Southwest Airlines Act II - An Airline in Trouble?
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Case Details:
Case Code : HROB061
Case Length : 13 Pages
Period : 2001 - 2004
Pub Date : 2004
Teaching Note :Not Available
Organization : Southwest Airlines
Industry : Aviation
Countries : USA
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Excerpts
Southwest's Success Story
Southwest was one of the biggest success stories in America.
Up to 2003, the airline had had 31 years of profits in a row. In the years since
it was set up, Southwest weathered some major storms and emerged successful.
Despite offering a no frills service, it was able to cut out competitors in most
markets. Southwest achieved this by offering fares that were considerably lower
than those of its competitors and emphasizing customer service...
Trouble Brewing
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Things began to change at Southwest in the early-2000s. The changes were not
apparent, but analysts felt that the company was undergoing a subtle
transformation. External factors like increased competition and rising fuel
prices also contributed to the airline's troubles.
Labor Problems
Southwest had a reputation for being one of the best companies to work for. (It
was a regular on Fortune magazine's Most Admired Companies list.) People loved
working for Southwest, because the company valued its employees and gave them a
lot of flexibility. Southwest's motto was 'employees come first, customers come
second'...
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Did Southwest Change?
Analysts believed that the culture at Southwest had undergone a
transformation in the early-2000s. Southwest was always associated with
Kelleher, who was a charismatic leader and influenced a great deal of the
culture at the airline. His flamboyant and fun loving attitude pervaded the
airline and created a culture that was people oriented, informal, and
nurturing. He was also a hands-on leader and involved himself in all the
activities of the airline. It was said that he knew thousands of employees
by name and often communicated with people personally. Analysts believed
that a large part of Southwest employees' motivation was drawn from
Kelleher...
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Can Kelly Replace Kelleher at Southwest?
Succession planning is thought to be one of the key functions of top
management. It assumes even greater importance at companies that
have long been associated with a dynamic and charismatic leader. "I
don't see any charismatic leaders on the horizon. I see lots of
managers. But I see no one that appears to be the one heir
apparent," wrote Holly Hegeman, an airline analyst, sometime before
Kelleher's retirement... |
Exhibits
Exhibit I: Features of Low Cost Airlines
Exhibit II: Annual Financials
Exhibit III: Q2 Cost per Available Seat Mile (CASM) for U.S. Low-Fare/Mainline
Airlines
Exhibit IV: Labor Cost as a Percentage of Operational Cost In Q2 2004
Exhibit V: Comparison of Services in LCAS
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