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Southwest Airlines Cheap Flights - Hub and Spoke Or Point to Point?

Southwest Airlines cheap flights operate on a point to point system rather than the more conventional hub and spoke system that many other carriers prefer. With more than three thousand flights a day, Southwest Airlines flights can often be bought cheaply because it is a low cost carrier.

The point to point system may benefit the traveler, as rather than having a central airport from which many of its flights originate, the Southwest Airlines model flies its airplanes between airports, with each of its airports having relative parity with the next. To cut down on costs and enable cheaper flights, Southwest Airlines frequently uses the secondary airports of its origin and destination cities. This may be a benefit or a disadvantage, depending on where the traveler wants to go in the destination city. Secondary airports usually have lower tariffs and charges for the airline, and the reduction in costs is often passed on in part to the consumer in the form of Southwest Airlines cheap flights.

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Southwest Airlines Cheap Flights - Hub and Spoke Or Point to Point?

However, Southwest Airlines also waives the rule about serving only secondary city airports - it also serves some of the major airports in the big cities. Listed below are some of the major airports that may be served if you book a Southwest Airline cheap flight.

1. Philadelphia International
2. Denver International Airport
3. Cleveland Hopkins International Airport
4. Orlando International Airport
5. Detroit Metropolitan Airport
6. Lambert St. Louis International Airport
7. Phoenix Sky Harbor International Airport
8. Seattle-Tacoma International
9. Pittsburgh International
10. San Francisco International Airport
11. Washington Dulles International Airport (limited flights, also serving Baltimore-Washington International Airport)

The Los Angeles area is served by Southwest Airlines cheap flights via four airports including the major Los Angeles International (LAX). The one airport not served by Southwest Airlines in the Los Angeles area is Long Beach so if you are headed there you will need to check out the fares of other low-cost carriers that fly to the area.

Benefits of Booking Southwest Airlines cheap flights

So why should you check out Southwest Airlines cheap flights rather than those of other carriers? First, the point to point system employed by Southwest airlines means that it is likely to have flights going between your intended origin and destination cities. If you are relying on cheap flights from other carriers, you'll probably be in luck if you happen to be living in a hub city otherwise, you might struggle to find a cheap flight to your intended destination.

Another reason to check out Southwest Airlines cheap flights is the fact that it avoids "farming out" its fares. It is not likely that you'll find a Southwest Airline cheap flight on fare search sites like Orbitz or Expedia. It is better that you go to Southwest Airline's home on the web to find bargain flights there. The current home page of Southwest Airlines can be found at [http://www.southwest.com]. Southwest Airlines has had an online presence for more than a decade. Its flights are sold direct from its web site, and Southwest Airlines has a great record for online sales. As such, you are likely to find good deals on Southwest Airlines cheap flights exclusive to its web site. So why not check it out today?

Southwest Airlines Cheap Flights - Hub and Spoke Or Point to Point?

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Southwest Airlines Operations - A Strategic Perspective

Background:

Southwest Airlines is the largest airline measured by number of passengers carried each year within the United States. It is also known as a ‘discount airline’ compared with its large rivals in the industry. Rollin King and Herb Kelleher founded Southwest Airlines on June 18, 1971. Its first flights were from Love Field in Dallas to Houston and San Antonio, short hops with no-frills service and a simple fare structure. The airline began with one simple strategy: “If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline.” This approach has been the key to Southwest’s success. Currently, Southwest serves about 60 cities (in 31 states) with 71 million total passengers carried (in 2004) and with a total operating revenue of $6.5 billion. Southwest is traded publicly under the symbol “LUV” on NYSE.

Facts:

* The first major airline to fly a single type of aircraft (Boeing 737s)

* The first major airline to offer ticketless travel system wide including a frequent flier program based on number of trips and not number of miles flown.

* The first airline to offer a profit-sharing program to its Employees (instituted in 1973).

* The first major airline to develop a Web site and offer online booking. In 2001, about 40 percent ($2.1 billion) of its passenger revenue was generated through online bookings at [http://www.southwest.com]. Southwest's cost per booking via the Internet is about $1, compared to a cost per booking through travel agents of $6 to $8.

Key competitive advantages:

* Low Operational costs / High Operational Efficiency

* Award winning customer service

* Human Resource practices / Work culture

Operations Analysis – Competitive Dimensions:

Southwest clearly has a distinct advantage compared to other airlines in the industry by executing an effective and efficient operations strategy that forms an important pillar of its overall corporate strategy. Given below are some competitive dimensions that will be studied in this paper.

1. Operational Costs and Efficiency

2. Customer Service

3. Employee/Labor Relations

4. Technology

1. Operational Costs and Efficiency

After all, the airline industry overall is in shambles. But, how does Southwest Airlines stay profitable? Southwest Airlines has the lowest costs and strongest balance sheet in its industry, according to its chairman Kelleher. The two biggest operating costs for any airline are – labor costs (approx 40%) followed by fuel costs (approx 18%). Some other ways that Southwest is able to keep their operational costs low is - flying point-to-point routes, choosing secondary (smaller) airports, carrying consistent aircraft, maintaining high aircraft utilization, encouraging e-ticketing etc.

