Operations Management at Southwest Airlines


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Case Details:

Case Code : OPEA004
Case Length : 9 Pages
Period : 2003
Organization : Southwest Airlines
Pub Date : 2004
Teaching Note :Not Available
Countries : USA Industry : Aviation

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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It's easy to offer great service at high cost. It's easy to offer lousy service at low cost. What's tough is offering great service at low cost, and that's what our goal is. To do it, we have to watch every penny. I personally approve all expenditures over $1,000, not so much because I don't trust our people, because I know that if they know I'm watching, they'll be just that much more careful.

- Herb Kelleher, the Chairman of Southwest Airlines.

Introduction

In 2003, Southwest Airlines (Southwest) was the fourth largest1 US airline in terms of domestic customers carried. The airline's major short haul, low-fare, high frequency, and point-to-point carrier in the US covered 60 cities (59 airports) in 30 states. It was the first airline to introduce a homepage on the Internet.

Southwest had enjoyed 30 straight profitable years. Southwest had the best customer complaint record of any US airline for the last 12 years. In 2003, Southwest was named by Fortune as one of the most admired companies in US. In November 2003, Southwest achieved a 9.4% increase in traffic due to Thanksgiving Day2.

It also recorded 3.76 million revenue passenger miles up from 3.44 million for the same period in the previous year. Its load factor3 was 63.7% up from 60.5% in November 2002.

Background Note

In 1967, Texas businessman Rollin King and lawyer Herb Kelleher founded Southwest as an intrastate airline, linking Dallas, Houston, and San Antonio. In 1971, Southwest made its first scheduled flight. Operating from Love Field Airport in Dallas, Southwest adopted love as the theme of its early ad campaigns.

While other airlines moved to the new Dallas/Fort Worth Airport (DFW) in 1974, Kelleher insisted on staying at Love Field, and gained a virtual monopoly there. When Lamar Muse, Southwest's president, resigned in 1978, Kelleher was elected as president and Chief Executive Officer. Thus began the career of one of the America's most popular business leaders. In 1979, Southwest started its new service to New Orleans from Dallas, the first city outside Texas. In 1982, Southwest extended its services to San Francisco, Los Angeles, San Diego, Las Vegas, and Phoenix. Southwest launched the "Just Say When " campaign in 1985, which established it as the point-to-point carrier in the nation.

 Excerpts >>

1]  After American airlines (AMR), Delta, and Jet blue.

2] A day for remembering remarkable military men. The Thanksgiving weekend is one of the most traveled periods during the year.

3] It was a percentage of total passengers carried.

 

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