GROUP CASE ANALYSIS SOUTHWEST AIRLINES

Due Date: June 10, 2016

Prepared for: Clyde Walton

Prepared by: Shivek Saini Pushpinder Singh Jaswinder Singh Gaurav Hoshiar Singh P a g e | 1 Group Case Analysis Southwest Airlines

Table of Contents Executive Summary...... 3 A. Industry Environment: The North American Airlines...... 4 B. Corporate Strategy...... 5 C. Corporate Structure...... 6 D. Corporate Culture...... 8 E. Role of Corporate Leaders: In General...... 10 F. Role of Corporate Leaders: In particular...... 13 Works Cited...... 15

Table of Figures

Figure 1 Organizational Structure of Southwest Airlines...... 7 P a g e | 2 Group Case Analysis Southwest Airlines

Executive Summary

Southwest Airlines was established in 1967 by Herb Kelleher, the former CEO of the Southwest Airlines was Colleen Barrette, she contributed most of her career in this airlines. Southwest Airlines is one of the leading airlines industry and proved as a big competition for other airlines in terms of growth and profit. Southwest Airlines is conscious about the leaders and leadership. Southwest is disciplined about the coaching and mentoring. In order to develop the employees, they prefer to select the people who have experience about the work and culture of the company. There are various programs for developing the leaders range from the leadership includes:

 Training to everyone  Leadership briefings  Communication about leadership in company bulletins  Presentation by outside consultants

The purpose of the training and development in the airlines to preserve the leadership and culture in the airlines which can have a beneficial effect on the growth of the airlines industry. In order to get the success, the southwest airlines promote the people who work well and get rid of people who does not perform well in the company. This is the major thing which contributes to the success of the southwest airlines. There are no big shot leadership in the southwest, is anybody is unwilling for being a part of the leadership team, they will be no longer be there. Leaders play an important role in the success and growth of the company but in southwest airlines everyone is responsible for the success and profit of the company. P a g e | 3 Group Case Analysis Southwest Airlines

A. Industry Environment: The North American Airlines

The industry environment is factor which includes the economic, social, political and managing the industrial market. The North American Airlines was in profit and had a good graph in growth but besides that the threat of loss was going on. Many factors were affecting the industry with their negative impact which includes the increase in the potential interest rate, strength of the U.S dollars, lowering the value of currency for China and fall in the oil prices. The calculations for the economic growth for the world is 3.3%, for U.S 2.5% and for Canada 1.5%. Negative impact of the weak economy also affects the customers’ services and it reduces the sales and profit rate. Economic growth plays an important role in the financial statistical of the airlines industry but the major contribution is of the oil prices. ALPA, a stakeholder in the airlines accepts the reduction in the oil prices. Reduction in the oil prices leads to the weak economy which can have negative impact on the growth of the airlines industry. In the middle of the 2015, U.S mainlines carriers reported profit margins for the current up cycle and renewed focus on the capacity disciplines leading for the financial improvements. Due to these improvement stakeholders are earning well on their investments and the employees were also expecting the benefits and increase in the salary. The fee for departure (FFD) sector of the U.S airlines industry has the negative affect due to the following factors: 1. Effect on the hiring and retention of the pilot due to the shortage in the pilot pay shortages in the FFD sector. 2. Carriers do not have the profit incentives. 3. The total fleet count was decreasing due to the larger seat aircrafts. 4. FFD airlines have some additional burden of the costs aircraft, whereas other aircrafts were using these costs for other useful purposes. P a g e | 4 Group Case Analysis Southwest Airlines FFD the fee for departure is unable to attract the pilots for retention and hiring because they were offering the lower wages and regional carriers required to replace the pilots to move to majors. To resolve this problem, the regional industry is introducing some approaches which can be useful for this, these three approaches are as follow: 1. Like the other airlines like Endeavor air, Southwest Air, and Envoy air are reducing the size to use the size of the available pilots, FFD should also follow this concept. 2. By adjusting the capacity of the larger airplanes. 3. To increase the fleet size so that upgrade time could be reduced.