Labor Costs

The labor costs for Southwest typically accounts for about 37% of its operating costs. Perhaps the most critical element of the successful low-fare airline business model is achieving significantly higher labor productivity. According to a recent HBS Case Study, southwest airlines is the “most heavily unionized” US airline (about 81% of its employees belong to an union) and its salary rates are considered to be at or above average compared to the US airline industry. The low-fare carrier labor advantage is in much more flexible work rules that allow cross-utilization of virtually all employees (except where disallowed by licensing and safety standards). Such cross-utilization and a long-standing culture of cooperation among labor groups translate into lower unit labor costs. At Southwest in 4th quarter 2000, total labor expense per available seat mile (ASM) was more than 25% below that of United and American, and 58% less than US Airways.

Carriers like Southwest have a tremendous cost advantage over network airlines simply because their workforce generates more output per employee. In a study in 2001, the productivity of Southwest employees was over 45% higher than at American and United, despite the substantially longer flight lengths and larger average aircraft size of these network carriers. Therefore by its relentless pursuit for lowest labor costs, Southwest is able to positively impact its bottom line revenues.

Fuel Costs

Fuel costs is the second-largest expense for airlines after labor and accounts for about 18 percent of the carrier's operating costs. Airlines that want to prevent huge swings in operating expenses and bottom line profitability choose to hedge fuel prices. If airlines can control the cost of fuel, they can more accurately estimate budgets and forecast earnings. With growing competition and air travel becoming a commodity business, being competitive on price was key to any airline’s survival and success. It became hard to pass higher fuel costs on to passengers by raising ticket prices due to the highly competitive nature of the industry.

Southwest has been able to successfully implement its fuel hedging strategy to save on fuel expenses in a big way and has the largest hedging position among other carriers. In the second quarter of 2005, Southwest’s unit costs fell by 3.5% despite a 25% increase in jet fuel costs. During Fiscal year 2003, Southwest had much lower fuel expense (0.012 per ASM) compared to the other airlines with the exception of JetBlue as illustrated in exhibit 1 below. In 2005, 85 per cent of the airline’s fuel needs has been hedged at $26 per barrel. World oil prices in August 2005 reached $68 per barrel. In the second quarter of 2005 alone, Southwest achieved fuel savings of $196 million. The state of the industry also suggests that airlines that are hedged have a competitive advantage over the non-hedging airlines. Southwest announced in 2003 that it would add performance-enhancing Blended Winglets to its current and future fleet of Boeing 737-700’s. The visually distinctive Winglets will improve performance by extending the airplane’s range, saving fuel, lowering engine maintenance costs, and reducing takeoff noise.

Point-to-Point Service

Southwest operates its flight point-to-point service to maximize its operational efficiency and stay cost-effective. Most of its flights are short hauls averaging about 590 miles. It uses the strategy to keep its flights in the air more often and therefore achieve better capacity utilization.

Secondary Airports

Southwest flies to secondary/smaller airports in an effort to reduce travel delays and therefore provide excellent service to its customers. It has led the industry in on-time performance. Southwest has also been able to trim down its airport operations costs relatively better than its rival airlines.

Consistent aircraft

At the heart of Southwest's success is its single aircraft strategy: Its fleet consists exclusively of Boeing 737 jets. Having common fleet significantly simplifies scheduling, operations and flight maintenance. The training costs for pilots, ground crew and mechanics are lower, because there's only a single aircraft to learn. Purchasing, provisioning, and other operations are also vastly simplified, thereby lowering costs. Consistent aircraft also enables Southwest to utilize its pilot crew more efficiently.

E-Ticketing

The idea of ticketless travel was a major advantage to Southwest because it could lower its distribution costs. Southwest became electronic or ticketless back in the mid-1990s, and today they are about 90-95% ticketless. Customers who use credit cards are eligible for online transactions, and today Southwest.com bookings account for about 65% of total revenue. The CEO Gary Kelly thinks that this idea would grow further and that he wouldn't be surprised if e-ticketing accounted for 75% of Southwest’s revenues by end of 2005. In the past, when there was a 10% travel agency commission paid, it used to cost about $8 a booking. But currently, Southwest is paying between 50 cents and $1 per booking for electronic transactions that translate to huge cost savings.

2. Employee and Labor Relations

Southwest has been highly regarded for its innovative management style. It maintains a relentless focus on high-performance relationships and its people-management practices have been the key to its unparalleled success in the airline industry.

Mission Statement

To Our Employees
“We are committed to provide our Employees a stable work environment with equal opportunity for learning and personal growth. Creativity and innovation are encouraged for improving the effectiveness of Southwest Airlines. Above all, Employees will be provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Southwest Customer.”

