Southwest Airlines Harvard Case Solution & Analysis

Southwest Airlines Case Study Solution

Introduction

Southwest Airline Company was incorporated in 1966 by Herb Kelleher and Rollin King. The company started its first flight in 1971. It has been operating with only three aircrafts, and 25 employees initially flying within three cities called golden triangle of Houston, Dallas, and San Antonio. Meanwhile, the flights would remain within Texas which also helped the company to avoid the federal regulations.

It can be determined that company’s huge success was the industrial benchmark fornew entrants. It was influential for new companies because Southwest was the only airline companywhich was profitable for the last 37 years. Since, market conditions, whether, terrorism, and other events that have shaken the whole industry, and financial crisis, and September, 11 attacks had worst impact on global and domestic travel that led many major industry players to file for bankruptcy.

It was the only airline company that did not followed the hub-and-spoke model for its operations. Since, the hub-and-spoke model is being practiced by almost all major domestic and international airline companies throughout theglobe. But, it has focusedon the point-to-point model that operated from one city to another city and so on. Furthermore, the huge customer’s base was due to its consistent low fares, punctuality, and customer service.

Meanwhile, Kelleher as the CEO has changed the destination of the company. Since, his style of management was considered to be the major contributing factor to the company’s huge success. Because, it has created interesting, friendly working environment throughout the organization. Where he has emphasized on the reflection of team work, and achieving high standards in cost reduction and better utilization of assets. Indeed, the concern was that would company be able to meet with the future challenges, issues, and competitors?

Airline Industry

The airline industry is very sensitive industry among many industries because the airline industry is the only industry that has around 80% fixed costs, and remaining 20% is variable which is completely opposite to general situation.Since the challenges an airline company faces are intense competition, customer satisfaction including low fares, efficiency in operations, and cost reduction.So, it can be determined that there are many complications and complexities in the airline industry.

Thus, it is very important to understand that there are many opportunities and threats in the airline industry. Because, it is very competitive, and dynamic as compared to other industries. But, the airline industry is very sensitive to the changing market dynamics such as many major airline companies filed for bankruptcy after September, 11 attacks that disturbed the domestic and international travel.

Southwest Airlines Harvard Case Solution & Analysis

Table 1 Opportunities and Threats

There are many opportunities, and threats for the company in the marketbecause the travel has increased. Indeed, the low fare of the Southwest has increased the demand for flying in the domestic market. So, it is a big opportunity for the company asit has a good customer base in the domestic market, and also it has been selling 80% of its tickets directly online to customers without the assistance of any agents.

Meanwhile, increasing customer base in domestic market has increased chances for being successful in the expansion, and introducing new routes, and adding new aircrafts. Indeed, technology has also very important role in bringing efficiency in operations, and cost reduction, and better utilization of the assets. Apart from that company has also been facing numerous threats. See table 1.

Industry Leaders

Key Statements

1. The company has unique business model based on the better utilization of company’s assets.

The model of the company is not based on what the whole industry has adopted the hub-and-spoke model where there is one hub, and others are spokes, so passengers at different destinations are brought together at hub airport, and then they are given connecting flight to their destinations. However, the model of Southwest Airline is completely opposite. It has point-to-point business model which is used to lower the costs associated with the flying and other operations. Since, it also increases the customer satisfaction, and reduces time, and one flight could take off double than the industrial average. So, revenues and profit would increase.

2. Efficiency in operations with well integrated resources, and well defined tasks.......................

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