Background:
Southwest Airlines is the largest airline measured by the number of passengers carried each year in the United States. It 'also the area known as "low cost" compared to his great rival. Rollin King and Herb Kelleher, Southwest Airlines with 18 June 1971. Its first flights were from Love Field in Dallas to Houston and San Antonio, short hops with no-frills service and pricing structure simple. The airline has startedwith a simple strategy: "If you get your passengers to their destination when they want to arrive on time, at rates as low as possible, and make damn sure they have time to do good, people will fly your plane. 'This approach is the key to the success of South West have been. Currently, Southwest serves 60 cities (31 states) with 71 million the total number of passengers (in 2004) and with a total of $ 6,500,000,000 th Southwest are listedunder the "LUV" symbol on the NYSE.
Facts:
first airline to fly * The type of aircraft (Boeing 737)
* The first major airline to offer ticketless system with large frequent flyer program, flying trips based on a number of trips and not the number of miles.
* The first airline to offer) a good share of its employees (in 1973 initiated the program.
* The first major airline to develop a website and offer on-lineReservation. In 2001, about 40 per cent (2.1 billion dollars) of its revenues generated from bookings on-line to [http://www.southwest.com]. Southwest, the cost for booking via the Internet is about $ 1 over the cost for booking through travel agencies from $ 6 to $ 8
Key competitive advantage:
* Low operating cost and high efficiency
* Award winning customer service
* Practical Human Resources / work culture
Operations Analysis - Competitive Size:
Southwest clearly has a distinct advantage over other companies in the industry doing a business strategy effectively and efficiently, which is an important pillar of corporate strategy. Given below are some competitive factors, which are studied in this work.
1. Operating costs and efficiency
2. Customer Service
3. Staff Relations Director
4. Technology
1. Operating costs and efficiency
For the> European airline industry as a whole is in chaos. How does Southwest Airlines stay profitable? Southwest Airlines has the lowest cost and highest balance in its sector, after its chairman, Kelleher. The two major operating costs for each airline are - wage costs (40%)), followed by the cost of fuel (about 18%. - Some other possibilities, Southwest is able to make their low operating costs in point-to-point links the choice secondary (smaller) airports,high maintenance aircraft consistent wear, the use of aircraft, the promotion of e-ticketing, etc.
Labor Costs
The cost of labor for the South West general accounting for about 37% of operating costs. Perhaps the most important element of successful business model of low-cost airlines for increased productivity significantly. According to a recent HBS case study, is located south-west of 'the most unionized airline, "the airline of the United States (about 81% of itsEmployees belong to a union) and their wages are industry or above average compared to the U.S. carrier. The price advantage is low labor market more flexible work rules Carrier, cross-almost personal use to allow all ( unless authorized by the rules of licensing and safety). These cross-use and a culture of long-standing cooperation between groups working to translate into lower labor costs. In South-West in the 4th quarter of 2000, total labor costsThe cost per available seat kilometer mile (ASM) was founded more than 25% below the United and American, and 58% less than U.S. Airways.
Southwest Airlines like having a huge cost advantage over companies in the network, simply because their employees more power generated per employee. In a study in 2001, the productivity of workers in the Southwest has been more than 45% higher than American and United, despite significantly longer lengths of flight and greater average size of aircraft carriers.Therefore, through his relentless pursuit of lower labor costs is able to positively affect the bottom line revenue southwest.
Fuel costs
The cost of fuel is the second largest cost for airlines after labor, which represents about 18 percent of carriers operating costs. to protect the airlines who want to avoid large fluctuations in operating costs and increase profits by choosing fuel prices. If airlines can control the cost of fuel, which can best be assessed for budgets andThe profit forecasts. With the increasing competition and air transport in a commodity business, with competitive price was the key to the survival of the company and every success. E 'was difficult to pass fuel costs to passengers by raising ticket prices because of the highly competitive nature of the sector.