The Southwest mission statement shows that the company has a strong commitment to its employees. The company affords the same respect to its employees that is provided to its customers. The Southwest mission statement is unique in that it recognizes the importance of its employees within the broader business strategy, which emphasizes superb customer service and operational efficiency. The employees reciprocate the respect, loyalty and trust that Southwest demonstrates. Southwest employees are known for their loyalty, dedication, attitude and innovation. The employees are the distinguishing factor between Southwest and the rest of the airline industry.

Hiring

Southwest hiring policy is unique not only within the airline industry, but also more broadly, and revolves around finding people with the right attitude that will thrive in the Southwest culture. Extensive procedures are employed to hire for positive attitude and dedication. Those who do not posses those qualities are weeded out. Colleen Barrett, a non-operational officer at Southwest, states that

“Hiring is critical, because you cannot institutionalize behavior. Instead, you must identify those people who already practice the behaviors you are looking for. Then you can allow Employees to be themselves and make decisions about Customer service based on common sense and their natural inclinations.” 1

Recruiting and interviewing at Southwest is a two-step process. The first step is a group interview, conducted by employees, where communication skills of potential candidates are evaluated. The next steps in this process are one on one interview, where the candidates' attitudes and orientation toward serving others are evaluated. These hiring criteria apply to all job functions since all Employees at Southwest play a customer service role. A critical part of Southwest operational strategy is that every job at Southwest is a customer service position, whether it directly applies to the customer or whether it is internal.

The table below shows that even though Southwest is the most heavily unionized airline, at approximately 80%, that contract negotiations between the unions and Southwest are much shorter in duration than of the other major carriers. This shows the quality of relationship that Southwest has with its employees and with the unions that represent them.

Culture

Southwest was created as a different kind of company and from its beginnings a unique culture was nurtured. In 1990 Colleen Barrett formed the Southwest Culture Committee. This is unique within the industry and among all large companies. The committee also has a mission statement:

“This group's goal is to help create the Southwest spirit and culture where needed; to enrich it and make it better where it already exists; and to liven it up in places where it might be "floundering". In short, this group's goal is to do "whatever it takes" to create, enhance, and enrich the special Southwest spirit and culture that has made this such a wonderful Company/Family.”

It is this unique approach to company values that has created a culture that differentiates itself from others. Southwest’s culture is the reason why it is successful.

3. Customer Service

The Mission of Southwest Airlines
The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.

Approach

Herb Kelleher, founder of Southwest, has been quoted as saying that "We're in the Customer service business; we just happen to provide airline transportation".2 Award winning customer service is a distinguishing characteristic of Southwest and it is referred to internally as “Positively Outrageous Service”. It means that from the top to bottom everyone does whatever he or she can to satisfy the customer. This includes Herb Kelleher, who has been known for helping out baggage handlers on Thanksgiving. It is through emphasizing the customer and employee that Southwest is able to differentiate itself from others in the airline industry. On a more technical level, each employee or group within Southwest has his or her own customer. This means that every employee ‘serves’ in one way or another despite not being directly involved with the passenger. The mechanic’s customer is the pilot and the caterer’s is the flight attendant.

Results

It can be said that the "Positively Outrageous Service" that is unique to Southwest “is not the result of a department, or a program, or a mandate from management. It is not secondary to the product; it is the product.” This approach creates the conditions where Employees are more likely to treat customers in ways that distinguish the company from others. There are numerous accounts of passengers who have received exceptional treatment from Southwest employees.

The question that needs to be answered is how Southwest’s customer service is different and why? Is it common for customers of other airlines to rave about their special service? The answer is that it is not. While Southwest does not have a monopoly on people who are kind and who are willing to go above and beyond to satisfy a customer, such behavior is nurtured at Southwest to a much greater extent.

It can then be concluded that the customer service that is inherent to Southwest is a part of its culture. This culture is supported through employee encouragement to do the extra to satisfy the customer. This approach inspires people who would ordinarily only on occasion go out of their way to help someone, to become consistent performers that offer exceptional service all the time. Southwest employees are what differentiate its customer service from the other airlines.

4. Technology

Southwest utilizes technology in many ways to fulfill its business objectives and maintain its efficient operations. According to its CEO, technology equals productivity. Launched in 1996, ticketless travel was first introduced by Southwest. On May 1st 2000, Southwest Airlines introduces "SWABIZ," a portal that assists company travel managers in booking and tracking trips made through its web site [http://www.southwest.com]. There are many new technology initiatives being undertaken currently and some are in the pipeline.

Bar codes in Boarding Passes

Southwest Airlines has invested $12 million during the past three years to standardize corporate and terminal operations on about 10,000 Dell OptiPlex desktop and Latitude notebook computers according to its company executives. Southwest wanted to replace its well known, brightly colored plastic boarding passes with an electronic system with bar-code paper boarding passes. So it installed about 350 touch screen ticket readers powered by Dell OptiPlex desktops. The bar code gives Southwest more information to automatically reconcile the number of boarding passes with the number of passengers that actually board the plane.

