Southwest Airlines
While flying home to Texas last summer with
Southwest Airlines, I had the most fun and
unique experience with an airline
that I could ever remember. It all started out
quite oddly enough in the
lobby just before takeoff. As I was checking in at the
ticket counter, the
representative asked me if I wanted to play a game that
could get me free
round trip tickets. "Sure, who wouldn't," I
exclaimed. As she gave me my
boarding pass she said, "Great, how many holes
do you have in your socks?"
Initially caught off guard, I responded,
"Excuse me!" "The free tickets are
being given to the customer
who has the most holes in their socks," she
explained with a perky smile.
It was just my luck that I was wearing
sandals. I told her, "Too bad your
not checking underwear, because I'm sure I
could be in the running for some free
tickets with that sort of game." The
remainder of the flight was filled
with jokes and gags yet quality service
from the pilot to the flight attendants.
I can remember our flight
attendant, dressed in a T-shirt, shorts and tennis
shoes along with the rest
of the staff, enhanced the safety announcements with
the remark: "There may
be fifty ways to leave your lover, but there are
only six ways to leave this
aircraft." Having fun is obviously a big part
of Southwest Airlines formula
to success. It all starts from the top with their
childish yet brilliant boss
Herb Kelleher. Kelleher, the company's CEO, is the
"nut" behind these
shenanigans. This chain-smoking, Wild
Turkey-drinking Texas transplant
from New Jersey has: · Dressed for employee
celebrations as Roy Orbison,
Elvis, a medieval knight and a teapot; · Passed
out the peanuts himself on
board his orange and brown 737s · In front of
cheering employees,
arm-wrestled another CEO for the right to use the slogan
"Plane Smart." (He
got whipped, but he used the slogan anyway.) This
man, once called "The High
Priest of Ha Ha" by Fortune Magazine firmly
believes: "If you feel real good
about coming to work, if you feel real
good about what you're doing, if you
feel you are doing something for a
meaningful cause and you're having fun
while you're doing it, then you look
forward to coming to work. You don't
succumb to stress as easily and you
cooperate with other people more quickly
and more easily. If you have a sense of
humor . . . it tends to not allow you
to make mountains out of molehills."
1 Kelleher, known as Herb to the
troops and his partners, reinvented air travel
twenty-five years ago with its
low fares and zany irreverent style. This paper
will give a historical
overview of the company, discuss the ingredients to the
company success,
offer some financial strengths and present a final conclusion.
Section I:
Southwest's History Twenty-seven years ago, Rollin King, a San
Antonio
entrepreneur who owned a small commuter air service, and Kelleher, who
was a
lawyer at the time, 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 certain they have a good time doing it, people will
fly your airline.
And you know what? They were right. Within those 27
years, Southwest Airlines
became the fifth largest major airline in America.
Today, they have flown over
50 million passengers a year to 54 cities all
over the southwest and beyond.
They do it over 2,300 times a day with
over 267 of the newest jets in the nation
and fly only one type aircraft; the
B-737. The average age of their fleet is
only 8.4 years and they own over
sixty percent of them. In May 1988, they were
the first airline to win the
coveted U.S. Department of Transportation Triple
Crown for a month - Best
On-time Record, Best Baggage Handling, and Fewest
Customer Complaints.
Since then, they've won it thirty-one times, as well as
five annual Triple
Crowns for 1992, 1993, 1994, 1995, and 1996. They have been
an airline whose
has led to the advancement of the commercial airline industry.
They were
the first airline with a frequent flyer program to give credit for the
number
of trips taken and not the number of miles flown. They have pioneered
senior
discounts, Fun Fares, Fun Packs, a same-day air freight delivery
service,
ticketless travel, and many other unique programs. 2 Here is a brief
year to
year synopsis about this little upstart three-jet airline and how it
got off the
ground to become one of America's largest and best-loved
commercial airlines in
history: 1971 With President Lamar Muse ( retired and
seasoned industry leader)
at the helm, Southwest Airlines takes off on its
maiden voyage and begins
service between Dallas, Houston, and San Antonio.
America's most unique airline
is born. 1972 All Houston service is
transferred to Houston's Hobby Airport from
Houston Intercontinental.