Southwest has been able to save a successful fuel hedging strategy, fuel costs at large and has the largest hedge position of other carriers. Insecond quarter 2005 unit costs decreased south-west by 3.5% despite a 25% increase in fuel costs. In fiscal 2003, Southwest had fuel costs much lower (0.012 per ASM) in comparison with other airlines, with the exception of JetBlue, as shown in Figure 1. In 2005, percent of fuel requirements, the airline has covered 85 per barrel to $ 26. World oil prices in August 2005 stood at USD 68 per barrel. In the second quarter of 2005 alone reached South West FuelSavings of $ 196,000,000. The state sector also point out that airlines that are hedged have a competitive advantage over the airlines do not cover. Southwest announced in 2003 that add blended winglets to improve performance of its current and future fleet of Boeing 737-700 is. The fins visually distinctive is the performance by extending the range of aircraft to improve fuel economy, lower maintenance costs and reduce engine noise.
Point-to-PointService
Southwest manages its point-to-point service run to maximize the efficiency of their operations and remain profitable. Most of its short haul flights average about 590 miles. It uses the strategy of their flights in the air more often and then have a better capacity utilization.
secondary airports
Southwest flies to secondary / smaller airports in an effort to reduce journey times and provide excellent service to its customers. It led topunctuality in the field. South West was also able to cut their operations cost relatively better than its rival companies.
Consistent aircraft
In the heart of the Southwest's success is its strategy of aircraft only: The fleet is composed exclusively of Boeing 737. Through the combined fleet significantly simplifies the task of planning, implementation and maintenance of flight. The training costs for pilots, ground crew and mechanics are lower because there is only oneindividual aircraft to learn. Purchasing, procurement, distribution and other activities also be simplified, while reducing costs. aircraft can also consistent Southwest pilot his team more efficiently.
E-ticketing
The idea of traveling without a ticket was a big advantage for the South West because it could reduce its distribution costs. South West was electronic or ticketless dates from the mid-1990s, and today there are about 90-95% ticketless. Customers using credit cardseligible for online transactions, and today Southwest.com bookings account for about 65% of total sales. CEO Gary Kelly thinks this idea could grow and which is not surprising that e-ticketing accounted for 75% of the south-west of revenue by 2005. In the past, when he paid a 10% commission for travel agent, cost about $ 8 a reservation. But now Southwest is between 50 cents and $ 1 per booking charge for electronic transactionshuge cost savings.
2. Employees and Labor Director
South West was regarded highly for his innovative style of management. It maintains a strong emphasis on high performance and its relationship to management practices of people have been key to its unprecedented success in the aviation sector.
Model
For our employees
"Our commitment to our employees a stable work environment with equal opportunity for learning and personal growth.Creativity and innovation are essential to improve the effectiveness of Southwest Airlines promoted. Above all, employees have the same concerns will be made available, and showing due respect for the organization that it expected to share with potential customers outside of Southwest. "
The Southwest model shows that the company has a strong commitment to its employees. The company offers the same respect for their employees that their customers will be provided. The south-westModel is unique because it detects stresses the importance of workers in the broader business strategy, excellent customer service and operational efficiency. The employees say, loyalty to and confidence that the South West show. Southwest employees for their loyalty, commitment, attitude and innovation known. The staff is the decisive factor between Southwest and the rest of the aviation sector.
Rent
South-westrecruitment policy is unique not only within the aviation sector, but also more generally, and turns around to find people with the right attitude, culture, living in south-west. complex procedures are used to rent for a positive attitude and dedication. Those who do not possess these qualities are weeded. Colleen Barrett, an officer is not operating in the south-west, it is stated that
"Rent is critical, because you can not institutionalize the behavior. Instead, you mustidentify people who already practice the behavior you seek. Then you can be the employees themselves, and decisions on customer service based on common sense and their natural inclinations. "1
Recruitment and interviews with the South West is a two-step process. The first step is a discussion group by employees, in which we evaluate the communication skills of potential candidates from outside. The next stages of this process are 1-1 interview in which thecandidate attitudes and orientation to serve others will be evaluated. This definition of the criteria apply to all job functions, as all employees of the South West have a role in customer service. An important part of South West Operational Strategy is that every job in the south-west is a service position customer service representative, whether it is applied directly to the customer, or if it is internal.
