Southwest Airlines: Turning A Profit In Tough Economic Times

2453 words - 10 pages

Many companies today are struggling to make a profit because of the explosive swings in the global markets. Leaders and managers are constantly asked to make tough decisions on how to keep their company in the black. Most turn to reducing hours or laying off personnel as a way to lower overhead costs. According to the U.S. Bureau of Labor, the nationwide unemployment rate is 8.8 percent. Over the past years, several large chains such as Circuit City closed their doors and others like Starbucks and Borders are closing some of their stores to reclaim profits. Despite these unsettling statistics, one company that seems to be bullet proof in an economy where more Americans are closing their wallets is Southwest Airlines. This unique and unconventional company is posting profits in the millions. Southwest Airlines continually modifies its organizational strategy and implements organizational change to meet stakeholders and consumer demands. This paper will explore Southwest Airlines' original business model, current changes within the company, and the benefits realized through current and future organizational change.
When Southwest Airlines opened the doors in 1971, their approach in this well-defined industry was anything but standard. They launched themselves into a class of their own through a radical business model. According to Spector (2009), "Business model innovation has become an increasingly common avenue for corporate growth. At its most basic level, a business model is the organization's approach to generating revenue and making a profit." (p.5). Southwest Airline's approach was to be a quality low-cost, high-frequency, point-to-point carrier. The low-cost flights competed not only with other airlines but they also offered an alternative to bus lines and driving. The key to Southwest's success is to keep things simple and consistent, maximize productive resources and manage consumer expectations. Southwest developed seven different tactics to meet their unorthodox business model (Brancatelli, 2008).
The first tactic is one plane fits all. Unlike their competitors, Southwest leadership made the decision when the company started to buy and fly only one type of plane, the Boeing 737. This alleviated substantial maintenance costs on spare-parts inventory and training for aircraft mechanics. Additionally, it made it easier for Southwest to move their planes within the system without costly disruptions or lost time due to reconfigurations.
The second tactic used by Southwest is point-to-point travel. Most of Southwest Airlines flights are direct flights and they utilize secondary airports to avoid traffic backlog of airport hubs. This allows the airline to minimize time on the ground which significantly contributed to Southwest Airlines' 78 percent on-time performance rate.
The third tactic is simple in-flight service. Southwest was the first to do away with the different classes of service. Southwest does not assign...

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