Southwest Airlines Operations – A Strategic Perspective

Background:

Southvest Airlines is the largest airline to measure the number of passengers flown annually within the United States. It is also known as a & # 39; discount airline. compared to its big industry rivals. Rollin King and Herb Kelleher founded Southvest Airlines on June 18, 1971. His first flights were from Love Field from Dallas to Houston and San Antonio, short hops with no extra service and an easy ticket. The airline started with one simple strategy: “If you move passengers to destinations when they want to arrive on time at the lowest possible prices, and be sure to have a good time, people will fly your airline. . "This approach has been the key to Southwest's success. Currently, Southwest serves approximately 60 cities (in 31 states) with 71 million passengers carried (2004) and a total operating income of $ 6.5 billion. The Southwest is publicly traded under the symbol "LUV" on NISE.

Facts:

* The first major airline to fly one type of aircraft (Boeing 737s)

* The first major airline to offer a non-ticket travel system, including a frequent flight program based on number of trips and number of miles traveled.

* The first airline to offer a profit sharing program to its employees (founded in 1973).

* The first major airline to develop a website and offer online booking. In 2001, about 40 percent ($ 2.1 billion) of passenger revenue was generated through online bookings at (http: //vvv.southvest.com). Southwest rates per booking online are about $ 1, compared to travel agency booking costs from $ 6 to $ 8.

Key competitive advantages:

* Low operating costs / high operational efficiency

* Award winning customer service

* Human resource practices / work culture

Business Analysis – Competitive Dimensions:

The Southwest clearly has a distinct advantage over other airlines in the industry by implementing an effective and efficient operating strategy that is an important pillar of its overall corporate strategy. The following are some competing dimensions that will be studied in this paper.

1. Operating costs and efficiency

2. Customer service

3. Employment / Labor Relations

4. Technology

1. Operating costs and efficiency

After all, the aviation industry as a whole is a mess. But how does Southvest Airlines remain profitable? Southvest Airlines has the lowest cost and strongest balance in its industry, according to Chairman Kelleher. The two biggest operating costs for any airline are – operating costs (approximately 40%), followed by fuel costs (approximately 18%). Other ways the Southwest is capable of keeping their operating costs low are point-to-point flights, selecting secondary (smaller) airports, transporting consistent aircraft, maintaining high use of aircraft, promoting e-tickets, etc.

Labor costs

Southwestern operating costs typically represent about 37% of its operating costs. Perhaps the most important element of a successful low-cost airline model is to achieve significantly higher productivity. According to a recent HBS case study, Southwestern airlines are the "strongest union" U.S. airlines (about 81% of employees belong to a union), with earnings rates considered or above average compared to U.S. airlines. The advantage of a low-cost workforce is its much more flexible work rules that allow for the cross-use of almost all employees (except where licensing and security standards do not allow it). Such cross-use and a long-standing culture of collaboration among work groups translates into lower labor costs. In the Southwest in Q4 2000, the total cost of operating per seat mile available (ASM) was more than 25% below United and American costs and 58% less than US Airvais.

Carriers like the Southwest have a huge cost advantage over network airlines just because their workforce generates more production per employee. In a 2001 study, the productivity of employees in the Southwest was over 45% higher than in the United States and United States, despite the significantly longer flight length and larger average aircraft size of these network carriers. Because of this, the relentless pursuit of the lowest cost of labor, the Southwest is able to make a positive impact on its lower incomes.

Fuel costs

Fuel costs are the second highest cost for airlines after work and account for about 18 percent of carrier operating costs. Airlines that want to prevent major changes in operating costs and bottom line profitability are choosing to hedge against fuel pricing. If airlines can control the cost of fuel, they can more accurately estimate budgets and forecast profits. As growing competition and airlines become commodities, price competitiveness has been crucial to the survival and success of any airline. It was difficult to pass on higher fuel costs to passengers by increasing ticket prices due to the highly competitive nature of this industry.

Southwest has been able to successfully implement its fuel protection strategy to greatly save on fuel costs and has the highest position of protection against other carriers. In the second quarter of 2005, unit costs in the southwest fell by 3.5% despite a 25% increase in jet fuel costs. During fiscal 2003, the Southwest had much lower fuel costs (0.012 per ASM) compared to other airlines, with the exception of JetBlue, as shown in Appendix 1 below. In 2005, 85% of the airline's need for fuel protection was $ 26 per barrel. World oil prices reached $ 68 per barrel in August 2005. In the second quarter of 2005 alone, Southwest generated $ 196 million in fuel savings. The state of the industry also suggests that protected airlines have a competitive advantage over non-protected airlines. Southwest announced in 2003 that it would add current and future Boeing 737-700 & Bingled Vinglets fleets with increased performance. The visually distinctive Vinglets will improve performance by extending the range of the aircraft, saving fuel, reducing engine maintenance costs and reducing take-off noise.