The table below shows that although Southwest is the most heavily unionized airline with about 80%,that contract negotiations between unions and the southwest are much shorter than the other major airlines. This is the quality of the report, the South West show with his staff and with unions, which he represented.
Culture
South West was created as a different type of society and from its beginnings nurtured a unique culture. In 1990, Colleen Barrett formed Southwest Culture Committee. This is unique within the industry and among all majorCompanies. The Committee also has a mission:
"This group aims to enrich the creation of the South Western mind and culture, where necessary, and make it better where it already exists, and to revive in places where it might be" corrupt. "In short, this group is to make the goal," what is necessary "to create, expand and enrich the South West special spirit and culture that this is a wonderful company / family has done."
And 'this unique approach tocorporate values, has a different culture created by others. Culture South West is the reason why it happened.
3. Customer Service
The mission of Southwest Airlines
The mission of Southwest Airlines is dedication to the highest quality of customer service, with a sense of warmth, friendliness, individual pride and company spirit delivered.
Directions
Herb Kelleher, founder of Southwest, was with the words: "We have been cited inservices to business customers, just happened to "Airline Transport 0.2 Award-winning customer service and is a characteristic feature of the south-west is for 'positive internal Outrageous Service" means. We have from top to bottom, everyone does what he or she can satisfy the customer. including Herb Kelleher, who is known to support the carrier on Thanksgiving. E 'through an emphasis on customer satisfaction and employeeSouthwest, which is able to distinguish itself from other industry in the airline. Technically, any employee or group within the South West of the same customers. This means that each employee "is" one way or another, though not directly involved with the passenger. The customer is the mechanical pilot and catering is the flight attendant.
Results
It 'possible that the "positive" Outrageous Service "to say thatis unique in the Southwest "is not the result of a department or program or contract management. It is not secondary to a product, the product is" This approach creates the conditions under which employees are more customers in a way to distinguish the company from treating others .. There are numerous reports of people who have received exceptional treatment from employees southwest.
The question that needs an answer is customers like SouthwestService is different and why? E 'common customers of other airlines, with their special service Rave? The answer is that it does not. While the Southwest is not the monopoly of the people, nature and who are willing to go further, to satisfy a customer, such behavior is fueled, to a greater extent in the south west.
It may be noted that the customer service that Southwest is an integral part of their culture. This culture is supported by staffencouragement to do more to satisfy the customer. This approach has become people who normally would only occasionally out of their way to help someone who is a unique artist, offer exceptional service at all times excited. Southwest employees make the difference in the customer service of other airlines.
4. Technology
Southwest uses the technology in many ways to meet their business objectives, while its efficient operation. According to the CEO,The technology is productivity. This was introduced in 1996, first ticketless travel from the South West. On 1 May 2000, Southwest Airlines gate "SWABIZ, a portal that supports companies in the booking manager for site visits and journeys through his pursuit Web [http://www.southwest.com]. There are many new technology initiatives currently underway, and some are in preparation.
Bar-code boarding passes in
Southwest Airlines has invested 12 million U.S. dollars in the pastthree years for the corporate and end up about 10,000 Dell OptiPlex desktop and Latitude notebook to standardize the management. Southwest wanted to replace its well-known, brightly colored plastic boarding passes with an electronic bar-coded boarding passes. It is about 350 touch screen ticket readers installed on Dell OptiPlex desktop supply of electricity. The bar code provides additional information about Southwest automatically reconcile the number ofBoarding passes with the number of passengers who actually board the aircraft.
Although the technology will help keep Southwest Airlines efficient by consolidating information on passengers for the company than 3,000 daily flights were going, we can extend the time to pick up passengers. However, it appeared that the increase in scanning each bar code on your boarding pass or not to reduce flight times for college, but it took a few minutes of administrative processes, such as researchCustomer data. The new bar code system is to record on paper what the Southwest ticket agents the ability for a customer to scroll through multiple screens to match and register the software. The process is much more automated. Once the barcode is scanned at the boarding gate is selected by the person from the list of passengers in real time.
