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 Organization
History and Life Cycle
 External Environment
 Mission, Goals, and Strategies
 Organizational Culture and Management
 Interorganizational Relationships
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1967: Air Southwest Co. is incorporated; later in 1971
the company name was changed to Southwest Airlines
Co.
Rollin King and Herb Kelleher founded Southwest
Airlines with one simple goal: To serve Dallas,
Houston, and San Antonio with point-to-point flights.

“As company legend
goes, the very first route
map was drawn on a
cocktail napkin during a
meeting between Rollin
King and Herb Kelleher.”
Herb Kelleher, Attorney at Law (Co-founder)

1967: Files application with TAC to serve DAL, IAH, & SAT.

Rival companies Braniff and Texas International serve the
same areas; hence, they fought through the legal system to
keep Air Southwest grounded.

Herb offers to represent Air Southwest’s appeal to the Texas
Supreme Court. He charged no fees and paid any costs out
of pocket.

1970: Texas Supreme Court overturns lowers court ruling
and clears Air Southwest for “take-off.”
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Lamar Muse: Joins Air Southwest in 1971 as President.

Sells promissory notes to raise $1.25M in funds for aircraft and
startup costs

Makes agreement with Boeing to purchase three Boeing 737s
(with Boeing holding 90% of the financing)

Hires “The Over the Hill Gang” (Dick Elliot, Jack Vidal, Donald
Ogden, Bill Franklin)

Made initial public offering of stock (raising $6.5M in funds)

June 18, 1970: The “Love Airline” is born; starting service to
DAL, IAH, & SAT.
1975: LUV made ticker symbol on American Stock
Exchange
1976: Southwest Airlines expands service to 5 new
cities in one year.
1978: Southwest Airlines purchases Midway Airline
as a wholly owned subsidiary and enters the
Northeast U.S. market
1978: Muse resigns as President; Herb is asked to
step in as Interim President, CEO, & COB.
1981: Herb Kelleher assumes the permanent
position of President and CEO

Herb Kelleher served Southwest Airlines from 1967-2007

Profitable for 37 years

Largest U.S. based airline (by passengers)

547 Aircraft (Boeing 737)

3400 Flights A Day

One of first airlines to have a website

First airline to offer automated ticket services

“Southwest Effect”- term coined by the Department of
Transportation
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Simple + Stable
Low Uncertainty
Complex + Stable
Low Moderate Uncertainty
1. Small number of external
elements, and elements are
similar.
2. Elements remain the same or
change slowly.
1. Large number of external
elements, and elements are
dissimilar.
2. Elements remain the same or
change slowly.
Simple + Unstable
High-Moderate Uncertainty
1. Small number of external
elements, and elements are
similar.
2. Elements change frequently
and unpredictably.
Complex + Unstable
High Uncertainty
1. Large number of external
elements, and elements are
dissimilar.
2. Elements change frequently
and unpredictably.
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Complex + Unstable
High Uncertainty
1. Large number of external
elements, and elements are
dissimilar.
2. Elements change frequently
and unpredictably.

Competition

Fuel Prices

Air traffic disasters

Customer demands

Economic downfall

Government Regulations
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External SWOT Analysis
Opportunities
• New Technologies increasing
efficiency
• Bargaining power with Boeing
• Decline in fuel prices
• Acquisition of AirTran
• Receptive business travelers
Threats
Increasing fuel prices
Increased airport security
Weather
Third-Party agents
Substitute products in shorthaul markets
• Intense competition
•
•
•
•
•
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Porter’s 5 Forces

Threat of New Entrants (L)





Capital Intense
Government Regulations
Excess to distribution channels
Loyalty
Power of Buyers (H)



Switching cost
Differentiation of products
Information available
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Porter’s 5 Forces Cont.

Power of Suppliers(H)



Switching costs
Good for Company’s success
Threat of Substitutes(M)




Rental Car Services
Rail
Bus
Ship
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Porter’s 5 Forces Cont.

Rivalry of Existing Firms (H)



Slow growth
Mergers
Competition
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

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.
To Employees:

We are committed to provide our Employees a
stable work environment with equal opportunity for
learning and personal growth. Creativity and
innovation are encouraged for improving the
effectiveness of Southwest Airlines. Above all,
Employees will be provided the same concern,
respect, and caring attitude within the organization
that they are expected to share externally with
every Southwest Customer
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

Low cost leadership
High customer service
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 Low
cost Leadership
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http://www.bloomberg.com/n
09-27/southwest-airlines-agre
airtran-for-1-4-billion-in-cash-
 Defender
strategy
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Internal process
approach
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Competitive
Dissimilar
Cooperative
Organization Relationships
Organization Type
Similar
Resource Dependence Population Ecology
Collaboration Network Institutionalism
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