore, if Southwest is to remain profitable, they must adapt AirTran to the point-to-point strategy. Additionally...
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...SOUTHWEST AIRLINES CO. 2013 ANNUAL REPORT TO SHAREHOLDERS To our Shareholders: Our goals for 2013 were ambitious. We wanted to stay on track with our five Strategic Initiatives described below. We wanted to maintain our strong Brand, unique Culture, and award-winning Customer Service. We wanted to sustain our strong ontime performance and baggage handling. Finally, we wanted to improve our cost performance, achieve our profit requirement, and return value to our Shareholders. Just like in 2011 and 2012, an enormous amount was accomplished in 2013. As a result, we produced stellar results. Our 2013 net income was a record $754 million, or $1.05 per diluted share, including special items (primarily noncash, mark-to-market, and other items required for a portion of the Company’s fuel hedge portfolio, as well as costs associated with the acquisition and integration of AirTran). Excluding special items1, our 2013 profits were also a record, increasing 93 percent year-over-year to $805 million, or $1.12 per diluted share. Our annual pre-tax return on invested capital, excluding special items (ROIC), was 13.1 percent, nearly doubling 2012’s performance. Total operating revenues were a record $17.7 billion, boosted by strong yields and an 80.1 percent load factor. Through the combination of stable fuel prices and rigorous cost control efforts, we met our goal to improve our cost performance. Despite a roller coaster economy, we achieved record earnings; and, while just short of our...
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...profitability? Sustainability Although Southwest cost are low, other competitor are cutting prices and becoming more competitive and therefore they face a problem being sustainable. Cost efficiency. Scenario: (The scenario is a 3-5 sentence summary of the case which includes the names of principles and companies, such facts and details as would be necessary to the understanding of the problem) Southwest Airlines was a market share leader in 2010 in domestic air travel in the U.S., and has continued to be the only carrier in the U.S to remain consistently profitable. The carrier has been able to sustain its position, growth, profit and competitive advantage through the implementation and dedication to a low-cost leader strategy which focuses on low operating costs, low fares, and excellent customer service which has become a major part of its culture and marketing. Despite the low costs strategy, and continually reported profit, the carrier has lost money between 1980 through 2009 as evidence by combined annual losses exceeding combined annual profits by $43.2 billion. Although it is apparent that the carrier’s competitive cost advantage has shrunk and operating costs are beginning increase, their low cost strategy has allowed them to remain leaders for example by adding 28 million passengers annually since 2000, where others lost them. One way that the carrier may once again realize high costs savings is through the possible acquisition of AirTran. Analyses: (Choose 2 forms...
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...Southwest Introduction For 40 years, Southwest has been very profitable and extremely successful as the largest domestic carrier in the United States. Because the rise in competition, varying costs in jet fuel, and struggling economic conditions, Southwest has been forced to move to a profit boosting strategy (opposed to their customer-oriented strategy previously used). Southwest has since added new fees and sacrificed comfortability of its customers to boost capacity in their cabins. Southwest has since also acquired AirTran Holdings Inc. to expand and give the company its first service in Atlanta. Despite this expansion, Southwest has yet to reap the benefits of the acquisition. Problem Southwest experienced a change in leadership in August 2001. Herb Kelleher stepped down from his position and appointed Colleen Barrett, and James Parker to take over. Since this change, Southwest's culture has also experienced a change. Strong employee ties have since dulled. Because of this culture change, Southwest's customers have also been affected. Due to their struggling corporate culture, rising competition, increased costs, and alternative means of transportation; Southwest has sacrificed some of their greatest benefits at the expense of their customers. Alternative #1 I feel that Southwest made a pretty bold move by acquiring AirTran. I feel that one of the best solutions in dealing with competition is to make your company readily available so that everyone has the opportunity...
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...Case Study Analysis Read “Taking Responsibility: High-Flying Labor Relations at Southwest Airlines” at the end of Chapter 14. Answer the three questions at the end of the case in a 2-3 page paper. Follow the project guidelines below. Requirements: 1. Click to use the Case Study Template (also available in Doc Sharing). 2. Complete a 2-3 page paper (not including the title page and reference page). 3. Answer each question thoroughly. 4. Demonstrate your understanding of the information presented in the weekly reading assignments by defining terms, explaining concepts, and providing detailed examples to illustrate your points. 5. Include at least two references from your reading assignments, or other academic sources, to reinforce and support your own thoughts, ideas, and statements using APA citation style. Review the Assignment Rubric (below) before starting this Assignment. ID: MT203-08-08-A Taking Responsibility: High-Flying Relations at Southwest Airlines BU203-Human Resource Management Professor Anton Suzzanna Hernandez Kaplan University 12/8/2013 Imagine, looking out a window of a skyscraper at the line of pickets at the bottom of this building. What must be going through the head of the CEO? How can an organization stop negotiations from going this far? How do strikes help real issues and conditions? By answering the questions on the case study of Southwest Airlines, analysis will help to see how labor relations should be done. Question...
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...| A balanced scorecard for Southwest Airlines | | | | Executive Summery The balance scorecard is a system of measurements on different aspects of a business. It is an important tool for setting up the strategies and putting them into actions. It gives the managers a clear and detailed structure to keep track of all operating activities. It includes four perspectives: financial perspective, customer perspective, internal business perspective, and innovation and learning perspective. The main measures and conclusion from the balance scorecard of Southwest Airline are as follows: * Financial perspective: 1) Compared to the year 2010, passenger revenues growth is the core factor which contributes 29% increase of the revenues in 2011. With the integration of AirTran, your company expands the international market and obtains additional customers. After overcoming the problems generated by the acquisition, you can expect the positive synergy which will bring more passengers and profits to your company. I recommend to solve these problems, adjust to new markets, attract more customers. 2) Operation expenses especially salaries, wages, and benefit expenses and fuel and oil expenses growth result in operation income reduction. I recommend redesigning the optimal routings, increasing carrying capacity in the busy routings and building the reward system for employees to improve their working performance. 3) The asset utilization ratio is an indicator of...
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...Southwest Airline: Culture, Values, and Operating Practices What is particularly impressive about Southwest Airlines is that the company has been consistently profitable every year since 1973. This is mostly due to its eager pursuit of low operating costs, low fares, and customer-pleasing service. Also, Southwest has consistently led the entire airline industry with the lowest ratio of complaints per passengers boarded. The company started out at the bottom and worked its way up through industry ranks to become a major competitive force in the domestic segment of the U.S. airline industry. The company was able to overcome industry downturns, dramatic increases in the prices of jet fuel, falloffs in airline traffic due to terrorist attacks and recessions, while other airline companies are in debt or have gone bankrupt. Also, not only were they able to overcome these threats, but they continued to add more and more flights to more and more airports overtime. The major reason for their continued success seems to be due to their low-cost model and strong emphasis on employee and customer satisfaction. Southwest management has done an incredible job at crafting the company’s strategy. From the beginning, Southwest has pursued a low cost/low price/ no-frill strategy. The company has crafted its strategy by incorporating its overall mission, vision, and core vales. Southwest’s strategy is a great example of a winning strategy because it shows the three complementary qualities...
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