Said Kelleher, "Why should our customers have to
drive 45 minutes to take a
40-minute flight?" 1973 Southwest files with the
Texas Aeronautics
Commission to extend service to the Rio Grande Valley. RUSH
Cargo
service, which provides same-day airport cargo delivery, is introduced
and
Southwest has its first profitable year. 1974 Southwest carries
its
one-millionth passenger and spends $400,000 to renovate their terminal
at
Houston's Hobby Airport by adding two new boarding gates and departure
lounges.
1975 Permission was finally granted for Southwest to fly to the
Rio Grande
Valley via the Harlingen Airport with four roundtrips each
business day. 1976
Southwest gets clearance to begin service to Austin,
Corpus Christi, El Paso,
Lubbock, and Midland/Odessa. Within five short
years, Southwest places its sixth
Boeing 737 into service while flying
over one and a half million satisfied
customers to their destinations. 1977
Southwest carries its five millionth
passenger. Southwest stock is listed on
the New York Stock Exchange as "LUV."
1978 The 1978 Airline Regulation
Act gives Southwest the opportunity to really
take off with new service to
St. Louis, Kansas City, and Detroit from Chicago's
convenient Midway Airport.
Lamar Muse steps down as President and Kelleher fills
in as interim
President, CEO, and Chairman of the Board. Later in the year,
Howard
Putnam is unanimously elected President and Chief Executive
Officer.
Kelleher stays on as permanent Chairman of the Board. 1979 Begin
service to New
Orleans from Dallas - the first city outside of Texas to
be served by Southwest.
1980 Southwest added its 22nd Boeing 737 to the
fleet and christened it the
"Rollin W. King" in honor of the co-founder of
the airline. It was the
first 737 to be completely owned by Southwest
Airlines. 1981 Southwest
celebrates a decade of "Love Southwest Style." With
fun, games, and
more savings for everyone, Southwest launches its next decade
of outstanding
service. 1982 Kelleher comes aboard as permanent President,
CEO, and Chairman of
the Board for Southwest. New service to San Francisco,
Los Angeles, San Diego,
Las Vegas, and Phoenix. 1983 Major schedule
increases are adopted, three
additional Boeing 737- 200s are purchased, and
Southwest flies over 9,500,000
satisfied Customers. 1984 Fourth consecutive
year Southwest is ranked number one
in customer satisfaction. Unveils the
first 300 series aircraft in its Boeing
737 fleet christened the "Spirit
of Kitty Hawk." 1985 Southwest names
the Ronald McDonald House as its primary
charity. Launched the "Just Say
When" campaign, which establishes
Southwest as the most convenient
point-to-point carrier in the nation. 1986
Southwest celebrates 15 years of low
fares, good times, and high spirits!
Southwest fliers have even more fun with
the introduction of Fun Fares. Over
13 million passengers. 1987 Southwest
celebrates the sixth year in a row as a
recipient of the Best Consumer
Satisfaction record of any continental
U.S. carrier. Weekend Fun Packs, which
include roundtrip airfare and hotel,
are introduced, and 14-day advance purchase
Fun Fares are reduced by as
much as 25%. 1988 Southwest and Sea World of Texas
join fins to promote Texas
as a major tourist attraction. Through the "New
Friends" campaign,
Southwest becomes Sea World of Texas' official airline
and creates Shamu One,
a Boeing 737 painted like Shamu the killer whale. Later
in the year,
Southwest becomes the official airline of Sea World of
California.
Southwest wins the first Triple Crown: Best On-Time Record,
Best Baggage
Handling, and Fewest Customer Complaints. 1989 A little more
than a year and a
half later, Southwest wins its second Triple Crown. Shamu
Two is born. Service
begins from Oakland's International Airport. 1990
Announces the billion-dollar
revenue mark and becomes a "Major" airline.
Shamu Three comes to the
surface to fly its colors. Lone Star One takes to
the sky as Southwest Airlines'
20th Anniversary flagship Boeing 737. 1991
Celebrates 20 years. 1992 Wins the
first annual Triple Crown in 1992 - a feat
no other airline has been able to
match in a single month! 1993 Expand to the
east coast and begins service to
Baltimore/Washington International
Airport. Captures the second annual Triple
Crown in 1993. 1994 Introduces
Ticketless Travel in four cities. Morris Air is
merged with Southwest.