Although the technology will help Southwest Airlines remain efficient by consolidating passenger information for the company's 3,000 daily flights, there were concerns it could lengthen the time to get travelers on board. However it was found that scanning each bar code on the boarding passes didn't increase or shorten boarding schedules, but it did take minutes from administrative processes, such as looking up customer records. The new paper bar code system is giving Southwest ticket agents the ability to match a customer record within having to scroll through and log into multiple software screens. The process is much more automated. Once the bar code on the boarding pass is scanned at the terminal gate it checks off the person from the passenger list in real time.

The old process was manual that involved finding the information, scrolling through several software screens from reservations to check-in to boarding. The bar code hardware to scan the boarding passes has been deployed. The company is in the process of replacing customer service back-office equipment at airports including at its headquarters in Dallas.

Software Upgrades

Software applications, such as those used by clerks to check in passengers, are being replaced. Southwest Airlines' internally written "Airport Application Suite" is expected to rollout next year as the company transitions from green screens to Window-based user interface. Similar to Wal-Mart Stores Inc., Southwest Airlines believes in developing in-house the software that runs its operations. The company uses very little off-the-shelf software. There are between 75 and 100 projects in the works each year supported by approximately 900 IT employees.

RFID

Radio frequency identification technology, a favorable alternative to bar-coding for luggage identification, is also on Southwest's radar. It plans to test RFID technology sometime in 2006. Even though, Southwest is playing a little catch-up with other airlines such as Air Tran, Alaska and Champion Airlines, in many cases they are able leapfrog to more sophisticated applications easily having waited longer.

Challenges:

Southwest has emerged very successful, despite the most troubled times in the airline market. However, it faces new challenges in the face of increasing competition from other low fare airlines such as JetBlue, ATA airlines, America West.

Reserved Seating

Due to increasing security guidelines since September 2001, Southwest would need to prepare for assigned (reserved) seating to track its in-flight passengers. This change will involve large technology investments and may impact its gate operations negatively since the current way of unassigned seating has helped in quick gate turnarounds.

Passenger Demand

The keep-it-simple philosophy has served Southwest well. But as its own business grows and grows more complex, with plans to purchase dozens of new aircraft and an expected upsurge in passenger traffic to about 80 million boarding’s a year, the simplicity strategy that has been reflected in the airline's IT philosophy is evolving. The CIO Tom Nealon says that "It's time to adapt our business processes for efficiency. As our airline scales for us to provide the same kind of high-touch customer service, we have to automate a lot of things we've been able to do without technology previously. The challenge is doing that without conceding the customer touch." Southwest is also aggressively pursuing customer relationship management (CRM) techniques and has applications to get insight into customer’s wants and dislikes. According to an interview with its CEO Gary Keller, Southwest has its focus on improving in two areas - customer’s airport experience and in-flight experience.

In-Flight Entertainment

In an overall effort to improve customer’s in-flight experience, in-flight entertainment is something that Southwest is currently evaluating and which JetBlue has been very successful at already because of its introduction in its long-haul flights. In comparison, Southwest has 415 airplanes to consider and that represents an investment decision at a whole new dimension. Additionally, Southwest has to consider how things may fit into their environment. At this point, 60% of its service is still very short haul. Southwest needs to be mindful of the fact that a certain approach that has been successful for its competitor may not be necessarily work to its advantage.

Summary:

Southwest has long been regarded as a benchmark in its industry for operational excellence. Southwest Airlines is a fine example of a company that is committed to its core competencies - efficient operations to drive its low cost structure, outstanding delivery of customer service and innovative HR management practices. We hope this paper provided a good insight into Southwest operations, as part of its overall strategy, to achieve success and gain competitive advantage.

References:

1. [http://www.southwest.com] (Southwest airlines official web site)

2. “Southwest keeps it simple” - Air Transport World, April 2005, Pg 36

3. “Around the World on $48 (or So): How High Can Discount Airlines Fly?“ Strategy Management - Knowledge@ Wharton Newsletter Oct 5, 2005

4. TechWeb - [http://www.techweb.com/wire/ebiz/173601227]

5. “Southwest's Strategy for Success: Consolidate!” - Oracle Magazine (Sept/Oct 2004 edition) http://www.oracle.com/technology/oramag/oracle/04-sep/o54swest.html

6. “Southwest Airlines: High Tech, Low Costs” - Eweek.com, April 2005

7. “Jet Fuel Hedging Strategies: Options Available for Airlines and a Survey of Industry Practices” – Kellogg School of Management Research Paper, Spring 2004

8. Winning Behavior: What the Smartest, Most Successful Companies Do Differently, Terry R. Bacon and David G. Pugh, 2003

9. Time Magazine, Oct 28th 2002 issue, Vol. 160 Issue 18, p. 45

10. “Wings Of Change”,Information Week, March 28, 2005,

11. Labor Contract Negotiations in the Airline Industry, Monthly Labor Review, July 2003, page 24

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southwest flight attendant (pls read description)

i was a PASSENGER on this flight from LAX to Chicago MDW. it was quite entertaining and had people laughing. i couldnt record the flight attendant b/c he was not visible to me, so i just recorded the sunny southern california weather. enjoy. just a few comments on this video: 1. it is a real recording, there are some people on youtube who have had this guy. 2. it is southwest airlines, so the demos are not like other airlines. 3. once again, i was just a PASSENGER 4. THIS IS THE ORIGINAL VIDEO!!!! dont think i dont see peoples stealing my video. (thanks to the 2 videos though for the reference)



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Southwest Airlines Cheap Flights - Hub and Spoke Or Point to Point?