The regional airlines which are having the increased fleet size are actually attracting the pilots towards them, since the 2008 to 2009 recession the U.S air freight business has gone through the change. The market shares of the U.S air freight has approximately drop with 3 percent of the total international trade in the year of 2000 to the 1.3 percent in the year of the 2013.

B.Corporate Strategy

Corporate strategy of a company decides its overall working to achieve its organizational goals. To ascertain profits or the company the strategy should be perfect which helps the company in the long run.

Southwest Airlines Co. has turned into the dear of the U.S. aircraft industry (and its speculators) since its initiation in 1966. With an attention on worker advantages, low airfares and proficient operations, it is known as one of the best aircraft organizations in the whole business. The company as the most grounded administration in the whole industry. Whether it’s suggesting or benefiting its clients, the company has remained at the top from CEO Herb Kelleher to the present CEO Gary Kelly in the industry. The part of Southwest Airlines that isolates it from the opposition is its emphasis on worker joy, P a g e | 5 Group Case Analysis Southwest Airlines which streams down to client satisfaction. Southwest representatives have a portion of the best advantages and pay bundles in the business, and it appears. While 87% of Southwest workers have a place with a union, there has never been a union strike at Southwest Airlines. This is a demonstration of the sort of workplace that has been developed at Southwest. This satisfaction can be found in the way the representatives treat clients, transforming everybody into Southwest Airlines evangelists.

Now if we talk in border sense about the corporate strategy of the Southwest airline so their whole business is based on low cost travel in the whole industry. Company focuses on the point to point strategy with its competitors. This helps the organization increase more noteworthy activity on the majority of its household courses, as it can offer lower normal flight time. The have strategy to have less toilets and exhibitions on the board that helps to cut the cost. Company has been adding Boeing 737-800s to its armada, which have a seating limit of 175 travelers. As per CEO 6 to 7% of boarding is by the business companies which in total gave company profit of $295 million in 2013. (Bhaskara, 2014).

The reason Southwest Airlines has swung progressively to business movement is established in its cost structure. For a great part of the most recent too many years of the twentieth century, Southwest was developing at a fast pace. At the point when a carrier is developing quickly it can counterbalance cost increments on its current system by spreading settled expenses crosswise over more flights flying machine and destinations. Be that as it may, by the mid-2000s, that development had to a great extent decreased. Lower per-gallon fuel costs because of savvy supporting of oil permitted. Southwest to keep on offering amazingly low tolls somewhere around 2003 and 2008 even as its ability development impeded. Be that as it may, today Southwest pays market cost for fuel, and its incomes have needed to increment appropriately. Besides Southwest is noted for its solid administration work relations, which has positive and negative effects. From P a g e | 6 Group Case Analysis Southwest Airlines one perspective this methodology minimizes the danger of work strife and expansions worker fulfillment, which Southwest accepts positively affects administration and the travel experience (Schmidt, 2015).

C.Corporate Structure

Southwest Airlines is a champion amongst the best transporters. It is also one of the convienet airline among others. It is arranged in the simplicity market piece which enhances it even. It is a decent case for some other negligible exertion bearers like Ryanair and Easyjet. I was enthusiastic about finding what their formal advancement and various leveled structure that makes it such a powerful air ship.

We along these lines reason that the motivation driving a connection's structure is to have a systematized strategy for control and correspondence among the general open join into the business. It likewise picks the position of a representative in the business. The structure facilitates the surge of responsibilities and set up the level of power that helpers in decreasing clash in the alliance.

Its strategy is: "The task of Southwest Airlines is commitment to the most raised nature of Customer Service went on with a slant of friendliness, congeniality, solitary pride, and Company Spirit." Moreover, they have an alternate statement for their HR organization: "We are embarked to give our Employees a persistent workplace with proportionate open passage to learn and care”. Few more properties that make their framework so strong are creative ability and improvement.