Point to Point service

Southwest uses point-to-point flight service to maximize its operational efficiency and remain cost effective. Most flights are short flights averaging about 590 miles. It uses the strategy to keep its flights in the air more often and thus achieve better capacity utilization.

Secondary airports

Southwest flies to medium / small airports in an effort to reduce travel delays and thus provide excellent service to its customers. This has brought the industry into timely performance. The Southwest was also able to reduce its airport costs relatively better than rival airlines.

Consistent aircraft

At the heart of Southwest success is its unique aircraft strategy: Its fleet consists solely of the Boeing 737 aircraft. Owning a joint fleet greatly simplifies flight planning, operations and maintenance. The cost of training pilots, ground crews and mechanics is lower because there is only one aircraft to learn. Purchasing, purchasing and other operations have also been greatly simplified, reducing costs. Consistent aircraft also allow the Southwest to use its pilot crew more effectively.

E-ticket

The idea of ​​traveling without tickets was a major advantage in the southwest as it could lower the cost of distribution. The Southwest became electronic or ticketless in the mid-1990s, and today they are about 90-95% ticket-free. Credit card customers are eligible for online transactions, and today Southvest.com reservations account for about 65% of total revenue. CEO Gary Kelli thinks this idea will continue to grow and he would not be surprised if e-tickets accounted for 75% of Southwestern revenue by the end of 2005. In the past, when there was a 10% travel agency fee paid, it previously cost about $ 8 to book. But right now, Southwest pays between $ 50 cents and $ 1 per reservation for electronic transactions that are big cost savings.

2. Employment and Labor Relations

Southwest is highly regarded for its innovative management style. He maintains a relentless focus on high performance relationships, and his people management practices have been the key to his unparalleled success at the airline.

Mission

To our employees
“We are committed to providing our employees with a stable work environment with equal opportunities for learning and personal growth. Creativity and innovation are encouraged to improve the efficiency of Southvest Airlines. Above all, employees will be given the same care, respect and caring attitude within the organization that they are expected to share externally with all customers in the Southwest. "

Mission Statement Southwest shows that the company is strongly committed to its employees. The company gives the same respect to its employees as to its customers. The Southwest Mission Statement is unique in that it recognizes the importance of its employees within a broader business strategy that emphasizes superior customer service and operational efficiency. Employees reciprocate the respect, loyalty and trust shown by the Southwest. Southwestern employees are known for their dedication, dedication, attitude and innovation. Employees are a factor that differentiates between the Southwest and the rest of the airline.

Rental

The employment policy in the Southwest is unique not only in the aviation industry, but beyond, and revolves around finding people with the right attitude to thrive in the Southwest culture. Extensive procedures are employed to recruit a positive attitude and commitment. Those who do not possess these qualities are removed. Colleen Barrett, a non-operational officer in the Southwest, claims that

"Recruitment is critical because you cannot institutionalize behavior. Instead, you need to identify those people who are already practicing the behaviors you are looking for. You can then allow employees to be themselves and make customer service decisions based on common sense and their natural preferences. "1

Recruiting and interviewing in the Southwest is a two-step process. The first step is a group interview, conducted by employees, where the communication skills of potential candidates are evaluated. The next steps in this process are one-on-one interviews, where candidates & # 39; attitudes and orientation toward serving others are evaluated. These hiring criteria apply to all job functions as all Southwestern employees play the role of customer service. A critical part of Southwest's operational strategy is that every business in the Southwest is a customer service position, whether it is directly related to the customer or whether it is internal.

The table below shows that the Southwest is the most heavily associated airline, around 80%, that contract negotiations between the union and the Southwest are much shorter than other major carriers. It shows the quality of the relationship the Southwest has with employees and the unions that represent them.