Southwest Airlines low cost flights operate on a point-to-point system instead of the conventional hub and spoke, many people prefer other airlines. With more than 3,000 daily flights, Southwest Airlines flights can often be bought cheaply because it is a low-cost carriers.

Point to point system can benefit the traveler, rather than in a centrally located airport, was the source of many of its flights, SouthwestAirlines that fly their model airplanes from airports, with each of its airports with relative equality with others. To reduce costs and therefore the cheapest flights, Southwest Airlines, often uses secondary airports of origin and destination. This can be an advantage or a disadvantage depending on where the traveler wants to go to the destination. Secondary airports have in common is usually lower rates and fees for the airline and cost reductionin part to the consumer, as a Southwest Airlines flight past.

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However, Southwest Airlines also waived the rule only to serve secondary airports in the city - also serves some of the major airports in major cities. Here are a few major airports served by Southwest can book a flight.

Philadelphia 1At the international level
2 Denver International Airport
3 Cleveland Hopkins International Airport
4 Orlando International Airport
5 Detroit Metropolitan Airport
6 Lambert St. Louis International Airport
7 Phoenix Sky Harbor International Airport
8 Seattle-Tacoma International
9 Pittsburgh International
10 San Francisco International Airport
11 Washington Dulles International Airport (flights and also offers limited Baltimore-Washington International Airport)

The Los Angeles area is served by Southwest Airlines for cheap flights to four airports, including the great Los Angeles International (LAX). The airport is one of Southwest Airlines in Los Angeles, Long Beach is so, if you're there, tip, to check the rates of other low-cost carriers flying to the area.

The advantages of booking cheap Southwest Airlines

So why should you be Southwest Airlines>cheap flights rather than those of other carriers? First, the point to point system employed by Southwest airlines means that it is likely to have flights going between your intended origin and destination cities. If you are relying on cheap flights from other carriers, you'll probably be in luck if you happen to be living in a hub city otherwise, you might struggle to find a cheap flight to your intended destination.

Another reason to check out Southwest Airlines cheap flights is the fact that it avoids "farming out" its fares. It is not likely that you'll find a Southwest Airline cheap flight on fare search sites like Orbitz or Expedia. It is better that you go to Southwest Airline's home on the web to find bargain flights there. The current home page of Southwest Airlines can be found at [http://www.southwest.com]. Southwest Airlines has had an online presence for more than a decade. Its flights are sold direct from its web site, and Southwest Airlines has a great record for online sales. As such, you are likely to find good deals on Southwest Airlines cheap flights exclusive to its web site. So why not check it out today?

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Southwest Airlines Operations - a strategic perspective

Background:

Southwest Airlines is the largest airline by number of passengers will be measured each year in the United States. It is also known as "discount airline" in comparison with his great rival in the industry. Rollin King and Herb Kelleher, Southwest Airlines, founded on 18 June 1971. The first flights were from Love Field in Dallas to Houston and San Antonio, short hops with no-frills service and a simple tariff structure. The airline began with a simpleStrategy: "If your passengers to their destinations if they want it to get on time to the lowest possible prices, and make damn sure that they have a good time to do it, the people with your airline to By air. " This approach was the key to the success of Southwest. Currently, Southwest serves 60 cities (in 31 states) with a total of 71 million passengers (in 2004) and with a total of 6.5 billion dollars. South West is publicly traded under the symbol"LUV" on the NYSE.

Facts:

* The first to fly a single large airline aircraft (Boeing 737)

* The first to offer Ticketless travel system, including major airline frequent flyer program from a wide number of trips is based and not number of miles flown.

* The first airline to offer instituted a profit-sharing program for its employees (1973).

* The first major airline to develop a website and book offer online. In 2001 about 40 per cent (2.1 billion U.S. $)of its revenue from online bookings was generated on [http://www.southwest.com]. Southwest, the cost per booking over the Internet is about $ 1, compared to a cost per booking through travel agents from $ 6 to $ 8

Decisive competitive advantages:

* Low operating costs / high cost

* Award Winning Customer Service

* Human Resource Practices / Work Culture

Operations Analysis - Competitive weight:

Southwest has a clearly markedAdvantage over other airlines in the industry compared with the implementation of an effective and efficient operating strategy, which forms an important pillar of corporate strategy. Given below are some competitive dimensions that are examined in this paper.

