Southwest Airlines Case Analysis

Case Analysis Southwest Airlines

1. What was the initial strategy for Southwest Airlines when it first started?

Southwest Airlines was founded in 1967. The initial strategy was to create an intrastate carrier with routes connecting the main cities in Texas, Dallas, Houston, and San Antonio. They did that because of federal regulation, it was complicated to start an airline for interstate travel. As part of their strategy, they lowered the costs allowing to travelers the possibility to spend less money on airfares than driving the same distance. The company started just with three used Boeing 737’s. The inaugural flight was on June 18, 1971. With a point-to-point service between the three biggest cities in Texas, they were able to meet on-time schedules. With frequent departures, passengers could easily catch a later flight in case they missed their original flight. Although these frequent departures did require a tight turnaround time. For making this possible employee were given the autonomy to do whatever was necessary to get the plane in and out in 15 minutes

2. What was the "Southwest Effect?"

In 1978 the Airline Deregulation Act, allowed to open new interstate new routes. Then, when Southwest was entering a new route offering lower fares, the other airline companies covering the same route had to lower their own fares to be competitive. This effect caused that even in routes not covered by Southwest fares went down. This was caused by the fear that other companies had of the entry of Southwest in their routes. The economic outcome was lower rates and increasing demand thus potentially rise for all airlines.

3. Outline some of the unique strategies used by Southwest that gave them the competitive advantage.

Southwest Airlines used different strategies. One of the things they did differently was to use the point-to-point system instead of using the hub-and-spoke route system. With the point-to-point system, Southwest had better utilization of their fleet with speedy turnarounds. Other strategies were eliminated onboard meals, a limited amount of checked baggage on short flights, a high-speed boarding process with a team approach, not to sell “interline” tickets, no connections with any other airline. Their customers were business and pleasure flyers who had short trips, so they did not assign seats. This allowed some flexibility to keep the plane doors open for last-minute arrivals.

4. Describe the unique leadership style of the founder Herb Kelleher.

Herb Kelleher’s leadership style is described as “Unorthodox but effective.” He was one of a kind. He made things that most of the people may consider unusual. Anyway, he had a vision and made his employees live by his style. He guided his company successfully for many years. He made the company profitable for 26 consecutive years. Kelleher is an ideal example of a charismatic leader