Southwest Airlines

• Mission – 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.

About SouthWest • •

• • • •

More than 37 years ago, Rollin King and Herb Kelleher got together and decided to start a different kind of airline. They began with one simple notion: If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline. Began as a small Texas airline Fly to 64 destinations across US 3400 times a day, With over 500 aircraft Southwest has consistently led the entire airline industry with the lowest ratio of complaints per passengers boarded Employees will be provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Southwest

Offerings • • • • • • • •

Always the innovator, Southwest pioneered Senior Fares, a same-day air freight delivery service, and Ticket less Travel. They Provide low cost flying across the U.S cities They are so low they compete with car fares They have a brilliant website which any customer can easily navigate through They provide additional offerings such as car/ hotel bookings on their site booking. So lowly priced and they still offer discounts Provide vacation packages to locations like (LA, Las Vegas, Disney Land) Rapid Rewards - Fly just eight (8) roundtrips in 24 consecutive months

Pricing Strategy • SWA’s pricing strategy is to charge the lowest possible fare that still enables the airline to make a profit. • They think that there competition is with automobiles. • Southwest must keep its operating cost to the bare minimum. • These fares would not be sustainable unless it is supported by a high passenger load factor

• Operation Simple It offers a single class, open seating, and no meals. Its aircraft fleet consists only of one type -- the Boeing 737 -- to minimize training and maintenance costs. • Run its own reservation system, and sells a significant portion of reservations through its Web site. • It can cut costs in the customer service

Profit Analysis • Analyzed viability of increasing profits by reducing airfares 20% • Investigated a SWA high volume route for this analysis (LA / Oakland) • Current route demographics: GENERAL INFORMATION Current Passenger Load Daily Flights between LAX and OAK Market Share Airfare – Roundtrip Plane capacity – 737

70.50% 20 18% $118.00 137

Current SWA Costs Costs for LA / Oakland Route Crew – Pilots (3 member) Crew – Attendants (5 attendants) Base Fuel Extra Fuel for Weight Ticket Handling Ticket Commissions (Average) Mechanical Maintenance Cabin Service Baggage Handling Landing Fees & Leasing Refreshments Plane Overhead / Administrative Costs Total

Fixed Per Year

Varible Per Flight $ 624.00 $ 600.00 $ 685.00

$ $ $

1.50 2.00 7.30

$

2.00

15,175,000.00 9,964,500.00 25,139,500.00 $ 3,109.00 $

12.80

$ $ $ $ $ $ $

Varible Per Passenger

350.00 200.00 150.00 500.00

Costs

Price

# Flts Actual Actual # # Tickets Needed # Daily Yearly Per Year per day Flts Flts

$ 118.00 686,200 $ 106.20 861,400 $ 100.30 934,400 $ 94.40 1,000,100 $ 82.60 1,124,200 $ 70.80 1,299,400

14 18 19 20 23 26

20 20 20 20 23 26

7,300 7,300 7,300 7,300 8,395 9,490

Fixed Cost per Year

$ $ $ $ $ $

25,139,500.00 25,139,500.00 25,139,500.00 25,139,500.00 25,139,500.00 25,139,500.00

$ $ $ $ $ $

Varible Cost Per Flight, Total

Varible Cost Per Passenger, Total

22,695,700.00 22,695,700.00 22,695,700.00 22,695,700.00 26,100,055.00 29,504,410.00

$ $ $ $ $ $

8,783,360.00 11,025,920.00 11,960,320.00 12,801,280.00 14,389,760.00 16,632,320.00

Revenues & Profit

Max Profit Point

Price $ $ $ $ $ $

118.00 106.20 100.30 94.40 82.60 70.80

# Tickets Per Year 686,200.00 861,400.00 934,400.00 1,000,100.00 1,124,200.00 1,299,400.00

Total Cost Per Year $ $ $ $ $ $

56,618,560.00 58,861,120.00 59,795,520.00 60,636,480.00 65,629,315.00 71,276,230.00

Total Revenue Per Year $ $ $ $ $ $

80,971,600.00 91,480,680.00 93,720,320.00 94,409,440.00 92,858,920.00 91,997,520.00

Total Accounting Profit Per Year $ $ $ $ $ $

Max profit point realized with a 15% reduction in ticket price

24,353,040.00 32,619,560.00 33,924,800.00 33,772,960.00 27,229,605.00 20,721,290.00

Cost vs. Revenue vs. Profit Yearly Profit vs. Number of Tickets Sold $100,000,000