1st Operating costs and efficiency

2nd Customer Service

3rd Staff / Personnel Director

4th Technology

1st Operating costs and efficiency

After all, the airline industry overall is in ruins. But how doesSouthwest Airlines stay profitable? Southwest Airlines has the lowest costs and highest record in its sector, after its chairman, Kelleher. The two largest operating expenses for any airline - will wage costs (40%), followed by fuel costs (18%). Some other possibilities, such as South West is able to keep their operating costs low - point-to-point links, the choice of secondary (smaller) airports, consistent implementation of aircraft, maintaining the high utilization of aircraft,Promoting e-ticketing, etc.

Labor

The labor cost for South West usually accounts for about 37% of their operating costs. Perhaps the most important element of successful low-fare airline business model is to achieve the much higher labor productivity. are according to a recent HBS Case Study, Southwest Airlines "Most are organized strongly unionized U.S. airline (about 81% of employees belong to a union) and their salaries as at or above averageagainst the U.S. airline industry. The low-fare carrier is advantage in the labor market more flexible work rules with cross-utilization of nearly all employees (except where prohibited by the licensing and safety standards). Such cross-utilization and a long-standing culture of cooperation between the working groups to translate into lower unit labor costs. In South West in the 4th Quarter of 2000, the total labor costs per available seat mile (ASM) more than 25% below the United and American, and 58%less than U.S. Airways.

Airlines like Southwest have a huge cost advantage over network airlines, only because their workforce generates more output per employee. In a study in 2001, employee productivity Southwest over 45% higher than American and United, despite the significantly longer flight duration lengths and larger average size of this aircraft carrier. Therefore, through his tireless search for the lowest labor costs, Southwest is able positive impact of theirThe bottom line revenue.

Fuel costs

The cost of fuel is the second largest expense for airlines after labor, which represents approximately 18 percent of the support of operating costs. Airlines, to prevent large fluctuations in operating profitability and want to hedge fuel prices select line. If airlines, the cost of fuel, they can estimate more accurately forecast budgets and profit. With growing competition and air travel to a commodity business, withCompetitive on price was the key to any airline's survival and success. It was hard to pass on higher fuel costs to passengers by ticket prices, the strong competition in the industry.

Southwest was able to successfully implement save their fuel-hedging strategy on fuel costs in a big way and has the largest hedge position among other carriers. In the second quarter of 2005, Southwest's unit costs by 3.5%, despite a 25% increase in keroseneCosts. In fiscal 2003, Southwest had much lower fuel costs (0.012 per ASM) in comparison to other airlines, with the exception of JetBlue as shown in Figure 1 below. In 2005 85 percent of the airline's fuel needs has been secured at $ 26 per barrel. World oil prices in August 2005 reached $ 68 per barrel. In the second quarter of 2005 alone, South West achieved fuel savings of 196 million dollars. The state of the industry, suggests that airlines who have secured ACompetitive advantage over non-hedging airlines. Southwest announced in 2003 that it would add performance-enhancing blended winglets for its current and future fleet of Boeing 737-700 is. The visually distinctive winglets will reduce the performance by increasing the airplane's range, saving fuel, maintenance costs and reducing the launch mass to improve noise.

Point-to-Point Service

Southwest operates its flight point-to-point service for its operational efficiency to maximizeStay and cost. Most of her short flights from an average of about 590 miles. It uses the strategy, and often keep their flights in the air and achieve better utilization.

Secondary airports

Southwest flies to reduce secondary / smaller airports in an effort to travel delays and thus provide excellent service to its customers. It has led the industry in on-time performance. South West was also able to trim after his airportOperating costs relatively better than its rival airlines.

Consistent aircraft

In the heart of the South West of success is the only aircraft Strategy: The fleet consists exclusively of Boeing 737 jets. Through joint fleet significantly simplifies the design, operation and maintenance of flight. The training costs for pilots, ground crew and mechanics lower because it only learn a single plane. Purchasing, procurement, supply and other operations are also greatly simplified,thereby reducing costs. Consistent aircraft also allows Southwest to use his crew pilot more efficiently.

E-Ticketing

The idea of the travel ticket was a big advantage, South West, because they might reduce their distribution costs. South West was electronic or Ticketless back to the mid-1990s, and today they are about 90-95% Ticketless. Customers who use credit cards are eligible for online transactions, and today Southwest.com bookings account for about 65% of total sales.The CEO Gary Kelly believes that the idea that he would continue to grow and not be surprised if e-ticketing represented 75% of the South West sales by 2005. In the past, when there is a 10% travel agent commission paid, it used to cost about $ 8 a reservation. But now Southwest is paying between 50 cents and $ 1 per booking for electronic transactions, which translate to huge cost savings.

2nd Staff and Director

South West has been highly regarded for hisinnovative management style. It maintains a relentless focus on high-performance relations and people-management practices have the key to their unprecedented success in the airline industry.