The principal aim of this airplane is to be a family unit bearer working straight flights on short-pull courses with a repeat and with low entries. The essential operative method relies on upon six behaviors which include:

1. compelled explorer, P a g e | 7 Group Case Analysis Southwest Airlines 2. consistent tried and true flights, 3. short-pull, point-to-point courses between medium estimated urban zones and discretionary air terminals, 4. low ticket costs, 5. slant, vivaciously useful ground and door groups, and 6. high aircraft use.

The various leveled building of Southwest Airlines is known for being utilitarian. There are three layers of organization. They consider quality as their affiliation which consolidate quality, steadfastness, movement, easygoing correspondence and feedback. As like Southwest, Work specialization doesn't keep running as far with different bearers. An instance of this is to diminish the improvement time, pilots clean the flying machine which only happens once a while.

Figure 1 Organizational Structure of Southwest Airlines I was to a great degree enlivened with the relationship of southwest. I have experienced southwest before and it has reliably been wonderful flight. My request for Southwest as to their affiliation would be:

1. How might they handle an issue with a hopeless customer on flight? 2. How might they oversee emergencies? P a g e | 8 Group Case Analysis Southwest Airlines 3. What are a couple of experiences from their flights? We subsequently assume that the inspiration driving an affiliation's structure is to have a systematized methodology for control and correspondence among the overall public incorporate into the business. It furthermore chooses the position of an agent in the business. The structure coordinates the flood of commitments and set up the level of force that aides in diminishing conflict in the affiliation.

D.Corporate Culture

Corporate culture is what a whole organization is bound to work with or is what organization run by. Talking about culture at southwest so the company is working on the theme love. Which was initiated by the founder and is carried on by the present CEO, Gary Kelly. As they think by passing on love between the co-workers the environment is good with the organization and also with the clients (Makovsky, 2013).

Company is working on strategies like warrior spirit and servant heart. With warrior spirit they mean being bold as far as conveying the item. Individuals go for an assortment of reasons i.e. business, tourism, education etc. Therefore, the company is always there to make them feel relax and easy journey. Servant heart means giving full reverence to the customers. For which they provide their employees with all the tools which they need to amaze the customers. Basically they are providing a low cost, reliable and friendly air travel. For Southwest employee satisfaction is above the customers. The methodology may appear to be eccentric — however it bodes well and is by all accounts working fine and dandy at Dallas airport that has employed 47,000 people and serves 100 million customers annually. If we look at some of the achievements made by the company so USA Transportation Department marked it first in consumer loyalty in 2013, also ranked second by the Business Insider for keeping best aircrafts and received P a g e | 9 Group Case Analysis Southwest Airlines number second position for Airline survey done for customer satisfaction by the Consumer reports (MOUAWAD, 2010).

Southwest is fixated on putting its employee first. Their administration focuses on treating their employees in the same manner in which they want to treat their customers. This is because Southwest consider its employees to be the customers to the company. So they respect them and give them importance. Company has created an environment in which they appreciate the work done by their employees and also reward them for the same. This is also an example for the other employees to work more hard. With such strategies company has great Corporate Social Responsibility Stance. As they are helping the employees even to live better and also helping their customers to live better lives and do their long distance work very easily and comfortably with affordable charges. Their strategy to treat their employees is very hard for their competitors to match with. As it can be seen from their Halloween party ritual that how they treat their employees. With such kind of the cultural events it motivates the employees to work with more enthusiasm. Also as all the top level employees and their subordinates party together is symbol of equality which also proves that there is no discrimination. In a nutshell such kind of culture is very lucrative and beneficial for the company to achieve its organizational goals effectively and efficiently (Peel, 2016).

E. Role of Corporate Leaders: In General

In view of the meaning of initiative, numerous hypotheses have concentrated on gathering process authority, conduct approach, aptitudes methodology, and characteristic methodology. In the most recent decade, more up to date speculations have gotten to be prominent, including social, change, and profound administration to help associations adjust to change in an unverifiable worldwide commercial center in the article, "The Art form of P a g e | 10 Group Case Analysis Southwest Airlines Leadership", led a study on ninety administrators to realize which skills were shared and consolidated in their parts to effectively make an interpretation of goal into reality in associations, while looking after consistency.

