Individual Write-Up Integrated Leadership Perspective

Name of the student Satenderjeet singh

PG Roll No: PG20112128

Submitted to Subject Submitted on Marks Allotted Remarks(if any)

Ms. Anisha Rani Integrated Leadership Prospective (ILP) 13/5/2013

Southwest Airlines: In a Different World

Introduction
Southwest Airlines is the largest airline measured by number of passengers carried each year within the United States. It is also known as a discount airline compared with its large rivals in the industry. Rollin King and Herb Kelleher founded Southwest Airlines on June 18, 1971. Its first flights were from Love Field in Dallas to Houston and San Antonio, short hops with no-frills service and a simple fare structure. The airline began with one simple strategy: 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. This approach has been the key to Southwests success. Currently, Southwest serves about 60 cities (in 31 states) with 71 million total passengers carried (in 2004) and with a total operating revenue of $6.5 billion. Southwest is traded publicly under the symbol LUV on NYSE. It is evident that the greatest strength that Southwest Airlines has is its financial stability. As known in the US airline industry, southwest is one of those airlines who are consistently earning profits despite the problems the industry is facing. With such stability, the corporation is able to make decisions and adjust policies, which other heavily burdened airlines may not be able to imitate. Having a low amount of cost in their operations is one of the contributing factors in Southwest Airlines financial success. Such low cost model of the corporation is brought about by an effective strategy. Southwest uses only one type of aircraft, the fuel-efficient Boeing 737. This tactic keeps training and maintenance costs down. Moreover, the no-frills approach to customer service contributed to the low cost of operations for Southwest. The airline does not serve meals on board, and there are no luxurious or first class seats offered. Services like these have been seen by the airline as unnecessary for an airline that provides a short-haul trip from city to city. By these, southwest were able to offer low price tickets to customers, which was good for the company because most people would prefer to fly without those services mentioned if it meant for cheaper ticket price. Even though Southwest offers no-frills, there is still a high degree of customer satisfaction that continuously builds customer loyalty for the company. As mentioned, Southwest offers low prices on their airplane tickets. Also, Southwest is renowned in the airline industry for its short turnaround time on arrivals and departures. And since people's biggest concern nowadays is money and time, having low price airline tickets, southwest help them achieving all those.

Why south west been so much more successful than its competitors?

Case Facts
There are very simple facts which southwest airlines use to increase their profitability. Some of them are as below: Use of non-conventional models for low-cost Have fun together Treat employees as family Hire people who form the fit Involve employees in management decisions Controlled and solid growth for the organisation Identifying attitudes rather than skills Peer hiring Centred on team building 10% of stock held by employees only Pension through a profit sharing plan Casual dress code and Strong guidelines to everyone Frequent, conveniently timed flights and low fares Direct non-stop flights on low fares Love theme called LUV Dont believe in the hype advertisings 84% unionized labor force but its labor relations were excellent Only few Boeing 737- Fleet of 150 and average of 1500 trips per day Differentiation in terms of turnaround time, 2 out of 3 planes were turned-around in 15 mins.

Key Issues/ Challenges

Due to increasing security guidelines since September 2001, Southwest would need to prepare for assigned (reserved) seating to track its in-flight passengers. This change will involve large technology investments and may impact its gate operations negatively since the current way of unassigned seating has helped in quick gate turnarounds.

Passenger Demand: The keep-it-simple philosophy has served southwest well. But as its own business grows and grows more complex, with plans to purchase dozens of new aircraft and an expected upsurge in passenger traffic to about 80 million boardings a year, the simplicity strategy that has been reflected in the airline's IT philosophy is evolving. The CIO Tom Nealon says that "It's time to adapt our business processes for efficiency. As our airline scales for us to provide the same kind of high-touch customer service, we have to automate a lot of things we've been able to do without technology previously. The challenge is doing that without conceding the customer touch." Southwest is also aggressively pursuing customer relationship management (CRM) techniques and has applications to get insight into customers wants and dislikes. According to an interview with its CEO Gary Keller, Southwest has its focus on improving in two areas - customers airport experience and inflight experience. In-Flight Entertainment: In an overall effort to improve customers in-flight experience, inflight entertainment is something that Southwest is currently evaluating and which JetBlue has been very successful at already because of its introduction in its long-haul flights. In comparison, Southwest has 415 airplanes to consider and that represents an investment decision at a whole new dimension. Additionally, Southwest has to consider how things may fit into their environment. At this point, 60% of its service is still very short haul. Southwest needs to be mindful of the fact that a certain approach that has been successful for its competitor may not be necessarily work to its advantage.