Mission Statement

For our employees
"We are committed to our employees a stable work environment with equal opportunities for learning and personal growth. Creativity and innovation are encouraged for improving the effectiveness of Southwest Airlines. Above all,Employees receive the same concern, respect will be provided, and caring attitude within the organization that they are expected to share externally with every Southwest Customer. "

The Southwest Mission Statement shows that the company has a strong commitment to its employees. The company offers the same respect to its employees that their customers will be provided. The Southwest model is unique as it recognizes the importance of employees in the wider economyStrategy, the best customer service and operational efficiencies emphasized. The employees say the respect, loyalty and trust that South West demonstrated. Southwest employees for their loyalty, dedication, attitude and innovation known. The employees are the distinguishing feature between Southwest and the rest of the airline industry.

Rent

South West recruitment policy is unique not only within the airline industry, but also in the broader sense, and is about findingPeople with the right attitude that can thrive in the Southwest culture. Extensive procedures are used to rent for the positive attitude and commitment. Those who do not possess these qualities are weeded. Colleen Barrett, a Non-Operational Officer, South West, they say, that

"Rent is critical, because we can not institutionalize behavior. Instead, you must identify those people who are already practice the behaviors you are looking for. Then you can enable employees tothemselves and make decisions about customer service on the common sense and their natural inclination is based. "1

Recruiting and interviews with South West is a two-step process. The first step is a group interview conducted by staff, where communication skills of potential candidates are evaluated. The next steps in this process are one to one interview, in which the candidate recruitment and orientation to the service are valued in others. This setting of criteria apply to allFunctions, as all staff at South West play a role in customer service. A critical part of the South West operational strategy is that every job at Southwest is a customer service position, whether it applies directly to the customer, or whether it is internal.

The table below shows that although South West is the most heavily unionized airlines in some 80% said that the contract negotiations between the unions and the South West are much shorter than that of other major airlines.This shows the quality of the relationship that Southwest has with its employees and the unions that represent them.

Culture

South West was created as a different kind of company and from its beginnings nurtured a unique culture. In 1990, Colleen Barrett formed the South West Committee for Culture. This is unique within the industry and among all large companies. The Committee also has a Mission Statement:

"This group has the goal to create the South West and spiritCulture, where necessary, to enrich, and make it better where it already exists, and revive him dangle in places where it could be ". In short, this group is to do the objective, "whatever it" takes to create, expand and enrich the special South West spirit and culture that it has made such a wonderful company / family. "

It is this unique approach to business, the values of a culture that is different from others created. South West culture is the reason why itsuccessful.

3rd Customer Service

The mission of Southwest Airlines
The mission of Southwest Airlines is dedication to the highest quality of customer service with a feeling of warmth, friendliness delivered, individual pride and Spirit Company.

Approach

Herb Kelleher, founder of Southwest, with the words: "We are in the customer service business have been cited, and we just happened to offer aviation history" .2 Award-winning customer service is a differentiatorFeature of the South West and it is internally known as "Positively Outrageous Service." It means that from top to bottom, everyone does what he or she can satisfy the customer. This includes Herb Kelleher, who is in support of baggage handling made famous on Thanksgiving. It is by the emphasis on customer and employee satisfaction that may Southwest from others in the airline industry to be distinguished. At the technical level of each individual employee or groupin the Southwest has its own customers. This means that every employee, "" is used in one way or another, although not directly involved with the passenger. The mechanic's customer is the pilot and the caterer's is the stewardess.

Results

It can be said that the "Positively Outrageous Service", which is unique for South West is not the result of a department or a program or contract management. It is not secondary to the product, it isthe product. have received "This approach creates the conditions where employees are more customers in a way of distinguishing the company to be treated by others. There are numerous reports of travelers, the exceptional treatment from Southwest employees.

The question that needs to be answered is how Southwest customer service differently and why? Is it common for the customers of other airlines rave about their special service? The answer is that it is not. DuringSouthwest does not have a monopoly on the people who are kind and willing to go above and beyond to satisfy a customer, such behavior feeds in South West to a much greater extent.

It can be concluded that the customer service that Southwest is an inherent part of their culture. This culture is supported by staff encouragement to do the extra content for the customer. This approach inspired people there to help get under normal circumstances, only on occasion out of the waysomeone to become consistent, that performers offer exceptional service to all the time. Southwest employees are what differentiate their customer service from other airlines.

4th Technology

Southwest uses technology in many ways to meet their business objectives and to its efficient operation. According to CEO, meets technology productivity. That was in 1996, ticket would first introduced by South West. 1 Introduced in May 2000, Southwest Airlines"SWABIZ", a portal, the company travel managers to help make when booking and tracking trips through its website [http://www.southwest.com]. There are many new technological initiatives are underway and some are in the pipeline.

Bar-code boarding passes in

Southwest Airlines has invested 12 million U.S. dollars in the past three years to standardize corporate and terminal operations on about 10,000 Dell OptiPlex desktop and Latitude notebook computers after his companyExecutives. South West wanted his well-known, brightly colored plastic boarding passes with an electronic system with bar code paper boarding passes replace. It is about 350 installed touch-screen ticket readers powered by Dell OptiPlex desktops. The bar code contains more information about Southwest automatic adjustment of the number of boarding passes with the number of passengers who actually board the aircraft.