Herb Kelleher's Competencies, Attributes, and Skills: Herb Kelleher is a one of a kind pioneer with an arrangement of abilities that have made him a legend at Southwest carriers (SWA), which are:

(1)Set up a society domain in which assorted qualities, pride and regard are esteemed, (2)Built up a worth included authority improvement program based the reasoning "contract for demeanor and train for expertise", (3)Stayed in contact with workers through viable correspondence and comical inclination, (4)Enlivened through duty, putting representatives FIRST, (5)Made a common vision by impacting workers and making an interpretation of that vision without hesitation, (6)Created inventive techniques keeping SWA a fruitful aircraft in a focused commercial center.

Herb Kelleher shared six key individual traits vital for fruitful administration, which are a sensible insight, great wellbeing, a hopeful mien, a protracted ability to focus, constancy, and an adoration for individuals. He additionally properties acquirable aptitudes that are the most donors to achievement, which are:

(1)Great listening abilities, (2)Wide information and instruction, (3)Sound judgment, (4)Capacity to be an energetic backer, (5)Capacity to discrete critical from insignificant things, (6)Capacity to be objective situated with spotlight on needs, (7)Charming doubt (BABSON, 2013).

Herb Kelleher has seven privileged insights for achievement, which are:

(1)One plane fits all - Boeing 737 arrangement is the main plane they fly decreasing support costs in the millions, P a g e | 11 Group Case Analysis Southwest Airlines (2)Use point-to-point flying contrasted with center and-talked framework which expands SWA on-time execution above industry normal, (3)Straightforward in-flight administration implies less down time and an additional flight for each day, (4)Basic charge structure with one way tolls lessens many-sided quality for travelers, (5)Administration is incline, all around adjusted, and exceptionally gainful, (6)Extremely cheerful workforce, which is 87% union, and are most generously compensated in the business. Since, SWA has 30% less representatives for every air ship, implies the most minimal expense per accessible seat mile (CASM) contrasted with any of the real aircrafts and, (7)Forceful fuel supporting (Lucier, 2004).

As per Herb Kelleher two needs, which are representatives and clients, he trusts officials ought to invest the greater part of their energy with inward and outside clients. In light of his timetable, he spends around fifty percent of his time discussing casually with workers and clients contrasted with other executive's. He likewise trusts the brand of society at SWA would not be conceivable without reasonable pay for his representatives. He concurs his representatives are paid above normal compensations, while paying his officers not exactly contending bearers. To persuade workers and motivate efficiency, SWA permit all representatives to take an interest in the liberal benefit sharing.

Kelleher's trusts SWA achievement depends on the accompanying methodologies taking into account his authority attributes, which are: (1) actualize a dream without bounds that spotlights on worldwide contenders, societal changes, and clients while investing less energy in interior conventions, benchmarking, and techniques, (2) execute critical thinking process by lessening the layers from base up and decrease the quantity of lasting boards of trustees and utilize specially appointed gatherings, (3) build up rules on basic leadership, (4) include representatives in broadly educating programs in initiative, bolster, client administration, and different offices to motivate achievement, (5) don't over examine and study reports and P a g e | 12 Group Case Analysis Southwest Airlines spending plans unless they have significant activity or inaction, (6) esteem workers by praising accomplishments and turning points, (7) rouse and intention new thoughts from all workers paying little respect to position, qualifications, and status, (8) include administration and workers in a participative procedure for taking care of issues, (9) actualize an adaptable vital arrangement concentrating on issues that defy you, and settle on choice and activities as indicated by the arrangement, (10) be unassuming, congenial, moral, led by serving, be reasonable, firm, don't separate, appreciate individuals, concede botches, don't be ravenous, and have a great time, and (11) correspondence with representatives to make trust and regard by putting them to start with, and (12) Hire individuals who have awesome dispositions, comical inclination, benevolent, and avid to learn (cote, n.d.).