How has the original strategy been altered in recent years? Southwest clearly has a distinct advantage compared to other airlines in the industry by executing an effective and efficient operations strategy that forms an important pillar of its overall corporate strategy. Given below are some competitive dimensions: 1.Operational Costs and Efficiency: The two biggest operating costs for any airline are labor costs (approx. 40%) followed by fuel costs (approx. 18%). Some other ways that Southwest is able to keep their operational costs low is - flying point-to-point routes, choosing secondary (smaller) airports, carrying consistent aircraft, maintaining high aircraft utilization, encouraging e-ticketing etc.Labor Costs is a key challenge for them. Fuel costs is the second-largest expense for airlines after labor and accounts for about 18% of the carrier's operating costs. Airlines that want to prevent huge swings in operating expenses and bottom line profitability choose to hedge fuel prices. If airlines can control the cost of

fuel, they can more accurately estimate budgets and forecast earnings. With growing competition and air travel becoming a commodity business, being competitive on price was key to any airlines survival and success. It became hard to pass higher fuel costs on to passengers by raising ticket prices due to the highly competitive nature of the industry. Secondary Airports: Southwest flies to secondary/smaller airports in an effort to reduce travel delays and therefore provide excellent service to its customers. It has led the industry in on-time performance. Southwest has also been able to trim down its airport operations costs relatively better than its rival airlines. Consistent aircraft: At the heart of Southwest's success is its single aircraft strategy: Its fleet consists exclusively of Boeing 737 jets. Having common fleet significantly simplifies scheduling, operations and flight maintenance. The training costs for pilots, ground crew and mechanics are lower, because there's only a single aircraft to learn. Purchasing, provisioning, and other operations are also vastly simplified, thereby lowering costs. Consistent aircraft also enables southwest to utilize its pilot crew more efficiently. E-Ticketing: The idea of ticketless travel was a major advantage to Southwest because it could lower its distribution costs. Southwest became electronic or ticketless back in the mid1990s, and today they are about 90-95% ticketless.
What kinds of things over which SW's leadership has some control could go wrong? What should be done to make sure they don't happen? Is there a need for the change by SW's leadership in the face of competitive moves and general economic conditions?

Employee and Labor Relations: Southwest has been highly regarded for its innovative management style. It maintains a relentless focus on high-performance relationships and its people-management practices have been the key to its unparalleled success in the airline industry. The Southwest mission statement shows that the company has a strong commitment to its employees. The company affords the same respect to its employees that is provided to its customers. The Southwest mission statement is unique in that it recognizes the importance of its employees within the broader business strategy, which emphasizes superb customer service and operational efficiency. The employees reciprocate the respect, loyalty and trust that Southwest demonstrates. Southwest employees are known for their loyalty, dedication, attitude and innovation. The employees are the distinguishing factor between Southwest and the rest of the airline industry. Hiring is critical, because you cannot institutionalize behaviour. Instead, you must identify those people who already practice the behaviours you are looking for. Then you can allow Employees to be themselves and make decisions about Customer service based on common sense and their natural inclinations.

Recruiting and interviewing at Southwest is a two-step process. The first step is a group interview, conducted by employees, where communication skills of potential candidates are evaluated. The next steps in this process are one on one interview, where the candidates' attitudes and orientation toward serving others are evaluated. These hiring criteria apply to all job functions since all Employees at Southwest play a customer service role. A critical part of Southwest operational strategy is that every job at Southwest is a customer service position, whether it directly applies to the customer or whether it is internal. The table below shows that even though Southwest is the most heavily unionized airline, at approximately 80%, that contract negotiations between the unions and Southwest are much shorter in duration than of the other major carriers. This shows the quality of relationship that Southwest has with its employees and with the unions that represent them. Culture: Southwest was created as a different kind of company and from its beginnings a unique culture was nurtured. In 1990 Colleen Barrett formed the Southwest Culture Committee. This is unique within the industry and among all large companies. The committee also has a mission statement: This group's goal is to help create the Southwest spirit and culture where needed; to enrich it and make it better where it already exists; and to liven it up in places where it might be "floundering". In short, this group's goal is to do "whatever it takes" to create, enhance, and enrich the special Southwest spirit and culture that has made this such a wonderful Company/Family. It is this unique approach to company values that has created a culture that differentiates itself from others. Southwests culture is the reason why it is successful. 3. Customer Service: 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.

