Southwest Airlines Case Analysis

INTEGRATED LEADERSHIP PERSPECTIVE

SOUTH WEST AIRLINES

INDIVIDUAL CASE ANALYSIS

PGP 2011-13

SOUTH WEST AIRLINES: IN A DIFFERENT WORLD

CASE FACTS

Southwest Airlines was founded in 1967 and became operational in 1971. Southwest Airlines operates as an efficient low cost no frills attached air passenger carrier. The Southwest model has become so popular that several airlines worldwide have been introduced based on the model. The founder members of the SW airlines were Rollin King, an investment counselor and pilot; Herb Kelleher, Southwest’s Attorney and Lamar Muse, former CEO of a small airline and Southwest’s first operating President and CEO.

King, Kelleher and Muse were able to establish a good relationship with Boeing Company by purchasing an extra produced aircraft Boeing 737 for a price lower by $50000 than the asking price. This aircraft was bought in addition to 3 already ordered aircrafts.

The airlines sold one of the four aircrafts in the first year to survive. This led to the need for efficiency reducing the turnaround time to 10 minutes. Even after higher passenger traffic the turnaround time was almost half the other airlines, below 30 minutes.

The Southwest Airlines as a company focuses on the people and culture. The staff was hired with precision and care. The efforts to preserve the culture were led by the co founder Herb Kelleher and Colleen Barrett.

Former CFO Gary Kelly became the CEO in 2004, and later in 2008 added to his title President and Chairman. Gary Kelly was credited of doing successful fuel hedging. Under his leadership the company delivered highest level of customer satisfaction. The revenue grew from $5.9 million in 1972 to $5.7 billion in 2000. The compounded annual growth rate was around 25%.

The company was facing a major challenge due to growing operating costs. Earlier the fixed costs used to be a major cost for the airlines. Now the variable or the operating costs sum up to be a major burden. This is mainly due...