Objective 1_ Naveen.docx

Objective 1: To identify the characteristics of the airline industry in which Southwest Airlines operates. The main function of airline industry is to provide air transport services for travelling passenger

and also to transfer their luggage from one place to another. In order to get successful in the market, an Airline industry must work on some characteristics. The characteristic that Southwest Airlines follows to operate in the market are given below. 1. Low cost carrier: Southwest airlines had consisted only one type of Boeing 737 crafts for many years. This helped them to minimize their cost. Because of having only on type of aircrafts it was easier to maintain quality of the crafts and improving the maintenance of the crafts. Besides it also minimized the size of spare part inventories and the task of scheduling the crafts for flights became easier. Southwest airlines used point to point route structure strategy which helped them to minimize cost. As southwest airlines’ main hub was a regional airport, so they had a steady work load. These airports did not have multiple peak hour s like bigger airports. So southwest airlines could have a steady or fixed number of stuffs employed at the airport. On the other hand, big airports had multiple peak hours and to handle these peak hours other airlines had to employed more airport stuffs than Southwest Airlines. As a result Southwest airlines minimized the stuffs which eventually reduced operating costs. 2. Build an integrated strategy and embrace innovation: Airline industry is a competitive market and the competition is growing every day. In order to sustain in the market it is important to have unique strategies and innovative ideas. Southwest Airline has created a benchmark for both of this. During 1971, when Lamar Muse was the CEO of Southwest Airlines, he was an aggressive and well experienced person with great entrepreneurial skills. He did some aggressive marketing. For example: they gave a tagline of “Now there’s somebody else up there who loves you” while their main hub was the Dallas Lovefield Airport. Not only this but they also change the name of the routes between Houston, Dallas and San Antonio as the “Love Triangle”,

their planes were called “love Birds”, drinks were called “love potions”. This innovative love campaign helped them to grab customer attention. Besides, it was a smart choice to keep their hub in a regional airport like Dallas Love Field rather than taking the hub to a big airport like Dallas Fort Worth International Airport as the gate fare is lower in Love field airport than DFW International Airport. Moreover, the traffic is less in a regional airport, so the chances of getting the flights delayed was also less. Also in 1972, SWA moved their hub from Houston Intercontinental airport to an old airport named Houston Hobby. As Houston Hobby was very close to the downtown, so the business travelers found it suitable to travel to Houston from Dallas and San Antonio. 3. Pricing and scheduling: Pricing strategy is a very significant factor in order to be successful in airline industry. Southwest Airlines showed a very good way of doing their pricing strategy. In 1973, there were many empty seats in their San Antonio- Dallas flights. In order to fill up the empty seats SWA cut it’s regular fare from $26 to $13 for all seats. Also Lamar Muse gave offer of $10 flight tickets on Friday night Houston-Dallas flights. Southwest Airlines served two types of different travellers. One is the business travellers who wanted weekday flights to save time. These categories of customers were less price sensitive. All they wanted was to travel during weekdays to save time. Another type was Price sensitive leisure travellers who wanted to fly at a lower fare. Lamar Muse came up with an idea of two-tier on peak and off peak pricing structure where all flights departing before 7 pm were price $26 and rest of all the seats of other flights were priced $13. This strategy increased customers for Southwest Airlines and this became the benchmark in the whole airline industry.

4. Building Culture: To sustain in any business, it is important to build culture and Southwest Airlines was succeeded in building a proper work culture. In 1981, when Herb Kelleher was the CEO of southwest Airlines he used to visit the maintenance personnel and check on how the crafts were running. He also used to talk to the flight attendants personally and listen to

the employees. In this was he used to observe and encourage the employees of the company. Even on “Black Wednesday”, he often helped the employees to load bags. Herb knew the name of thousands of employees and the employees treated him like a celebrity. Because of creating a different work culture Herb became famous among the employees. He was also known as the “Clown Prince” of airline industry because he used to make jokes and engaged with pranks. This person created a different work culture. In 1971, Southwest Airlines decided to have their flight attendants dressed colorfully and hired the people with sparkling personalities. This Airline did another attention-getting task by providing their passengers free alcoholic beverages. 5. Turnaround time: Turnover time in aviation industry denotes to the time essential to unload a plane after its arrival at the gate and prepare it for the next departure. The more the turnaround time is, the less number of flights an aircrafts can take. Airline industries are continuously working on this turnaround time so that they can reduce it without compromising the quality. Southwest Airlines had less number of planes and its turnaround time was only 10 minutes in 1970s. after arrival of a flight it used to take only 10 minutes to off-load passengers and luggage, refueling the craft and other necessary paperwork. Later in 1980s, when the number of passengers increased the turnover time gradually increased to 30 minutes. It took less time with 135 passengers compared to a half-full plane with just 60-65 passengers. Even in 2000-2013, the turnaround time of Southwest airlines was less than the turnaround time of other airlines. It proves that Southwest Airlines provided their employees the best training possible. 6. Marketing Response: As Airlines industry a big industry and it is not easy to sustain in the market so one needs to have proper marketing strategies prepared. In early 1973, Braniff international was Southwest’s major rivals. They announced $13 plane fare and as response, southwest strike back with a two paged advertisement in the Dallas newspapers with a headline, “Nobody is going to shoot Southwest Airlines out of the sky for a lousy $13”. They came up with a strategy where they not only reduced the plane fare to $13 but also gave offer to their passengers to buy a regular-priced ticket for $26 and get a free alcohol.

7. Competitive industry: In 1970s, Southwest Airline faced several legal cases. One reason was the refusal of Southwest to move its hub from Dallas Lovefield airport to Dallas-Fort Worth airport. Local officials were uncompromising as they were expecting to get fees from Southwest’s flights in order to clear the debt of the bonds issued to finance the construction of the airport. Eventually Southwest won the case as Texas Aeronautics Commission did not give any order regarding this. Southwest Airlines faced another problem when the rival airlines protested against Southwest’s involvement in sending their flights to another smaller cities in Texas. According to the rival airlines, there were enough airlines present in the market already and Southwest’s entry might create overcapacity. Southwest airlines opposed this fact saying that their low plane fares would increase the number of passengers. The number of passengers increased from 123,000 to 325,000 flying from Harlingen Airport in the Rio Grande Valley to Houston, Dallas or San Antonio. During earlier days of Southwest Airlines, it faced so many difficulties that the employees also knew that the airlines’ existence was continually on the line. All these competition thrown by the rivals made Southwest more strong in the airline Industry. Herb Kelleher was determined that southwest will earn success.

References: 1. https://www.finavia.fi/en/newsroom/2017/why-quick-turnarounds-are-crucial-airlines 2. https://w3.accelya.com/blog/6-characteristics-of-high-performance-digital-airlines