Strategic Management

Southwest Airlines in 2010: Culture, Values, and Operating Practices

Overview

Founded in 1966 under the name of Air Southwest Company, the airline now

known as Southwest Airlines opened for business as a commuter airline servicing the Texas

cities of Dallas, Houston and San Antonio (Pederson, 2005, Par 2). From the onset the company

faced lawsuits from competing airlines in attempts to prevent the company from servicing certain

airports and fare wars with other airlines. But the executive leadership of the company endured

the onslaught, winning the legal battles and the fare wars, and began selling company stock in

1975 (Pederson, 2005, Par 6). By 1977 Southwest Airlines had expanded service to all major

destinations within the state of Texas and issued a third quarter dividend of seven cents per

share. Congress passed the Airline Deregulation Act in 1978, which greatly altered the airline

industry. Airlines were afforded the opportunity to legally expand service, but Southwest chose

to move slowly to avoid taking on large debt. In 1979, the company introduced self-ticketing

machines to expedite and simplify the ticketing process and implemented service to New

Orleans, the first destination outside of Texas (Pederson, 2005, Par 14). The airline was

considered a no-frills operation with a focus on customer service. Throughout the 1980’s,

Southwest Airlines continued to grow through market expansion, low fares, creative advertising

campaigns, and exceptional customer service.

The company entered the 1990’s as a major airline, with a stable of 94 planes

serving 27 cities and revenues exceeding $1 billion (Pederson, 2005, Par 30). Taking advantage

of ailing competitors, Southwest increased market share in California and Arizona and bought

gates from defunct Midway Airlines at Midway airport in Chicago. The company continued to

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acquire small regional airlines and slowly expanded into other regions of the country. In 1997,

the airline posted...