Approach: Herb Kelleher, founder of Southwest, has been quoted as saying that "We're in the Customer service business; we just happen to provide airline transportation".2 Award winning customer service is a distinguishing characteristic of Southwest and it is referred to internally as Positively Outrageous Service. It means that from the top to bottom everyone

does whatever he or she can to satisfy the customer. This includes Herb Kelleher, who has been known for helping out baggage handlers on Thanksgiving. It is through emphasizing the customer and employee that Southwest is able to differentiate itself from others in the airline industry. On a more technical level, each employee or group within Southwest has his or her own customer. This means that every employee serves in one way or another despite not being directly involved with the passenger. The mechanics customer is the pilot and t he caterers is the flight attendant. The question that needs to be answered is how Southwests customer service is different and why? Is it common for customers of other airlines to rave about their special service? The answer is that it is not. While southwest does not have a monopoly on people who are kind and who are willing to go above and beyond to satisfy a customer, such behavior is nurtured at Southwest to a much greater extent. It can then be concluded that the customer service that is inherent to Southwest is a part of its culture. This culture is supported through employee encouragement to do the extra to satisfy the customer. This approach inspires people who would ordinarily only on occasion go out of their way to help someone, to become consistent performers that offer exceptional service all the time. Southwest employees are what differentiate its customer service from the other airlines. 4. Technology: Southwest utilizes technology in many ways to fulfill its business objectives and maintain its efficient operations. According to its CEO, technology equals productivity. Launched in 1996, ticketless travel was first introduced by Southwest. On May 1st 2000, Southwest Airlines introduces "SWABIZ," a portal that assists company travel managers in booking and tracking trips made through its web site [http://www.southwest.com]. There are many new technology initiatives being undertaken currently and some are in the pipeline. Bar codes in Boarding Passes: Southwest Airlines has invested $12 million during the past three years to standardize corporate and terminal operations on about 10,000 Dell OptiPlex desktop and Latitude notebook computers according to its company executives. Southwest wanted to replace its well-known, brightly colored plastic boarding passes with an electronic system with bar-code paper boarding passes. So it installed about 350 touch screen ticket readers powered by Dell OptiPlex desktops. The bar code gives Southwest more information to automatically reconcile the number of boarding passes with the number of passengers that actually board the plane. Although the technology will help Southwest Airlines remain efficient by consolidating passenger information for the company's 3,000 daily flights, there were concerns it could lengthen the time to get travellers on board. However it was found that scanning each bar code on the boarding passes didn't increase or shorten boarding schedules, but it did take minutes from administrative processes, such as looking up customer records. The new paper bar code system is giving Southwest ticket agents the ability to match a customer record within having to scroll through and log into multiple software screens. The process is much

more automated. Once the bar code on the boarding pass is scanned at the terminal gate it checks off the person from the passenger list in real time. The old process was manual that involved finding the information, scrolling through several software screens from reservations to check-in to boarding. The bar code hardware to scan the boarding passes has been deployed. The company is in the process of replacing customer service back-office equipment at airports including at its headquarters in Dallas. Software Upgrades: Software applications, such as those used by clerks to check in passengers, are being replaced. Southwest Airlines' internally written "Airport Application Suite" is expected to rollout next year as the company transitions from green screens to Window-based user interface. Similar to Wal-Mart Stores Inc., Southwest Airlines believes in developing in-house the software that runs its operations. The company uses very little offthe-shelf software. There are between 75 and 100 projects in the works each year supported by approximately 900 IT employees. Conclusion: Southwest has long been regarded as a benchmark in its industry for operational excellence. Southwest Airlines is a fine example of a company that is committed to its core competencies-efficient operations to drive its low cost structure, outstanding delivery of customer service and innovative HR management practices. We hope this paper provided a good insight into Southwest operations, as part of its overall strategy, to achieve success and gain competitive advantage.

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