SOUTHWEST AIRLINES 2002:
AN INDUSTRY UNDER SIEGE
Case by: James L. Heskett
Group 1: Joseph Dady, Deron Duncan, Devon Haugan, Caitlyn Miyamoto,
Kate Mulvaney-Kemp, Ryan Olson
28 September 2015
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SUMMARY
 Southwest Airlines, 1967
 Low-cost airline
 Highly successful
 Company culture
 Permeated all roles within Southwest
 September 11th, 2001
 New external changes
 Most harmful to small, low-cost airlines
 How to maintain business strategy and company culture in the face of these
changes?
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IS STRATEGY TRIANGLE
 Small group discussion
 Group 2 and Group 3 triangles
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IS STRATEGY TRIANGLE
Business Strategy
- Cost efficient
- Service to all customers
Organizational
Strategy
- Flexibility
- Collaborative
- Charismatic
corporate culture
Information Strategy
- Minimalist and simple
- Easy to use
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ORGANIZATIONAL CULTURE
 Unique hiring philosophy
 Consistently rated one of the best
places to work
 Strong culture overseen by
“culture committee”
 “Whatever it takes” attitude
combined with autonomy
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ORGANIZATIONAL CULTURE
https://www.youtube.com/watch?v=TEhnx183xiY
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FINANCIAL SUCCESS
 Low-fare based airlines
 Point-to-point route system
 No meals
 Limited number of baggage
 Uniform configuration
 Team-oriented approach
 Handoff of flights
 Utilization of agents
 First come, first serve
 Customer Service
 Frequent Flyer Rewards
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MAINTAINING MARKET PRESENCE
 Short-Term Challenges: Operating
Procedures
 Redesign passenger and baggage
handling processes
 Mandate early arrival
 Nonstop transcontinental flights
 Long-Term Challenges: Growth Strategies
 Non-stop transcontinental flights
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SHOULD SOUTHWEST GROW?
 YES!
 Obstacles
 Government regulations
 Low-cost carrier competitors




JetBlue
Frontier
AirTran
Delta Connection services
 Includes 6 small regional airlines
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HOW TO GROW
 Create long distance point-to-point
flights
 Existing cities
 Expand into new markets
 Slow and steady growth
 International markets
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CONSEQUENCES OF REDUCED
GROWTH RATES
 Past growth may not be sustainable
 New security measures
 New taxes have hit Southwest harder than other airlines.
 Possible losing position if:
 Current problems remain unfixed
 Entrance to a new market is forced
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INDUSTRY BANKRUPTCIES
 Post-9/11 policies forced small
airlines to go out of business
 Creates market share that
Southwest could occupy
 Flip the chessboard: seeing things
from a different perspective
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ROLE OF IS/IT
 Boarding passes
 Ticketing interface
 Security directives
 Loss of simplicity
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DROP IN PROFITS (2008)
 Increased fuel prices
 “No hidden fees”
 FAA investigation
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PORTER’S MODEL
New Entrants
-High Capital
Barriers
-Terminals, Planes
Threat of Substitutes
-Nonstop Flights
-Service
Industry Competition
-Price Competition
Supplier Bargaining
-Boeing
-Unions
Buyer Bargaining
-Relative Standards
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RECOMMENDATION
 Manage current issues
 Evolving federal regulations
 Updating/develop IT systems
 Passenger and baggage processes
 Resume previous growth strategy
 Entering new markets slowly
 Find markets that fit their needs
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