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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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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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

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'...

Human Resource and Organization Behavior | Case Study in Management, Operations, Strategies, Human Resource and Organization Behavior, Case Studies

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...

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...


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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