Culture

The Southwest was created as a different kind of company and from its beginnings it nurtured a unique culture. 1990 Colleen Barrett established the Southwestern Culture Committee. This is unique within the industry and among all major companies. The Committee also has a mission statement:

"The aim of this group is to help create the spirit and culture of the Southwest where needed; to enrich it and make it better where it already exists; and to bring it to life in places where it might "fail." In short, the goal of this group is to do "whatever it takes" to create, enhance and enrich the special spirit and culture of the Southwest that have made this such a wonderful company / family. "

It is this unique approach to enterprise values ​​that has created a culture that is different from others. Southwestern culture is why it is successful.

3. Customer Service

Southwest Airlines Mission
Southvest Airlines' mission is to commit to the highest quality customer service provided with a sense of warmth, kindness, individual pride and company spirit.

Access

Herb Kelleher, founder of Southvest, was quoted as saying: “We are in the customer service business; it just happens that we provide air travel. ”2 Award-winning customer service is a distinctive feature of the Southwest and is referred to internally as“ Positive Outrageous Service ”. This means that from top to bottom, everyone is doing everything they can to satisfy the customer. This includes Herb Kelleher, who was known for helping luggage handlers on Thanksgiving. By emphasizing the customer and employee, Southwest can be different from the others in the airline. At the technical level, every employee or group in the Southwest has a customer. This means that every employee serves & # 39; one way or another despite not being directly connected to the passenger. The customer is the pilot's buyer and the stewardess is the caterer.

the results

It can be said that the "positively unbelievable service" unique to the southwest "is not the result of a department, program or management mandate. It is not secondary to the product; it is the product." This approach creates conditions in which employees are more likely to treat customers in ways that differentiate There are numerous passenger accounts that have received exceptional treatment from Southwestern employees.

The question to be answered is what is the difference between Southwest customer service and why? Is it common for customers of other airlines to brag about their special service? The answer is no. Although the southwest has no monopoly on people who are kind and willing to go above and beyond to satisfy the customer, this behavior is nurtured in the southwest on a much larger scale.

It can then be concluded that customer service inherent in the southwest is part of the culture. This culture is supported through encouraging workers to do extra to satisfy the customer. This approach inspires people who usually just sometimes try to help someone become consistent performers who offer a constantly exceptional service. Southwestern employees are what sets her customer service apart from other airlines.

4. Technology

Southwest uses technology in many ways to meet its business goals and maintain its efficient operations. According to its director, technology equals productivity. Launched in 1996, the ticketless journey first introduced the Southwest. On May 1, 2000, Southvest Airlines launches SVABIZ, a portal that helps travel company managers book and track trips through their website (http: //vvv.southvest.com). Many new technological initiatives are currently underway and some are under development.

Bar codes in passports

Southvest Airlines has invested $ 12 million over the past three years in standardizing corporate and terminal business on about 10,000 Dell OptiPlek desktops and Latitude laptops, according to company executives. Southwest wanted to replace its famous, bright-colored, bright-colored plastic beams with an electronic bar code system. Around 350 touchscreen card readers have been installed to run Dell OptiPlek desktops. The bar code provides the southwest with more information to automatically reconcile the number of boarding passes to the number of passengers boarding an aircraft.

While this technology will help Southvest Airlines stay efficient by consolidating passenger information for the company with 3,000 flights a day, there were concerns that this could extend the time for boarding passengers. However, it was found that scanning each bar code on the tickets did not increase or shorten the boarding schedule, but took several minutes of administrative processes, such as requesting user information. The new barcode paper system gives southwest ticket agents the ability to establish themselves with customer information within which they need to navigate and log on to multiple software screens. The process is much more automated. Once the bar code is scanned at the entrance, the person in the passenger list will be excluded in real time.

The old process was a manual that involved finding information, navigating through several software screens from bookings to check-ins to entry. Barcode scanning hardware for entry tickets is deployed. The company is in the process of replacing office equipment for customers at airports, including its headquarters in Dallas.

Software upgrade

Software applications, such as those used by officers to check passengers, are being replaced. Southvest Airlines & # 39; интерно написан "Аирпорт Апплицатион Суите" очекује се да ће се представити следеће године, пошто компанија прелази са зелених екрана на кориснички интерфејс базиран на прозорима. Слично Вал-Март Сторес Инц., Соутхвест Аирлинес верује у развој софтвера који покреће своје компаније. Компанија користи врло мало софтвера који није доступан. У радовима сваке године постоји између 75 и 100 пројеката које подржава око 900 ИТ радника.

