Presented By:Group C

Background

• First low cost carrier in US• Founded 1971• Largest domestic carrier in US• 41 years of profitability• “exemplary business model”

Issue 1

• Why is Southwest Airlines able to remain in the US airline business with its flag flying high even after all these years ?

• Secret behind its success• 5 reasons

Issue 1: Secret behind its success?• Business Model of “Low cost strategy” built in

with pervasive cost saving efficiencies /mechanics

• A) Basic Operation– No frills, Short-haul, low fare– High frequency (3600 flights per day)– Maximum Airtime for airplanes (Economies of

scale)– Minimum employees– High turnaround rate (25 minutes)

Issue 1: Secret behind its success?• B) Commitment to SINGLE FLEET OF aircraft –

Boeing 737– Low training costs– Low maintenance costs– High bulk discounts from Boeing • E.g. 2011 order 208 Boeing 737 Max• Biggest order in Boeing’s history• SWA is the single biggest buyer of Boeing-40 years of

relationship– Even when designing new planes, the manufacturer

will take the preferences of SWA into account

Issue 1: Secret behind its success?• Early adoption of Fuel Hedging Strategies– Started 1994– Secret behind success during times of trouble, fuel

price hikes– 2008, jet fuel hedging up to 70% by SWA– Others 20-30%– Saved $4 billion from 1998 to 2008

Issue 1: Secret behind its success?• Exceptional Customer Service (consistent)– Ranked #1 in 2001– Ranked #2 In Customer Report 2014

• Proper Employee Relations• Strategic moves (Absorption of competitor)– AirTran acquisition May 2011– Eliminated one of the major competitors– Gave entry to new markets particularly Alaska and

Washington D.C.

Issue 1: Secret behind its success?• An Airline of “First”s : Benchmark creator– First low cost carrier in US– First to fly only one type of aircraft– First to do exclusive booking via internet and

phones – First to introduce ticket less travel– First to introduce frequent flyer program

Issue 2

• If you are a strategic consultant advising the SWA board, what would be your advice to them for their future for the next 5 to 7 years?

Short term strategies: for upcoming 5 years

• Capitalize more on its exceptional “low cost” brand image/equity

• Publicize untapped competencies “Safest Airlines” and “Use of fuel efficient airplanes”

• ATRA ranking

• Continue to poach competitors’ customers with its “No change fees” and “bags fly free” services

• Expand in new geographical grounds – South American countries, Columbia,

Venezuela, Argentina, Brazil, Canada, etc.• Continue hedging on the air fuels• Increase contribution of air freight business– Contract with global giants having strong supply

and distribution network for the cargo, freight transportation

• Continue with the simple, lean structure

More opportunities• “Medical Tourism” – Mexico, Brazil, Costa Rico– 2012, 2 million American passengers– 30% expected annual growth rate

• Differently-able-friendly aircrafts

Long term strategies: for 5+years

• Invest on research on alternative bio fuel and solar panels to cut down costs.– Research on the bio-fuel potential of algae, castor

and other weeds– People are being more environment sensitive with

each passing day• Possible Growth Strategy:– Possibility of creating different SBU to tap niche

market

Thank You!