Evaluation Of Southwest Airlines Corporate Culture
We find it very impressive how everything the company does is dedicated to it‘s strategy of providing low-cost flights via under-average turnover times. It is great how all the small details fit together and reinforce each other. The warrior-spirit which is part of their corporate culture has been lived since the beginning when Herb Kelleher was fighting for four years to get the new airline into the air. But the most impressive is how they did a lot of things differently from other airlines and how that contributed to a faster turnover, more passengers and to more costumer satisfaction like not asigning seats, not charging for checked-in baggage, not employing an extra crew for airplane cleaning, not charging additional fares, increasing number of flights to destinations when other airlines decreased their number of flights to the same destinations and not telling their employees how to behave but to give them the possibility to come up with their own ideas how to do things better.
We would give Southwest a 1 for crafting its strategy (1 - 5, 1 is the best). We like that they think differently from their competitors and that everybody in the company is aligned with the strategy. They really acomplished to offer a superior costumer experience for a very low price unlike their competitors who offer either low prices for less service or higher rates for better service. Furthermore they sticked with their initial strategy although when it was hard in the beginning to gain a foothold in the market and when they had to face legal issues partially caused by their competitors. They have been very succesfull for more than 30 years in terms of profits, growth and costumer satisfaction. But most important: Nobody has been able to copy their strategy, that is what makes it a winning one.
The three main key policies are the use of a single aircraft type (many cost saving benefits: minimizing size of spare parts inventories, simplifying training of maintenance and repair stuff, improved proficiency and speed of maintenance routines, simplified scheduling of planes), the point to point structure instead of the hub and spoke system (minimizing time of aircraft at gates, reduced number of gate facilities required, no peak time when all flights come in - steady work load) and the striving to perform all value chain activities cost efficiently (projects to increase fuel efficiency, ticketless Travel, online reservations, serving airports in medium sized cities and less congested airports, no asigning of reserved seat, flight attendants cleaning plane, no first class and fancy sections at airports etc.) The two lived core values are luv and fun - employees and customers are treated with dignity and respect and people are encouraged to have fun at work. Their policy is that employees come first and customers second because they believe that happy employees would genuinely care about the well being of their customers. Managers had to spend one third of their working time outside of their office to go around and talk to the staff. The idea is that somebody who does the same procedure every day would know best how to improve it.
The key elements of Southwest’s culture are first and foremost their “keep employees happy then they will keep customers happy” and the warrior spirit incorporated by former CEO Herb Kelleher. Southwest is definitely a strong culture company. This is made visible through rather recruitung people that fit into the company culture than perfectly skilled employees, the existing of a corporate culture Committee that is responsable for nurturing and sustaining the corporate culture and the identification of the staff with the company (they even have their own song they sing in company celebrations). The culture is also visible by the customers having extraordinary experiences flying with Southwest, for example the flight attendend who dressed up as bunny, hid in the overhead bin and surprised customers in a funny way. Gary Kelly could have problems with sustaining the corporate culture because people strongly identified with Herb Kelleher. Gary Kelly might not be as convincing or just seen as a cheap copy of the former CEO. He should try to find his own way how to live and to pass on the company’s core values luv and fun.
We would give Southwest a 1-2 for implementing and executing it’s strategy. They are consequently and continuosly improving the efficiency of every value chain activity and living their core values. They have eben succesfull over so many years for a reason. We think that following factors have been most crucial for their success: The idea to fly point to point instead of hub and spoke and the impowerment of their employees to improve procedures by their ideas and to use common sense instead of sticking to strict rules. Without that the company would just be like any other airline and would not have a competitive advantage. However, we really disapprove Southwest’s decision to not conduct required inspections for early detection of fuselage-fatigue cracking putting their customer’s safety on risk. An airline which is known for offering superior customer service can risk to do such a thing. This could have cost them their credibility and reputation amongst customers and employees. Furthermore we do not agree to 100 percent with the acquisition of Air Tran because the company does not perfectly fit to the strategy of Southwest even after the transforming to Southwest standards (branding, point to point, employees and types of airplanes). The case does not say anything about the corporate culture at Air Tran but we asume that the culture was different to the one at Southwest and that not all employees could identify with the “new” culture when becoming part of Southwest.
The weakness I see in Southwest Airlines is related to one point of its strategy. The current strategy of only flying to 'second line' airports represents a problem of limited growth and there are still big cities in the USA without SWA services. And this is contradictory with the ideas of Gary C. Kelly. As it is explained in the case, during his tenure as a CEO, Kelly has worked with other top-level Southwest executives to sharpen and fine-tunes SWA´s strategy in a number of areas and continued expanding the operations (adding both more flights and initiating service to new airports). The current strategy has a 'space' limit that will restrain company's desires of expansion.
Southwest is in the process of completing its integration of AirTran, and I personally feel this was a strong business move for both airlines. In my opinion, the biggest benefit of the acquisition has been the acceleration of Southwest’s entry into the international markets. AirTran added 21 cities domestically and 7 cities internationally to Southwest’s network. Southwest is now positioned to expand in other markets such as Central America and portions of South America where they are seeing rapid growth in air travel demands. The integration of both airlines has made Southwest the largest domestic airline based on the number of passengers flying. All in all, AirTran has accelerated Southwest’s expansion in the continental U.S. and also positioned it well for long-term growth in the international market. When this acquisition took place in 2011 executives had concerns with the process of how Southwest operates a predominantly point-to-point network; while AirTran operations had significantly concentrated flights in Atlanta. Other concerns developed based on the single aircraft Southwest used (Boeing737) to help keep cost low while AirTran’s fleet consisted of Boeing 717’s.
Southwest decided to create a slower but smooth transition in absorbing AirTran’s Atlanta operations, making them similar to the rest of Southwest’s four cities, rather than remaining a hub. Southwest also then decided to lease-purchase AirTran’s Boeing 717’s to Delta. While this added more time to the overall integration time period it was a critical move needed to preserve the cost benefit of maintaining and operating a single aircraft type. By taking it slow Southwest was able to methodically maneuver through the acquisition while staying true to their business model thus sustaining operating costs which are still well below those of other major airlines.