Southwest Airlines is an organization that qualities uniqueness. By permitting representatives to act naturally at work, it gives them the opportunity to be creative and beneficial. Thus, representatives feel enabled, make the most of their occupation, which means upbeat workers who are less pushed and are more adept to deal with themselves physically. Kelleher is an incredible good example, who is an energetic advanced pioneer, who values his workers. As a powerful pioneer, he has empowered his officials to run their areas of expertise as fit, while giving the important backing and assets tobe effective.

This sort of initiative has empowered the formation of the administration benefit chain (SPC) model, which is contains representative fulfillment, client dedication, and shareholder esteem. In light of this model, Kelleher trusts benefit and development are animated by client unwaveringness, client dedication is the aftereffect of consumer loyalty, and consumer loyalty is made the worth workers make items and administrations to clients. This empowers chiefs to target new speculations created around consumer loyalty while augmenting the aggressive effect. P a g e | 13 Group Case Analysis Southwest Airlines Herb Kelleher has gained from his encounters, both decidedly and contrarily, and kept on driving SWA until he ventured down from the CEO position in 2001 he cleared out as a legend. At the season of his takeoff, it was the ideal opportunity for another pioneer with crisp thoughts and procedures to take SWA to the following level. Despite the fact that he is no more piece of SWA, he kept working with SWA as Chairman of the Board until he surrendered from the board in 2008.

F. Role of Corporate Leaders: In particular

I. Leaders at Southwest Airlines are made qualitatively to ensure the supportive culture and increased productivity. The Former CEO, Colleen Barret believed that the making of leaders starts from the hiring process which maintains the corporate culture that supports leadership at southwest. Consistent coaching and mentoring is extremely important to build such an environment of leadership, says Barret. The company firmly believes in forgiveness for honest mistakes but never spare the ill attitude and behavior which creates negative image of the company. To exemplify, close monitoring on employees is an everyday work of the managers, to ensure that employees are working efficiently and those who are not, goes out whereas those performing well receives appreciation or reward in the form of promotions and so on (Nahavandi, 2015). At southwest, different programs are run to create leaders ranging official leadership training sessions for everyone starting with front desk employees, to professional consultants providing presentations and seminars and communicating about leadership on bulletin boards at company level. The motive of these training sessions are to establish a culture that supports leadership and its style that can be effective to produce customer satisfaction because ultimate goal for southwest airlines is happy customers. Moreover, employees are P a g e | 14 Group Case Analysis Southwest Airlines treated with same respect and care as the company treats their customers which makes the difference and this is how company promotes healthy and friendly work environment ensuring competitive output threatening rivals (Nahavandi, 2015). II. The concept of fit and leadership developing culture has really boosted the company’s success to heights. Fit here means the one who fits in the company’s culture and the environment to work dedicatedly such that he or she cares for what he or she does. Moreover, Southwest build its employees in a way that they love their co-workers and customers genuinely. The former CEO made a committee of hundred people to flourish that culture by making the employees learn every bit of it. Furthermore, this culture committee encourages the task to reinforce the spirit of Southwest Airlines. Therefore, the joint effect of fit and leadership culture where all employees are themselves a leader and strong training guides help the southwest employees to engage with the company in such a way that they feel it their own success and pride. To exemplify, in 1991 air-fuel prices increased so tremendously that it almost became non-viable for the company to sustain the impact. However, the southwest employees showed an engagement with the company as they were built, by voluntarily purchasing fuel for the company through their payroll deductions. It shows that employees consider themselves as an important participants and are treated one in the business and will go out of their way to help the company. One more case where southwest employees showed full commitment to the company by creating a ten-minutes plane turnaround in 1972. As the company wanted to service the same number of routes but had to cut the number of planes. This could not have been possible without the dedication of employees working for Southwest (Employee Engagement Lessons From Southwest Airlines, 2013). In this way, the concept of fit and creating culture has proven to be beneficial for Southwest Airlines. P a g e | 15 Group Case Analysis Southwest Airlines

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