Southwest Airlines

Southwest Airlines Co.

I. Mission Statement

"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."

II. Company Description

Southwest Airlines is based in Dallas, Texas and currently operates more than 3,400 flights a day and has roughly 35,000 employees system wide. Southwest is a low-cost airline that provides service throughout the United States. It is the largest airline measured by number of passengers carried each year within the U.S. On March 27, 2011 Southwest initiated service to Newark Liberty International Airport, and is now serving 71 cities in 36 states. In its 40th year of service, Southwest continues to differentiate itself from other low-cost carriers by offering a reliable product with commendable customer service (Srinivasan).

III. Company Focus

Southwest Airlines primary focus is exceptional customer service. Their award winning customer service is one way in which Southwest distinguishes itself among competitors. Furthermore, Southwest is known worldwide as the "discount airline", and therefore differentiates itself based on two competitive dimensions. Southwest prioritizes its competitive dimensions with quality and reliability being the first and foremost, and price following. Herb Kelleher, founder of Southwest, reinforces the company focus with this famous statement, "We're in the customer service business; we just happen to provide airline transportation." (Srinivasan).

IV. Company Operations

A. Operational Strategy

Southwest's recipe for success is their simplistic operations strategy of consistent low-cost, no-frills, high frequency, and on-time air transportation with friendly service. They have defined their key competitive advantages as: low operational costs/high operational efficiency, and award winning customer service.

In terms of operational costs, the two biggest costs for any airline are labor costs (approximately 40%) and fuel costs (approximately 18%). Southwest's labor costs account for 37% of its operational costs, and they have an advantage over network airlines (i.e. United Airlines, American Airlines) because their workforce generates more output per employee. A recent study showed that the productivity of Southwest employees was over 45% higher than American Airlines and United Airlines (Srinivasan). Southwest implements a fuel hedging strategy to achieve major fuel savings. Airlines that are hedged can essentially control the cost of fuel, allowing for more accurate estimated budgets and forecasted earnings. Another major way Southwest maintains a low-cost structure is by serving smaller, less congested secondary airports in larger cities, which tend to have lower gate costs and landing fees.

Southwest attains high operational efficiency by applying a three-prong strategy including: point-to-point service, secondary airports, and consistent aircraft. Southwest operates a point-to-point service, which keeps its flights in the air more often and thus achieve better capacity utilization. In addition, Southwest does not need to coordinate flight schedules into connecting hubs, which dramatically reduces scheduling complexity and costs. Along with the above-mentioned benefits of utilizing secondary airports this also allows Southwest to reduce travel delays and deliver on-time performance therefore, providing the upmost service to its customers (Anderson). A prime factor of Southwest's success is its use of consistent aircrafts. Flying solely the Boeing 737 jets has helped Southwest reap benefits such as: simplifying scheduling, operations and flight maintenance, reducing training costs for pilots, ground crew, and mechanics given that there is only a single aircraft to learn.

As clearly stated in Southwest Airlines mission statement they are dedicated to providing the best customer service possible. Southwest's notable customer service is referred to internally as "Positively Outrageous Service." It means that from top management to lower-level employees everyone does whatever he or she can to satisfy the customer. It is effectively communicated throughout the organization, and inherently a part of Southwest's culture. At Southwest, customer service "...is not secondary to the product; it is the product." This outstanding customer service does not include costly amenities like reserved seats or food service,