The old method was manual, find the information in question, running different software reservation screensCheck-in for boarding. The hardware of the bar code to scan boarding passes have been provided. The company is about to replace the customer service back-office equipment at airports, including at its headquarters in Dallas.
Software Updates
Software applications such as those used by employees to screen passengers to be replaced. Internal written Southwest Airlines' "Airport Application Suite" is scheduled for deployment next year, as the company transitions from green screenwindow-based user interface. Similar to Wal-Mart Stores Inc., Southwest Airlines believes in developing in the construction of software that manages their business. The company uses an off-the-shelf software. There are 75-100 each year to support IT projects in the works of some 900 people.
RFID
radio frequency identification technology, an alternative to bar code identification for baggage, including the Southwest radar. E 'plans to test RFIDThe technology sometime in 2006. Although the game a little 'catch-up with other South West airlines such as Air Tran, Alaska Airlines and Champion, in many cases are able to jump around waiting with more complex applications easy.
Challenges:
South West has proved a great success despite the difficult times in the airline market. However, the new challenges of increasing competition from other budget airlines like JetBlue, ATAAirlines, America West.
Reserved seats
increasing the safety guidelines in September 2001, Southwest was prepared to be assigned seats (reserved) for passengers, traces its in-flight. This change is large investments in technology and its operations can have a negative gate since the current has assigned seating contributed to a rapid reversal of the gate.
The passenger demand
The Keep-it-simple philosophy has served Southwest. But as hisyour business grows and grows increasingly complex, with plans to board of purchase dozens of new aircraft and the expected increase in passenger numbers of around 80 million a year, the simplest strategy for the airline was in IT philosophy developed resist further. The CIO Tom Nealon says that "it is time to adapt our business processes for efficiency. As our aerial ladders for our services offer the same kind of contact with customers-up, automate many thingsyou could, without first making technology. The challenge is that touch the customer without conceding a goal. "Southwest is also aggressively pursuing Customer Relationship Management (CRM) techniques and applications you want to know the customers and get dislikes According to an interview with the CEO, Gary Keller, Southwest focus is on improving in two areas -. airport customers experience and in-flight experience.
In-FlightEntertainment
In an effort to improve the customer experience on the flight, the flight entertainment in the southwest is one thing that is taking into account, while JetBlue has been very successful in the past for its introduction in the long-haul flights. By comparison, Southwest has 415 planes to examine, and make an investment decision represents a completely new dimension. In addition, Southwest has to consider how things can enter in their environment. OnThis point will be 60% of its service by very short distances. Southwest must recognize the fact that a particular approach, not necessarily successful work for his competitors to his advantage.
Summary:
Southwest has long been regarded as the industry benchmark for operational excellence. Southwest Airlines is an excellent example of a company that is committed to its core competencies - the efficient operation of low-cost structure, the unit, providing excellentCustomer service and innovative management practices of human resources. We hope that this work has provided a good knowledge of operations in South-West part of its overall strategy to achieve success and gain competitive advantages.
References:
1. [HTTP: / / www.southwest.com] (Southwest Airlines official website)
2. "Southwest keeps it simple" - Air Transport World, April 2005, Pg 36
3. "Around the world on $ 48 (or so): How High Can Discount Airlines Fly" strategyManagement - Knowledge @ Wharton Newsletter October 5, 2005
4. TechWeb - [http://www.techweb.com/wire/ebiz/173601227]
5. "South West Strategy for Success: Consolidate!" - Oracle Magazine (September / October 2004 issue) http://www.oracle.com/technology/oramag/oracle/04-sep/o54swest.html
6. "Southwest Airlines: High tech, low cost - Eweek.com, April 2005
7. "Jet Fuel Hedging: Options available for airlines and a study on industry practices- Kellogg School of Management Research Paper, Spring 2004
8. Winning Behavior: What is the smartest, most successful companies in different ways, Terry R. Bacon and David G. Pugh, 2003
9. Time Magazine, October 28, 2002 issue, Vol 160 Issue 18, p. 45
10. "Wings Of Change", Information Week, March 28, 2005
11. employment contract negotiations in the aviation sector, Monthly Labor Review, July 2003, page 24
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