Cuatro Burros Presentation

1. Hillary Joiner, Nathan Fisher,
Brett Huey & Phillip Duffy
June 2013
SOUTHWEST AIRLINES

2. • In 1982, Southwest Airlines had 27 planes, 270 million in revenues, and
flew to 14 cities.
• We now employ 538 planes, operate in 69 cities, covering 35 states, and
rank 164th on the Fortune 500 list.
• For the last 39 years, we have relied on an organic growth strategy
stemming from cost leadership and a unique corporate culture:
• Dedicated employees allowed for competitive labor costs. Employees
are paid 30% less than competitors, but are offered valuable stock
options as extra compensation.
• Flies out of less congested airports to get quicker turnarounds.
• Only operates on Boeing 737
• No “frills”
BACKGROUND

3. BUT…
It’s time for a new strategy.

4. NEW LEADERSHIP
• Herb Kelleher relinquishes power after building company around his image of customer
service and employee loyalty
• Remained chair of board with focus on long range
• Colleen Barrett
• New President and COO
• Was the culture keeper since early days of company
• James Parker
• Resigned in 2004 amid labor negotiations with flight attendants
• Gary Kelly
• Now CEO
• Expanded company to key airports through M&A
• Understood further cost reductions would be hard to come by without modest fare
increases and layoffs

5. CULTURE & GROWTH: EMPLOYEES
• As company grows so does distance between employees and management
• Small staff with increasing passenger load and frequency
• Leads to more bags and shorter time, with no pay increase
• Flight attendants asked to work longer hours
• Boosted productivity but no pay increase, stock value also declining
• Southwest is no longer underdog so their pay should match the success of the
company

6. CULTURE & GROWTH: COMPANY
• To increase productivity and convenience for customers, must expand to more
airports
• Key acquisitions of gates in Chicago, Atlanta, Pittsburg, Fort Meyers
• More online reservations and narrowing labor-cost advantage with major airlines
• Leads to increase in rates and possible layoffs
• Expansion of JetBlue & AirTran would be direct threats
• Must increase amenities to compete with similar airlines
• Leather seats & in-flight entertainment

7. http://www.youtube.com/watch?v=DYA_ivyj3kE&t=0m40s

8. Strengths
-Human Capital
-Social Network
-Culture
-Overall Cost Leadership
Weaknesses
-Accustomed to organic growth
strategies in an industry that now
requires nonorganic growth
-No segmentation (first class, etc.)
-Most employees are unionized.
Opportunities
-More U.S. cities
-International Flights
-New target markets: Hispanics and
elderly
Threats
-Economic recession- less people are
flying
-Fluctuating oil prices
-Competition (Delta, US Air, etc.)
SWOT ANALYSIS

9. • How do we continue to grow? (Alternative growth
solutions)
• LUV our people (Internal Strategy)
• LUV our customers
• Focus on new markets
GIVE A LITTLE LUV

10. • Return to our core values
• Herb Kelleher said: “We want people who do things well, with laughter and
grace.”
• With over 35,000 employees and the acquirement of Airtran introduce a veteran
mentor program to integrate new employees into OUR culture.
• Number of Departures
• Maximize productivity of people and machinery, add additional departures each
day.
• Cost Cutting – “Airlines don’t have revenue problems, they have cost problems.”
• Ensure pilots feel involved internally by contributing new ideas on how to save
fuel.
• Continues to keep service cost low, because who knows the skies better than
our pilots.
LUV OUR PEOPLE

11. • Core Business
• Customer Service – we just happen to provide airline transportation.
• Triple Crown Award Winner
• Our Philosophy- “Service for Smiles and Profits”
• Encourage our employees to treat customers and customer service as the most
important aspect of their job.
• Provide the best value for our target consumers dollar (frequent
schedules, comfortable seats and on-time departures).
• Add segmentation in seating for customers willing to pay more.
• Our Mission
• 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.
LUV OUR CUSTOMERS

12. • Focus on Product Positioning in New Markets.
• Alert customers of our: Low-fares, short-hauls, high-frequency, and point-to-
point carrying.
• Southwest Cities
• Between 2006 and 2010, we grew from 63 to 69 in numbers of cities served.
• Recognize the new markets (Washington Dulles, Denver and Atlanta) through
promotion (media blitz).
• Continue to pursue more U.S. cities.
• Southwest Countries
• Begin working on expanding to international cities. International travel is
growing and growing in today’s world.
• Target Hispanic and elderly populations
• “We want to have greater appeal to more customers nationwide,” Kelly said.
NEW MARKETS

13. • Southwest Cities
• Southwest Countries
• Target Hispanic and elderly populations
OUR RECOMMENDATION:
NEW MARKETS