Arizona One joins the fleet. Seven new cities open,
including Seattle,
Spokane, Portland, and Boise in the Pacific Northwest. Wins
the third
consecutive Triple Crown. 1995 Ticketless Travel is available
systemwide in
January. California One debuts in Sacramento. Adds service to
Omaha and
wins the fourth consecutive Triple Crown in 1995. 1996 Florida service
is
added - Tampa Bay and Ft. Lauderdale in January and Orlando in
April.
Southwest celebrates 25 years of service. Ticketless Travel Online
debuts on the
Southwest Airlines Home Gate webpage. In October, Southwest
inaugurates service
from Providence, Rhode Island. Southwest wins the fifth
annual Triple Crown for
1996. 1997 Starts out the year with service to
their 50th city - Jacksonville,
Florida. Jackson, Mississippi becomes the
51st city added in August. In
December, Southwest accepts the delivery of
its first Boeing 737-700. Southwest
is the launch customer for Boeing of the
next generation Boeing 737-700. 1998
Begins new service to Manchester,
New Hampshire on June 7. 1999 Begins new
service to Islip, New York on March
14. 3 As you can see, this airline has been
very busy the past 27 years.
Southwest is a rare bird in American business, a
company that has cultivated
an exceptional working atmosphere with amazing
success in its industry. Now
let's take a look at how Southwest succeeds in one
of the world's most
demanding airline industries. Section II: Culture Club
"There is a growing
concern that companies cannot live by numbers
alone." So said Forbes Magazine
to introduce the results of its 1995
Corporate Reputation Survey. "The
one thing that the top ranking companies
in the survey have in common is
culture. A company's culture, like a person's
character, drives reputation.
It should come as no surprise that a company whose
culture honors customers,
employees and shareholders alike have excellent
reputations." 4 Southwest's
culture is the glue that holds the airline
together. It encompasses beliefs,
expectations, norms, rituals, communication
patterns, symbols, heroes and
reward structure. Culture is not about magic
formulas and secret plans but
rather a combination of trust and loyalty.
Kelleher believes that culture
is one of the most precious commodities a company
owns so everyone from the
CEO to the baggage handler must work harder at it than
anything else.
Kelleher defined Southwest formula to success as to: · Blaze new
trails.
Don't rest on the laurels of others. · Ask yourself how can you do it
before
you ask others how it's been done. · Become a "risk doctor:"
help others
recover from mistakes by accepting, encouraging and laughing. ·
Stand
behind your commitment and those of your people. · Own mistakes,
share
mistakes, learn from mistakes and move on. · Play to win! 5
Southwest's
commitment to culture has blended three important ingredients to
make their
airline a thriving force: employees, customers and leadership.
First of all, the
employees at Southwest have an uncompromising dedication to
a cause or movement
that they deeply believe in. Secondly, Southwest has set
the standard for low
fares for the customers. They have made it possible for
people all over the
country to travel more conveniently and affordably.
Finally, there is sound
leadership to ensure that the employee/customer
relations merge to instill faith
and allegiance. 6 Southwest is obviously a
collaborate effort. Kelleher has
surrounded himself with qualified and
capable people who can run the airline
with or without him. Of course, they
can survive without him however I'm sure it
would be quite difficult for them
to live without him. He has set the benchmark
for all industry leaders to
follow. Section III: Financial Success Southwest is
the team that everyone in
the industry would want to play for. They have been a
genuine American
success story. Let's take a look at a few of their successful
economical
accomplishments. First is their profitability. In an industry that is
still
reeling from the $12.8 billion loss it posted between 1990 and
1994,
Southwest was the only airline to be profitable each year during
that period.
During this time the airline industry lost more money than
it made in the
previous sixty years. Southwest is the only U.S. airline to
earn a profit every
year since 1973. Secondly, Southwest has have maintained
a steady growth rate.
