Southwest Airlines

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Southwest Airlines
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Southwest Airlines Case

• Why is Southwest a success?
• What are the most important contributors to the
  financial and operational success of Southwest?

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Southwest Airlines Case

• What aspects of the Southwest business model
  explain its sources of competitive advantage?

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Southwest Airlines Case

• What are the specific characteristics of the
  various sectors of Southwests general or
  industry environment?
• Briefly describe the task or internal
  (organizational) environment of Southwest.

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Southwest Airlines Case

• Can Southwest sustain its competitive advantage
  and strategy?
• Are there any serious competitive threats?

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Southwest Airlines

• How should management respond to the fact that
  Southwest Airlines has fallen to next-to-last
  place among major airlines in on-time performance
  in late 2002?

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Southwest Airlines Case

• Once operations are fully stabilized, would you
  recommend that airline management resume its
  historic growth rate of 10 to 15 percent per
  year? Why or why not? If so, what form should
  growth take? If not, how would you recommend
  dealing with the consequences of reduced growth?

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Southwest Airlines Case

• What are the implications for Southwest of the
  actual or threatened bankruptcies of other U.S.
  airlines?

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Southwest Airlines

• Recruiters speak in the same near-spiritual
  terms. What's he looking for in a candidate? "An
  attitude -- a genuineness -- a sense of what it
  takes to be one of us."
• It takes a special individual to become a
  Customer Service Agent, and we look for folks who
  are eager, who are quick on their feet with
  outside the box thinking and who have caring,
  friendly natures. Because we operate almost
  around the clock (including holidays), Customer
  Service Agents work unusual hours and are on
  their feet eight hours a day. Yet, almost all of
  these Employees will tell you how much they LUV
  their jobs.
• Colleen Barrett

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Traditional Approach to Staffing

• Traditionally staffing has focused on the match
  between an applicants skills and experience and
  the job requirements.

Job Requirements Rewards
Match
Person KSAs Motivation
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Southwest Airlines Hires the Right People
Organization
Task Flexibility
Values/Culture
HR Outcomes Performance Extra Effort
Retention Satisfaction Commitment
Career Progression
Match
Impact
Person KSAs Motivation ATTITUDE
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Southwest Can Choose the Best

• In 2006
• SWA received 284,827 resumes
• Hired 3,363 new employees
• Hired only about 1 of applicants!
• No nepotism policy
• 1133 married couples work for SWA
• Progressive on diversity recruitment
• Corporate 100 by HISPANIC magazine
• Most admired companies among women
• Fortunes Best Companies list

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"Coat of Arms"

• Applicants fill out and read aloud a
  questionnaire in which applicants complete
  statements such as
• One time my sense of humor helped me was..
• A time I reached my peak performance was.
• My personal motto is

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Fallout Shelter

• Applicants are told to imagine they are a
  committee charged with rebuilding civilization
  after a just-declared nuclear war.
• They're given a list of 15 people from different
  occupations nurse, teacher, all-sport athlete,
  biochemist, pop singer. They have 10 minutes to
  make a unanimous decision about which 7 can
  remain in the only available fallout shelter.

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Fallout Shelter

• The answers dont matter....
• The test is about the interaction...
• As the candidates debate, evaluators watch from
  across the room and grade each person on a scale
  from "passive" to "active" to "leader."

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Support Business Strategy

• Southwests reputation for service and Fun Place
  to Work
• More than 34,000 total Employees
• Southwest received 202,357 resumes and hired 908
  new Employees in 2003
• Hires about .5 of applicants that is they hire
  4.4 per 1000 applicants.

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Results

• 31 consecutive profitable years.
• Southwest has ranked number one in fewest
  Customer complaints for the last 13 consecutive
  years as published in the DoTs Air Travel
  Consumer Report.
• Among all industries in 2003, FORTUNE has listed
  Southwest Airlines as number two among Americas
  Top Ten most admired corporations.
• According to the April 2003 issue of FORTUNE,
  Southwest is an employer of choice among college
  students.

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Colleen Barrett

• Currently President of SWA
• Began 3 months before Sept 11 attacks
• Listed on 100 most powerful women
• Kellehers legal secretary
• No formal business education
• Success Tactics
• Commitment to excellence
• Initiative
• Do the right thing

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Southwest Today Key Challenges

• Fuel pricing
• Fuel hedging becoming more difficult
• SWA fuel hedging for future
• 2007 95 hedged at 50/barrel
• 2008 65 hedged at 49/barrel
• 2009 50 hedged at 51/barrel
• 2010 25 hedged at 63/barrel
• 2011 15 hedged at 64/barrel
• 2012 15 hedged at 63/barrel
• Labor Negotiations
• Executive Succession
• Colleen Barrett leave President July 2008
• Herb Kelleher resign as chairman May 2008

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Southwest Today Outcomes

• Slowing growth to respond to economic challenges
• shareholder value down from previous highs
• Facing downsizing for the first time in History
• Attrition buyouts are being used
• 7 of employees take buyout (609)
• Buyouts offered to clerical employees not pilots

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Southwests Continuing Strengths

• In 2006, carried more passengers than any other
  airline in the U.S.
• Continuation of high employee productivity and
  strong culture
• October 2006 Repeal of the Wright Amendment
  Nationwide Service out of Love Field is possible

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Southwest Today

• What steps could SWA take to sustain its
  competitive advantage today?
• What should SWA do to face the challenges of
  today?