TR TC

Total Revenue Per Year

$60,000,000

Total Accounting Profit Per Year

Max Profit Point $40,000,000

Profit

Tickets Sold per Year

0

0

00 0, 40 1,

0, 30 1,

1,

20

0,

00

00

0

00 ,0 00 1, 1

1,

00

0,

00

0

00 0 0, 90

0 00 0, 80

00 ,0 70 0

0, 0

00

$20,000,000

60

Dollars

$80,000,000

Total Cost Per Year

PROMOTION •Rapid reward offer •Annual education travel program •Special offers •Celebrity endorsement •Promotional partners •Commercial Ads

Rapid Reward Offer • • • • • • • • • • •

Get one bonus credit when you fly into or out of Minneapolis/St. Paul! Receive triple Rapid Rewards® credit and up to 25% off with Alamo®! Avis® rewards Southwest Airlines’ Rapid Rewards Members with double credit and up to 40% off! For a limited time, earn a bonus Rapid Rewards credit at any Best Western® Hotel! Budget® rewards Rapid Rewards Members with up to 40% off and up to double credit! Receive triple credit at Cambria Suites® hotels Double up with Dollar®! Dine your way to Rapid Rewards credits with Rapid Rewards DiningTM. Up to 20% off & earn double Rapid Rewards credits with Hertz®! Earn Triple Rapid Rewards® Credits with Hyatt® Book smart. Receive double credit at Thrifty®.

Annual Education Travel Program • Southwest Airlines and the Hispanic Association of Colleges and Universities Open Travel Program for College Students • Online registration starts from 13 apr 09 till 5 jun 09.

Celebrity Endorsement •   Model Bar Refaeli unveiled Southwest Airlines' new SI One 737 at LaGuardia Airport in New York today.

Promotional Partners Credit cards Rental cars Hotels

Dining

Retail

PEOPL E

DIFFERENT CAREERS AT SOUTHWEST AIRLINES

CONTINUE…

CONTINUE…

BENEFITS - THE EIGHT FREEDOMS

CONTINUE…

CULTURE

Culture: the development, improvement, and refinement of the originality, individuality, identity, and personality of a given people.

Work Hard Desire to be the best Be courageous Display a sense of urgency Persevere Innovate

Adhere to the Basic Principles Treat others with respect Put others first Be egalitarian Demonstrate proactive Customer Service Embrace the SWA Family

Have FUN Maintain perspective (balance) Celebrate successes Enjoy your work Be a passionate Team player

PLACE

SOUTHWEST AIRLINES TOP TEN AIRPORTS

KEY POINTS • • • •

Low cost Un tapped market Less facilities Comparatively less luxuries

THE SOUTHWEST EFFECT AND CODESHARE AGREEMENTS • • • • • •

Morris Air Muse Air Iceland Air ATA Airlines West Jet Airlines Volaris

ROUTE-MAP OF SOUTHWEST AIRLINES

NON-STOP SERVICES

Process  Southwest has built a successful business on an unusual model: Flying multiple short quick trips into the secondary (more efficient and less costly) airports of major cities Uses only one aircraft type, the Boeing 737  Tickets cannot be purchased through common online venues and a minority are booked through travel agents.  Southwest's tickets are issued directly by the airline over the phone or online at the company's website.  Southwest allows passengers to change reservations without additional cost. Refunds can be made online where you need to cancel the reservation or you can do so by calling the reservation number.

 Customers are not assigned seats; rather, they are assigned to one of three "boarding groups“ Southwest offers no aisle or window seat assignments  Extend no upgrades nor preferred boarding status to their most frequent travellers  Southwest historically allowed three pieces of luggage to be checked in free as opposed to the limit of two on the domestic flights of some other U.S. airlines  Southwest served smaller meals than the meals served by full service airlines, with shorter flights receiving single small snacks and soft drinks, and longer flights (with a duration of about 3 hours or more) meriting "Snack Pack"s of pre-packaged goods.  In the 2000s these meals in a bag typically exceed the food served on full-service airlines.  There are several flights that are at least of two hours long whereby you are served with peanuts and pretzels. If you are on a non stop flight, then a packaged snack will be served. Other complimentary tea, coffee, non alcoholic drinks are also available but some product such as beer, wine may be charged.  Provide no lounges with free drinks

Physical Evidence Southwest is known for colourful boarding announcements and crews that burst out in song.

“Marvin Martinez, a bellman and front desk agent at the San Antonio River Walk Marriott, says, “We all bring out smiles in our own special way. Me, I’m a performer. Every day I’m on stage in front of my biggest fans, my guests. When I walk into the lobby, I’m on! I’m an aggressive hospitality animal. My guests always leave satisfied.”

An Birds Eye View