Southwest Airlines (Southwest) became one of the most successful and stable airline companies operating within the USA. While most airline companies have disappeared following various crises such as the September 11 terrorist attack and the 80s recession, Southwest continued to be successful and profitable, unlike many of its competitors. The company assigns its success to its operating philosophy of “managing good times” and providing its customers and employees with security and good times, especially during a crisis (Inkpen and Degroot, 2017).
Southwest was founded in 1966 by Herb Kelleher, a practicing lawyer, and his client, Rollin King. The company started its business with three surplus Boeing 737s and 25 employees flying to three cities. The operation began on June 18, 1971, and since then, Southwest Airlines became one of the largest companies in the USA airline industry. With the acquisition of AirTran and several destinations to Mexico and Caribbean towns in 2011, Southwest entered the international airline market; the company added three destinations to Cuba in 2016 (Inkpen and Degroot, 2017).
Southwest has recognized the divide between its customers on business-oriented high spenders and cheap-oriented leisurely travelers. By offering the customers a choice oriented to their needs, Southwest attracts many travelers who can choose to travel in the way that fits their needs the most. Like other major airlines, such as American and Delta, Southwest maintains its operations within the hub-and-spoke network (Inkpen and Degroot, 2017).
The existing networks of hubs across the country require the passengers to travel from one hub to another to reach their destination. Although it often inconveniences travelers, the hub-and-spoke networks allow companies to distribute their businesses and services efficiently. Because the hubs are essential for the airplane market, major companies protect their hub cities from their rivals and control local operations. Choosing new cities as hubs is a difficult task, and while other companies may rush to obtain as many hubs as possible, Southwest prefers to keep a smaller number not to overwhelm its resources.
Employee and Work Policy
Southwest became famous for its positive attitude towards customers, offering extra help and services to upkeep its reputation. The company often diversifies its services with creative visuals and other fun changes to make the customers feel welcomed and comfortable on the flight. Southwest also has the highest labor costs in the USA and takes pride in its employee policy, paying attention to the working conditions, support, and culture in the company when it comes to the employees’ needs. With over 50 000 employees working in the company, the labor costs are ever-growing and challenging the management (Inkpen and Degroot, 2017). While some began considering outsourcing the work, especially on international flights, many employees see it as a threat to their job security and the quality of service.
Airline Industry Situation
Currently, the USA airline industry is struggling with various issues that affect its performance and profitability. Although Southwest has always managed to avoid the many problems surrounding its competitors, it is still affected by the market’s situation. Some of the issues that affect the market are low quality of customer service, air-traffic delays, energy issues, security problems, environmental regulations, and open sky agreements. The volatile fuel prices, high labor costs, maintenance spendings, and new legislations that allow non-American carriers to enter the USA market continue to affect Southwest’s efficiency as a company.
Southwest has steadily endured various crises that erased many of its competitors from the market. Although the company has demonstrated unusual signs of struggle in recent years, it remains a large and influential part of the market. Its favorable policy towards employees, customers, and the quality of service and its careful nature when expanding business are the foundation that allowed it to thrive. On the other hand, the recent struggles, rising costs, and new competitors become new risks that the company needs to consider if it wants to keep its high position in the airline market.
Inkpen, A. C., & Degroot, V. (2017). Southwest Airlines. Caso pedagógico.