РФИД

Технологија радиофреквентне идентификације, повољна алтернатива бар-кодирању за идентификацију пртљага, такође је на југозападном радару. Планира да тестира РФИД технологију негде у 2006. Иако се Соутхвест мало надокнађује са другим авиопревозницима, попут Аир Тран, Аласка и Цхампион Аирлинес, у многим случајевима могу прескочити софистицираније апликације лако чекајући дуже.

Изазови:

Југозапад се појавио врло успешно, упркос најтежим временима на тржишту авио-компанија. Међутим, суочава се с новим изазовима у виду све веће конкуренције других нискотарифних авио-компанија као што су ЈетБлуе, АТА ваздухопловства, Америца Вест.

Резервисано седење

Због све већих безбедносних смерница од септембра 2001. године, југозапад ће се морати припремити за додељено (резервисано) седење ради праћења својих путника током лета. Ова промена укључиваће велика улагања у технологију и може негативно утицати на њену операцију јер је тренутни начин ненаменског седења помогао у брзим преокретима врата.

Потражња за путнике

Филозофија „Кееп-то-симпле“ добро је служила југозападу. Али како сопствени посао расте и постаје сложенији, са плановима за набавку десетака нових летелица и очекиваним порастом путничког саобраћаја на око 80 милиона укрцаја током године, стратегија једноставности која се одразила на авиокомпанију & # 39; ИТ филозофија се развија. ЦИО Том Неалон каже да је „време да прилагодимо наше пословне процесе за ефикасност. Како наша авио-компанија важи за пружање исте врсте корисничких услуга на додир, морамо аутоматизовати много ствари које # 39 Раније сам могао без технологије. Изазов је то без прикривања додира с клијентима. "Југозапад такође агресивно слиједи технике управљања односима с клијентима (ЦРМ) и има апликације за увид у жеље и невоље купаца. Према интервјуу са генералним директором Геријем Келлером, Соутхвест се фокусирао на побољшање у две области – искуство купца на аеродрому и искуство у лету.

Забава током лета

У свеобухватном напору да се побољша искуство купца током лета, забава током лета је нешто што Југозапад тренутно оцењује и што је ЈетБлуе већ био успешан већ због увођења у своје дуготрајне летове. За поређење, југозапад има 415 авиона за разматрање и то представља инвестицијску одлуку у потпуно новој димензији. Уз то, југозапад мора да размотри како се ствари могу уклопити у њихово окружење. У овом тренутку, 60% његове услуге је и даље веома кратко. Југозапад мора имати на уму чињеницу да одређени приступ који је био успешан за свог конкурента не мора нужно радити у његову корист.

Резиме:

Југозапад се дуго сматрао мјерилом у својој индустрији за оперативну изврсност. Соутхвест Аирлинес је сјајан пример компаније која се залаже за своје основне компетенције – ефикасне операције за покретање своје структуре ниских трошкова, изванредну испоруку услуга за кориснике и иновативне праксе управљања људским ресурсима. Надамо се да је овај документ пружио добар увид у операције југозапада, као део његове укупне стратегије, како би се постигао успех и стекла конкурентска предност.

Референце:

1. (хттп://ввв.соутхвест.цом) (званична веб локација авио-компаније Соутхвест)

2. „Југозапад то једноставно чини“ – Свет ваздушног саобраћаја, април 2005., стр. 36

3. „Око света са 48 долара (или слично): Колико високо могу да лете авиокомпаније са попустом?“ Управљање стратегијом – Знање @ Вхартон Невслеттер 5. октобар 2005.

4. ТецхВеб – (хттп://ввв.тецхвеб.цом/вире/ебиз/173601227)

5. „Југозападна стратегија за успех: објединити!“ – Орацле Магазине (издање за септембар / октобар 2004) хттп://ввв.орацле.цом/тецхнологи/орамаг/орацле/04-сеп/о54свест.хтмл

6. „Соутхвест Аирлинес: Висока технологија, ниски трошкови“ – Евеек.цом, април 2005

7. „Стратегије заштите од јет горива: могућности доступне авио-компанијама и истраживање индустријске праксе“ – Истраживачки рад Келлогг Сцхоол оф Манагемент, пролеће 2004.

8. Победничко понашање: шта најпаметније, најуспешније компаније раде другачије, Терри Р. Бацон и Давид Г. Пугх, 2003.

9. Часопис Тиме, 28. октобар 2002. године, вол. 160, бр. 18, стр. 45

10. „Крила промене“, Недеља информација, 28. марта 2005,

11. Преговори о уговору о раду у авио-индустрији, Месечни преглед рада, јул 2003., страна 24

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