_Southwest Case Study

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Southwest Airlines Case Study
Caio T. Leite
Johnson University TN & FL
BUSN 4023: Organizational Strategy & Policy
Dr. John Stricklen
March 24, 2021
 Southwest begins its case by clearly stating how the company was in the past, able to maintain themselves successful and financially stable through challenges and hard times that have striked and effected many other airlines. In their case, Southwest appears to believe that the reason for the company to be consistently profitable for decades and through energy crises, the terrorist attacks of September 11, and the 2008-09 recession for example, is due to their corporate and leadership philosophy, which is told to be to push, manage well and give importance to performance and results during good and stable times, so that Southwest and its employees can be job secure and be able to be prepared and prosper whenever challenging times arise.
 The company’s “comfortable” situation in the market is told to be shifted in their 42nd year of service, since as time go by, competitors begin to try and find ways to get an advantage and improve their services in comparison to others, after all the airlines industry is a very competitive market and companies are constantly spending a lot of money or applying specific strategies to be able to gain an competitive advantage and continue to improve results. As according to the National Business Aviation Association (NBAA), the business of aviation contributes with $150 billion to U.S. economic output and employs more than 1.2 million people, which can give us a brief overview of how extensive and profitable these companies are, which increases competitiveness and due to its importance, is a market that constantly changes with technological and also corporate advances.
 In their case, Southwest notes how Legacy Carriers, which are the big and well-established companies that had established interstate routes before the beginning of route liberalisation, were able to improve their service and become more efficient, which again highlights how competitive this industry constantly is. Another huge competitive challenge that arose in their 42nd year, was the fact that mega-mergers involving Delta/Northwest, Continental/United, and American/US Airways began to shake up the industry, as well as other smaller companies such as JetBlue, Alaska, and Spirit began to pressure Southwest’s cost advantage and low-fare focus as what appear to be an attempt to knockdown Southwest and gain an advantage. From what we know of Southwest’s company and service features, we note that the company differentiates from its competitors with the promise of being a “discount airline” when compared with its larger rivals in the market, and this strategic fact played an important role in Southwest’s success in the past. As the airlines industry shifted, Southwest was able to maintain employee productivity very high, which can be explained by the fact that the company had the highest salaries for pilots of narrow-body jets, and for mechanics and flight attendants their salaries was also among the one of the highest in the industry. However, Southwest’s case tells us how their operating costs were rising, and along with the changes and advances that would come in the future within the industry, the future of the company became uncertain. 
 When we break down the reasons of Southwest’s success in the past, we can note how the strategy that Southwest Airlines has always followed, is to assure customers arrive at their destinations on schedule and on time, at whatever point they need and at the most reduced and conceivable rate possible, and at that point, specific customers that seek this type of differentiated service would consequently come back and create this type of loyalty with their preferred airline. Not only were they able to keep customers hooked to their service, but another interesting point is regarding Southwest’s process, which aimed to keep their operating costs low and would fly from point-to-point routes and choose the smaller airports, while focusing on maintaining high efficiency, productivity and utilization, and this balance of still keeping its operating costs low and at the same time providing cheaper tickets and lower rates for customers, helped Southwest establish themselves in the market.
Although this is a good thing, we learn through their case that this strong corporate culture and philosophy actually became a barrier in 2010 when Southwest announced that it would buy AirTran Airways for $1.4 billion. Despite the fact that this integration would extensively expand their market, Southwest did not have a lot of experience in the past with acquisitions, only in 1985 when they acquired Muse Air, then in 1993 with Morris Air, and the last and most recent one in 2008 with the acquisition of certain assets of the bankrupt ATA Airlines (Airlines.org). To draw an comparison, it is interesting to note how Delta Airlines for example, had already gone through 10 acquisitions by that time, but not only that, as Southwest was a smaller company with a structure and philosophy that differed a lot from others, therefore it was not safe to say that the company could only benefit or take the most of this transition. These past acquisitions in the history of Southwest, proved that for the company, many factors such as the geographically diversified flight schedule, different airfleets and differences in service were all challenges that threatened the success and effectiveness of these acquisitions. 
 Southwest therefore, must move forward being highly aware that their expansion strategies will always present risks for the current processes and service of the company, due to the fact that they have a specific philosophy and promise for customers that differentiates from that of their competitors. If we think of today, after the pandemic, airlines were affected due to the new flight regulations and cautions changes in Airports that vary from state to state, and country to country. This, I believe, can be a huge challenge for Southwest as they move forward, since as a smaller branch they should now try and implement strategies that will help them adapt and continue to pursue their promise for customers and corporate philosophy. More than the others I believe, Southwest’s success was put at risk by the changes that happened in the industry due to the pandemic, with all processes and services suffering changes causing many of these airlines companies to struggle financially, due to the shortened amount of flights permitted, capacity in aircrafts, and another extensive list of changes and regulations that were implemented after the virus. Moving forward, the strong and defined strategic aspects noted in Southwest’s past will be even more important as they continue to create a positive environment for employees and customers despite difficult transitional times, which will maintain their competitive advantage that is attained through their strategy that is based on cost leadership and in which gives them this advantage based on their low costs, high volume and considerably lower prices for customers to achieve satisfactory returns on their equity and continue to be a force in the industry even after many past and coming challenges. For Southwest, it appears that the best and smartest thing to do as they advance is to make sure they maintain these factors that have built this advantage and success that they have had in the past, being always very careful with changes, advances or expansions that could possibly harm their established service philosophy and structure. I’m confident to say that the way Southwest differentiates themselves in this market, should be prioritized and is enough for them to continually be successful as they were in the past, and continue to attract new potential customers and maintain the loyalty and satisfaction of those current ones, which would then naturally contribute for Southwest’s expansion.References
Airlines for America (2021, March 24). Airlines For America. www.airlines.org. 
National Business Aviation Association (2021, March 24). NBAA. nbaa.org