Southwest Airlines : Case Study

Just Plane Smart Harvard Business School – Case Study Summary Abhishek Mehra Balaji P Saruabh Ranadive Sarang Bhutada

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[object Object],[object Object],[object Object],[object Object],People skills of Southwest ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

“ After lengthy deliberation at the highest executive levels, and extensive consultation with our legal department, we have arrived at an official corporate response to Northwest Airlines Claim to be number one in Customer Satisfaction…… … Liar Liar. Pants on Fire”

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Product Positioning Example of Southwest Airlines nuttiness - use of the word “love” One ad titled " How Do We Love You? " - flight schedule. Another ad titled " We're Spreading Love " - the rapid growth of the airline. Word " love “ - dedication to customer service ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],Distribution and Promotion Product Distribution Strategies SWA does not rely on travel agents Travel bookings - direct marketing Does not interline or offer joint fares with other airlines Southwest's Internet ticketing saves it $50 million a year, or 1% of revenue "We're not competing with other airlines. We're competing with ground transportation"

Promotion Strategies: Marketing Mix Southwest Airlines wants to differentiate itself from other airlines as the airline that can get passengers to their destinations when they want to get there, on time, at the lowest possible fares – while having fun. Frequent Flyer Awards Rapid Rewards-based on number of trips taken Way of showing Southwest’s philosophy that every customer is equally important as the other and making ALL passengers feel special. ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],“ We’d like to match their new fares but we’d have to raise ours!!"

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Internal Marketing Core Business - Customer Service business—they just happen to provide airline transportation Southwest’s philosophy - “Service for Smiles and Profits” Encourages employees to treat customer service as the most important aspect of their job CEO Kelleher, " We want people who do things well, with laughter and grace. "

OPERATIONS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Travel agents had to contact the airlines directly to book seats SWA passengers flew non-stop origin to destination. Did not promote connecting services Savings in reduced taxi time, fewer gate holds and less in-air waiting time It doesn’t coordinate its services with other airlines

OPERATIONS Usually do not share the ground handling crew until unavoidable Other airlines flew variety of jet aircrafts, as many as 5 distinct ones including McDonnell Douglas, Airbus and Boeing 737’s had average life of 20 years US industry average was 55 mins. ,[object Object],[object Object],[object Object],[object Object]

COST CONTROL “ Airlines don’t have revenue problems, they have cost problems”

GROWTH STRATEGY ,[object Object],[object Object],[object Object],[object Object]

MARKET ENTRY STRATEGY ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

South west North west Number of employees Revenues per employee Revenue Vs. Employees ( DEA )

Wages as % of total expenses – 29.78% ( Industry average = 35.17%) Lowest among Non-Chapter11 Airlines for the year 1992 . How was it possible ? Employee required per each additional trip Number of departures from a city Ground crew staffing efficiency ,[object Object],[object Object],Ground Crew Staffing Levels based on number of departures at an Average Southwest city Departures People Marginal emp reqd per departure 10 35 3.5 20 45 1.5 30 60 1.5 60 120 2

ASM: Average Seat Mile ; RPM : Revenue Passenger Mile Employee productivity (1992)

South West Airlines built numbers on its culture where as most competitors let the culture to shape up by their focus on numbers Other large Airlines F O C U S CONCLUSION F O C U S NUMBERS CULTURE SCHEDULING STRATEGY CULTURE SCHEDULING STRATEGY NUMBERS

Southwest Airlines : Case Study

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