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Group Case Analysis Southwest Airlines 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
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