Southwest Airlines
A review of the operational and cultural aspects
of Southwest Airlines
Aimee Henkle, Christine
Lindsey, Michelle Bernson
Introduction
Southwest Airlines was established in 1971 in Texas with 3
planes and routes between Dallas, Houston and San Antonio.
Business model was simply: “If you get your passengers to
their destinations when they want to get there, on time, at the
lowest possible fares, and make darn sure they have a good
time doing it, people will fly your airline.”
Today Southwest Airlines is the 4th largest airline in the
United States servicing 58 cities with a fleet of 366 planes
and is on its 29th straight year of profitability.
Class Discussion
Business Model
Customers – who are they?
Short haul business travelers who want to get there when they want. In
other words offer several flight time choices between cities in close
proximity.
Families who decided to take a short flight rather than driving their car
the same distance.
Low Cost
Average one-way fare is $83 and it supplies 90% of all discount fares
Concerned with keeping cost low to increase profitability rather than
increase market share. Understand specific market niche.
Fly Short Distances
Southwest does not use a hub-and-spoke system, but rather flies point
to point.
Average flight last just over an hour.
Have Fun!!
Typical flight attendant spiel: "Please pay attention to the flight
attendant at the front of the cabin. She's either going to be Miss
America 2000 or a very bitter runner up."
Employee Culture
Recruiting
Hire for attitude and train for skills
Humor taken seriously
Hired 6,406 new employees in 2001
Employees
Encourage to assume ownership
Hire for life
Trust there decisions
Communication
Give employees immediate access to critical information. They have the power
to make adjustments to fix significant problems quickly.
On-time arrivals, baggage handling, and customer complaints are
communicated on a weekly basis.
Everyone is focused on customer service and making Southwest a success
which allows them to expand outside of “assigned” responsibilities.
Bottom Line
On average 6 seats per flight accounted for profit
in 2001.
Market Comparison
JetBlue is modeled after Southwest
Airbus planes with leather seats and satellite TVs
Founder also started Morris Air, which Southwest bought in 1993
American Airlines announces layoffs and restructuring
US Air declares bankruptcy August 11
United Airlines expected to declare bankruptcy later this year
Source: BusinessWeek, August 5, 2002 and August 12, 2002
2001 Selected Financials
Southwest Continental American
Airlines Airlines Airlines
all numbers in $, millions
Revenue
Passenger 5379 8457 15780
Cargo 91 512 662
Operational Expense
Wage 1856 3021 8032
Fuel 771 1229 2888
Aircraft Rentals 192 903 829
Landing Fees 311 581 1197
Maintenance and Repairs 398 568 1165
Depreciation & Amortization 318 467 1404
Passenger Servicing 347 778
Commissions 103 364 835
Net Income 511 -95 -1762
Balance Sheet
Cash 2280 1132 120
A/R 71 404 1414
Spare Parts 71 272 822
Flight Equipment 7534 6153 14980
Ground Property and Equipment 899 1494 2079
Data Sources: Annual reports of Southwest Airlines, Continental Airlines, and American Airlines.
Queuing Theory Applied to Check-in
Customer Arrivals
Other airlines have wider distribution
Centered around 0.5 hr. before departure
Longer tail
Southwest encourages early arrival
Check-in begins one hour before
Distribution much tighter, short tail on end
No Seat Assignments
Service Time
Quicker seating
Southwest Boarding Pass
SOUTHWEST AIRLINES BOARDING PASS SOUTHWEST AIRLINES
OPEN SEATING
Passenger Name
C
Passenger Name
Flight 1234
March 2004
C
Typical 737 Seating Chart
Continental Airplane (737)
Check-in Board Find Seat
Airport Gate Jetway
Terminal Area
Southwest 737 Layout
13 – 18 seats more than typical layout
3 seats to choose from
Point-to-Point vs. Hub and Spoke
Hub and Spoke = Batch Process
Point-to-Point vs. Hub and Spoke
Point to Point = Line Flow Process
737 Fleet of Airplanes
Enables point to point route structure
Short – medium haul airplanes
Small passenger carrying capabilities.
Reduced takeoff and landing runway length requirements
Costs
Operating costs 4% lower than other airplanes in its class.
Low weight
Lower engine thrust ->less fuel ->lower engine maint. costs
Lower landing fees
Lowest maintenance costs in their class. 35% lower than
the A320 as reported by the US Department of
Transportation.
737 Fleet of Airplanes
Maintenance
Simple design and low stance easy to maintain and load
Engines can be serviced from the ground
Bags can be loaded from the ground
Ground Crews familiar with airplane
Common ground equipment, tools, and manuals for all airplanes
Flexibility
In case of “mechanical irregularities” a one model fleet allows easy
substitution with one airplane for another.
Simplified fleet management
Pilots
Ease of cross training
Any pilot for any airplane
Boeing 737-700 design inputs
737-200 Flight Deck
737-700 Flight Deck
SWA 737-700 Flight Deck Option
737 Fleet of Airplanes
Reduced number of airplanes means inventory levels can be kept lower
Rapid Turnaround Times
20 minute turnaround times
25 minute average
45 minutes – 1 hour industry average
Everybody does everything
Do what it takes to get the airplane out the door
Pilots help check in
Flight Attendants help clean
HIGH OCTAINE!!!
High airplane utilization.
2 additional hours of
flying time per day.
Critical Path Method for Turnaround
Landing
Taxi In
Check In
Gate Arrival
Service Airplane
Unboard Passengers
Unload Bags
Troubleshoot Food Fuel
Clean Cabin
Toilet Water Checks
Board Passengers Load Bags
Check-in & Boarding Policy Taxi Out
BOEING 737 Fleet of Airplanes
Point to Point to and from Tower Clearance Employee Attitude –
small airports everyone pitches in!
No baggage transfer NUTS!
Takeoff
Necessity is the Mother of…
Customer Service = More Customers
Leveraging System = Competitive Advantage
High Utilization = Low Cost