Although the technology help, Southwest Airlines remains with efficientPassenger information for the company's 3,000 daily flights were consolidation, it could renew concerns about time to get on board the passenger. However, it was found that scanning each bar code to increase the boarding pass or not to cut flight schedules boarding school, but it did take a few minutes of administrative processes, such as looking up customer data. The new paper bar code system to give Southwest ticket agents the ability to record a customer within scroll Matchby and sign up multiple software screens. The process is much more automated. Once the barcode on the boarding pass is scanned at the gate, it hooks the person on the passenger list of real-time.

The old manual process was involved to find the information, scrolling through several screens to reservations software for check-in to boarding. The bar code hardware to scan the boarding passes were posted. The company is in the process of replacing customersService back-office equipment at airports, including at its headquarters in Dallas.

Software upgrades

Software applications, such as used by officials to check in passengers, will be replaced. Southwest Airlines' internal written "Airport Application Suite" is expected to rollout in the coming year as the company believes transitions from green screens to Windows-based user interface. Similar to Wal-Mart Stores Inc., Southwest Airlines in the development of in- house is the software that theirOperations. The company uses some off-the-shelf software. There are 75 to 100 projects in the works every year from around 900 IT staff support.

RFID

Radio frequency identification technology, an affordable alternative to bar code identification for baggage, including South West's radar. She plans to RFID technology sometime in 2006 to test. Even if, at South West a little catch-up with other airlines such as Air Tran, Alaska, and ChampionAirlines, in many cases they are able to simply wait for more complex applications with LeapFrog.

Challenges:

South West has turned out very successful, despite the troubled times in the airline market. However, it faces new challenges, given the increasing competition from other low-fare airlines like JetBlue, ATA Airlines, America West.

Reserved seats

By increasing the safety guidelines in September 2001, Southwest would have to prepare forassigned (reserved) seats to its passengers in-flight length. This change will make major investments in technology and can influence its operations Gate negative, since the current nature of the unassigned seating has helped in quick gate turnarounds involve.

Passenger Demand

The Keep-it-simple philosophy has served well Southwest. But when her own business grows and grows increasingly complex, with plans to buy dozens of new machines and an expected recovery in passenger traffic by about 80 millionBoarding is a year, the simplicity, the strategy in the airline's IT philosophy has been developed against him. The CIO Tom Nealon says, "It is time to adapt to our business processes for efficiency. As our airline fares, which offer us the same kind of high-touch customer service, we need to automate a lot of things we were able to do without technology before. The challenge here is that the customer to touch a clean sheet. "South West is also aggressively pursuing customersRelationship Management (CRM) techniques and applications that will bring insight into the customer and dislikes. According to an interview with the CEO, Gary Keller, South West, with an emphasis on the improvement in both areas - airport customer experience and in-flight experience.

In-Flight Entertainment

In a comprehensive effort to help customers better in-flight experience, in-flight entertainment something that Southwest is considering, and JetBlue has been verysuccessful, because even at its introduction in its long-haul flights. By comparison, South West to examine 415 aircraft and represents an investment, the decision to a whole new dimension. In addition, Southwest has to consider how things can fit in their environment. At that time, 60% of his service is still very short. South West must be aware of the fact that a particular approach that has been successful for its competitors may not necessarily work to theirAdvantage.

Summary:

Southwest has long been regarded as a benchmark in the industry for Operational Excellence. Southwest Airlines is a fine example of a company that is committed to drive their core competencies - efficient operation of its low cost, outstanding customer service and delivery of innovative HR management practices. We hope that this paper provided a good look at Southwest's operations, as part of its overall strategy for success and to achieve competitive advantageAdvantage.

References:

1st [Http: / / www.southwest.com] (South West Airlines official website)

2nd "Southwest keeps it simple" - Air Transport World, April 2005, PG 36

3rd "Around the World on $ 48 (or so): How high can fly discount airlines?" Strategy Management - Knowledge @ Wharton Newsletter October 5, 2005

4th TechWeb - [http://www.techweb.com/wire/ebiz/173601227]

5th "Southwest's Strategy for Success: Consolidate!" - OracleMagazine (September / October 2004 issue) http://www.oracle.com/technology/oramag/oracle/04-sep/o54swest.html

6th "Southwest Airlines High Tech, Low Costs - Eweek.com, April 2005

7th "Jet Fuel Hedging Strategies: Options available for airlines and a survey of industry practices" - Kellogg School of Management Research Paper, Spring 2004

8th Winning Behavior: What is the smartest, most successful companies do differently, Terry R. Bacon and David G. Pugh,2003

9th Time Magazine, 28 October 2002 issue, Vol 160 Issue 18, p. 45

10th "Wings Of Change", Information Week, 28 March 2005

11th Laboratory contract negotiations in the airline industry, Monthly Labor Review, July 2003, page 24

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Southwest 737 landing in San Diego

Southwest Flight 3064, Boeing 737-7H4, landing in San Diego from Chicago Midway. Note the Royal Air Force VC-10 on the GA ramp, it's just west of the 767th DHL



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