Southwest Airlines Case Study

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Register to read the introduction… Southwest has been the lowest-cost carrier in the airline industry, with its operating costs per available seat mile were 15 percent lower than America West; 29 percent lower than Delta; 32 percent lower than United; and 39 percent lower than US Air. Other large competitors are trying to match Southwest’s cut-rate price, but they all end up with huge losses.

There are many aspects of the operation contributed to Southwest’s cost containment. Southwest is the only airline company that using a single aircraft type, fuel-thrifty Boeing 737, it is therefore enables Southwest to reduce costs in training, maintenance and inventory. Specifically, Southwest was successfully achieved a fast turnaround time on the group, with almost 70 percent of its flights have a turnaround time of 15 minutes while other competitors need an hour to turnaround on the ground. With it fast turnaround time, Southwest is better in reaching a higher level of passengers volume as well as higher revenue even though it offering a low fare prices. Additionally, Southwest is saving on its operation costs by taking its passengers to smaller satellite airfields rather than major metropolitan
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Kelleher is a successful leader who creates a fun and friendly working environment, and with his sincere interest in the employees and company parties, which resulted that Southwest employees are unionised but has no relationship with unions. The benefits is that Southwest is able to negotiate flexible working rules with employees, they brought a dedication to serving customers, flight attendants and even pilots are willing to help with plane cleanup. This is one of the reasons that why Southwest is able to achieves fast turnaround time. As employees enjoying their works, they tend to achieve high productivity, and Southwest was enabling to be leanly staffed. Kelleher also introduced the first pro-sharing plan in the US airline industry in 1974, employees own a total of 13 percent of the company stock. This profit-share plan promotes employees’ productivity, and creates a sense of security and loyalty for employees. Employees are motivated through fun working atmosphere and feelings of commitment and loyalty, which helps Southwest to avoid high turnover rate in order to minimise costs that will spend on human resources issues.

Conservative Growth
Kelleher was resisted to expand vigorously and chose the conservative approach to growth, the philosophy of expansion was only to do when there are enough resources could be committed. Moreover, Southwest was showing a vigorous growth but under controlled with almost financing from its internal funds, and taking the lowest level of debt in US airline industry with 49 percent equity. Southwest has efficiently using its resources concentrated in only a few areas rather than trying to compete

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