Beruflich Dokumente
Kultur Dokumente
SW Airlines - Case
1968:
Feb 20 License for Texas states (Herb Kelleher)
Introduction
(Braniff, Continental, Trans Texas competitors)
1971-78: Proud Texan Period
1978: US Market De-regulation (Competition Start)
1978 - 86: Inter-state Expansion
1987- 97: National Achievement
Financials of 1996:
Heavy Losses to
Op. Margin: 15% / Net Margin: 7 ~ 8%
Aviation
ROE: 15%, Debt / Equity Ration: <60% Industries in
Target for 1997: Margin Expansion
1992 (Pan Am,
Eastern)
Mission & Objective:
1.High Degree of Customer Service & Employee
Commitment
2.Safe, Low price Transportation with max. customer
Theme: Make Love not War. LUV
Stock ticker
convenience
symbol
Aviation Industry
1. Value Adding Activities (Airline procurement,
Aircraft maintenance, reservation system,
Schedule & route planning, In-flight services,
after-flight services like hotel, Taxi etc.,
2. Customers (Travel agents, Corporate travel
managers, Individual travelers Leisure/Business)
3. Geographical Coverage (Short haul Point to
Point, Long haul Hub and Spoke / Different
Pricing structure)
4. Passenger Service (meals, advance seat
bookings, frequent flier program, full service
(Business/first class), Sparton/
Coach
(No
3. High
InfraService
Structure
Competitive
frills)
cost
Environment:
4. High Inefficient
1.High Cost Structures
Planes
Structural Characteristics
(Aviation)
Porters 5 Forces:
1.
2.
3.
4.
5.
SW Airlines - Strategy
Category : Low fares / No frills airline
Cheapest / efficient operator in domestic
circuit
motivation
level
of employees
High
Cost Leadership
(Low
cost structure
due to secondary
airports, less landing charges, lower gate costs, cheap
schedule cost due to Point to point, focus on good
weather)
Route Structure ( Specialized in short haul flights,
price sensitivity, Threats from ground transportation, no
frills, less cost, extended snack, Ex. Lousiville-Chicago
increase from 8000 to 26000 passenger load, Huge
saving in one-way/non-stop city pairs / round trips
Low Turn Around Time (Huge saving15-20min, Inds
avg 55 min) increases more trips/plane and assets
turnover.
SW Airlines - Strategy
SW Airlines - Strategy
Labour: 4 Unions (IAM-customer service &
reservation employees, TWU-flight attendants,
SWAPA-Pilots, IBT-cleaners, trainers, flight
instructors), Good relations, Profit sharing and
participation, stock options, 5/10 year bonus
eligibility for pilots. Ex.1994 10 yr agreement with
SWAPA, 5 yrs same package, 1.4Mn shares / year
option
Customer service: POS, Excellent service due to
good labour relationship, Emphasis on flight
frequency and on-time performance.
SW Airlines - Strategy
Growth: Go-Slow Philosaphy, favourable market,
labour availability, prohibits monetary subsidies
offered by cities/airports.
Highly skilled in market selection, Select under
served markets, abandoned segments/city, poor
performance in service, high cost structures, start
up carrier, other markets neglected by competitors.
PTP < 500 miles avg, low AT congestion, new
airports, gates availability, quick turn around time.
Strategy to dominate high population market.
Ex. In 1996, SWA controlled 40% marekt share in
top 61 cities of top 100 US domestic market.
SW Airlines Structure:
Organization
High Degree of Formalization and Standardization in
operations
High Level of Customer and Employee Satisfaction.
Informal Job Description.
Size:
Small Company, less ASMs, lesser ground crew (own staff).
Outsourced only major Overhauls & Repairs.
Adaptability / Flexibility:
Quick to adopt abandoned Gates.
Acquire more planes & Capture Mkt. Share (eg; California,
Chicago)
HRM:
Great Attitude, Culture and Fit.
Great emphasis on Socialization & Training.
SW Airlines SWOT
Analysis
Strengths :
High capacity usage
Low cost structure
Young &
Standardized Fleet
Short Haul/PTP
No frills,
Safety & Reliability
Quality service,
Customer
satisfaction
Good Labor
Relations
Weakness :
No Expertise in Long
Haul, offering other
associated airlines and
services
No international flights
No segmented seating
Dependent on a single
supplier (Boeing-737)
Lack of Technological
upgradation of fleet,
CRS
Highly Unionized &
Deteriorating Labour
Relation
SW Airlines SWOT
Analysis
Opportunities :
New Segment in
Domestic
Operating Long Haul
thro Hub & Spoke
system
Explore international
Mkts
Technology upgradation
of fleet & system for
operation in bad weather
Online Services & E-Mktg
Growth of business and
leisure travel /High
capacity usage
Threats :
Major & New Small
Competitors in Short
Haul
New government
regulations/
amendments
Fuel price
fluctuations.
Terrorist attacks.
Annual airline
security costs have
increased.
No Leader for
SW Airlines - Challenges
Growth
Opportunity:
1.Long haul market
2.Selection of Market
Competition:
1.New Cost Competitive
Smaller Players in short
haul (PTP)
2.Major Players matching
in short haul
3.Deteriorating Labour
Relation
4.Wright amendment
5.Increasing Turnaround
Time/Cost
6.Greater Coordination
Limitation:
1.Poor weather
condition
2.Direct competition
majors
3.Volume increase
(investment, inventory,
integration, yield,
inadequate existing
systems)
4.North South Hub
5.Longer Flights,
National marketing,
Frequent flier program,
SW Airlines To overcome
Challenges
Existing
Strategy :
Low Cost
No Frills
On Time
Quality Service
(POS)
PTP & Short Haul
Good Weather
Less Congested
Airport
Rapid Turnaround
time Required
No Sponsorships
11-Oct-2011
New Strategy :
Cost Control
Food Service
Inter-airline
Agreement with
International Airlines
Hub & Spoke and
Long Haul
Fleet upgradation to
manage Bad
Weather
Selection of New
Cities/Markets
NFC Sponsorship
SW Airlines Proposed
strategy in a changing
environment
creat
Ability to obtain
scarce resources
increase
s
Competitive
advantage
Organizational
strategy
develop
creat
e
Core
Competencies
Value- creation
cycle
Use of global
learning to
enhance core
competencies
Establishment of
global network
Gaining access to
global skills &
resorces
SW Airlines 4 levels of
Strengthen
strategy
organizations
Functional level strategy
resources &
coordination
abilities to create
core competences
Core competences
to gain competitive
advantage
Developing core
competences and
expansion into new
domains
To obtain scarce
resources &
develop core
competences