Since deregulation in 1978, 120 airlines have gone
bankrupt. They company has
experienced 133% traffic growth over the past five
years, ranging from 20 to 30
percent annually. Next is their outstanding
stock performance. Investment guru
Peter Lynch lauds Southwest as "The
only U.S. airline to have made money
every year since 1973." Up 300 percent
since 1990, Southwest's stock has
performed formidably. While airlines
typically trade at typically at
approximately ten times their earnings,
Southwest has generally traded at twenty
times earnings. Finally, Southwest
continues to lead the industry with the
lowest fares, market dominance, most
productive workforce, low employee
turnover, highest customer service rating
and the youngest and safest fleet in
the world. 7 Kelleher calls his company
"NUTS!" However nuts they may
be, they are living out one of the greatest
success stories in the history of
commercial aviation and they're having fun
while doing it. Section IV:
Conclusion Since 1971, this eccentric and
outlandish company has established a
consistent pattern of deviating from
convention. When other airlines were
creating big hubs, Southwest was flying
point to point. Instead of serving
expensive meals, flight attendants pass
out nuts. Instead of wearing stuffy
uniforms, they sport polo shirts and
shorts. For these departures from
convention, and many others, the world has
become fascinated with these crazy
people whose unrestrained enthusiasm comes
from the desire to make their lives
and their company extraordinary. Somehow,
while the competition was trying to
figure out who these "goofs" were, they
never noticed that these
"goofs" had already passed them up! The
"Southwest"
Experience By Dennis Brooks Instructor: Mr. Verret Course:
MAS 602 Date: May 10,
1999 Bibliography Baiada, R. Michael. "Southwest
Airlines: Below the
Surface." Airline Pilot, July 1994: pp. 19-22.
Chakravarty, Subrata.
"A Model of Superb Management: Hit'em Hardest with the
Mostest."
Forbes, September 1991: pp. 48-51. Freiberg, Kevin. Nuts!
Southwest Airlines
Crazy Recipe for Business and Personal Success; 1st
ed.; Bard Press: Texas,
1996. Jacob, Rahul. "Corporate Reputations."
Fortune, March 1995 pp.
72-76. Jarboe, Jan. "A Boy and His Airline."
Texas Monthly, April
1989: pp. 98- 103. Jones, Del. "Low-Cost Carrier
Still Challenging
Industry." USA Today, July 10, 1995. Notes 1.
Chakravarty, Subrata. "A
Model of Superb Management: Hit'em Hardest with
the Mostest." Forbes,
September 1991: pp. 48- 51. 2. Jarboe, Jan. "A Boy
and His Airline."
Texas Monthly, April 1989: pp. 98-103. 3. Baiada, R.
Michael. "Southwest
Airlines: Below the Surface." Airline Pilot, July
1994: pp. 19-22. 4.
Chakravarty, p. 49. 5. Freiberg, Kevin. Nuts!
Southwest Airlines Crazy Recipe
for Business and Personal Success; 1st ed.;
Bard Press: Texas, 1996. 6. Jacob,
Rahul. "Corporate Reputations."
Fortune, March 1995 pp. 72- 76. 7.
Jones, Del. "Low-Cost Carrier Still
Challenging Industry." USA Today,
July 10, 1995. Abstract: The
"Southwest" Experience Purpose: This
paper will give a historical overview of
Southwest Airlines, discuss the
ingredients to the company success, offer
some financial strengths and present a
final conclusion. Introduction: First
flight and my strange yet refreshing
experience aboard Southwest Airlines.
Section I: A brief year to year synopsis
of the airline. Section II: A club
and its culture. Section III: A momentary
look at a few of their economical
accomplishments. Section IV: Conclusion
Bibliography
Baiada, R.
Michael. "Southwest Airlines: Below the Surface."
Airline Pilot, July
1994: pp. 19-22. Chakravarty, Subrata. "A Model of
Superb Management:
Hit'em Hardest with the Mostest." Forbes, September
1991: pp. 48-51.
Freiberg, Kevin. Nuts! Southwest Airlines Crazy Recipe for
Business and
Personal Success; 1st ed.; Bard Press: Texas, 1996. Jacob, Rahul.
"Corporate
Reputations." Fortune, March 1995 pp. 72-76. Jarboe, Jan.
"A Boy and His
Airline." Texas Monthly, April 1989: pp. 98- 103.
Jones, Del. "Low-Cost
Carrier Still Challenging Industry." USA Today,
July 10, 1995.