South West Airlines: Final Project Report On
South West Airlines: Final Project Report On
South West Airlines: Final Project Report On
Submitted to:
Submitted By:
Anush Kumar – 18A1HP051
Saideep – 18A3HP662
Hariharan – 18A3HP608
Anoop – 18A1HP113
Srihari P V – 18A1HP077
Shashi Kumar – 18A3HP614
INTRODUCTION
In the year 1966 Southwest Airlines was founded by Herbert Kelleher and Rollin King.
Southwest Airlines made a storm into airline industry with its strategic and efficient business
model. Three competitor airlines filed a lawsuit against them to stop southwest airlines from
operating its business model so that they don’t need to undercut their prices to compete with
them. Lawsuits were resolved in 1970 and from 1971 airline began to operate regularly in the
routes between Dallas love field and Houston and San Antonio.
Southwest airlines expanded its fleet in 1975 and started to operate flights to cities like
Texas and currently in the year 2020 it schedules flights to around 102 destinations and 40
cities around the globe.
It uses Point to point system associated with a rolling hub in the base cites, which is
different from its competitor’s hub and spoke system. Low turnaround time is achieved by
following this point to point system.
All the flights in the southwest airlines are Boeing 737 and 752. In 1966 Boeing
forecasted a huge market scope of airplanes and manufactured many Boeing 737 flights, but
due to weak market demand they were willing to sell each of their flight for $4.1 million,
providing discount of $500,000 from the initial price and agreed with a flexible financial
term to sell their flights. Southwest airlines bought four flights of Boeing 737 and sold one
flight in the first year to maintain profits.
It led to a new strategy were now the airlines operated with three airlines in all the routes
with a low turnaround time. So fleet time is drastically reduced, it took only 10 minutes of
turnaround time. Even though the time has changed now their low turnaround has also been
increased to 30 minutes or less than it. It’s far better than the industry standards maintained
by the competitors, nearly half of the time.
To maintain costs southwest airlines didn’t provide any value-added services like no first-
class seats, no foods, no exchange of bags and luggage’s with other airlines, no route sharing
and no hub and spoke structure. But they proposed on time arrivals, point to point service,
cheap flight fares and frequent flights to the customer.
This model became popular worldwide and other airlines in different part of the globe
started to carry out the same model. Air Asia, Indigo, Go airlines, SpiceJet in Asia, Ryanair
and easy jet in Europe and Delta in U.S.
Currently it has operating crew bases in cities like Atlanta, Baltimore, Chicago-Midway,
Della’s-Love, Denver, Houston, Las Vegas, Los Angeles, Oakland, Orlando, Mexico,
Phoenix-Sky Harbor.
When all the competitors were thinking about the services that can make the customer
satisfied, south west airlines took different strategy to achieve customer satisfaction. Their
revenue increased from $5.7 million in 1972 to $5.7 Billion in 2000. CAGR of more than
25%. They were the only airlines to win Triple crown award in airlines industry with highest
customer satisfaction, lowest lost luggage’s rate and the best on time arrival rate for an
airline.
CEO of southwest airlines has quoted in one of the interviews that ‘we like to think of
ourselves as a customer service company that happens to fly airplanes’ as the company
strategy mainly focuses on the operations and customers. The founders always tried to deliver a
memorable and inexpensive service to the customers.
Southwest airline is the company with well-defined clear and simple business process and
choosing the right business model to support the purpose and consistently demonstrates the core
values that are derived from the business purpose. Some of the steps south west airline
incorporated to manage their customer relationship are as follows –
PRODUCT DESIGN – Southwest airlines uses Boeing 737 models which have an easy
maintenance scheduling and training and has the largest Boeing 737 fleet operating 4000 flights
during peal seasons per day.
It is the first airline to offer satellite based WIFI services and has some other features
to attract customers like allowing pets on flights for a fee, vacation packages, priority lane
access, and for its business class customers it offered features like extra reward points, free
drinks. South west airlines are the official airlines of Superbowl, and they are the official
carriers of Honor flight network where they bring the ageing war veterans to visit national
monuments.
CRUX: Southwest Airlines target price sensitive, no-frills travelers, looking for the best value
for their money.
GEOGRAPHIC SPREAD: It currently runs in 37 states and 72 cities of the UNITED STATES
OF AMERICA.
VALUE PROPOSITION:
By reducing its operating cost: High standardization leads to lowering of operating cost
and error less process flow.
Purchase of standard product- the aircraft purchased are always of one kind, this
reduces cost of acquiring when purchasing in bulk.
Short flights: point to point short flights will help reduce total costs and help customers
have multiple location options along with different timing options in a day
No meals offered: As the flights are short, no meals are offered in the aircraft which also
saves money. But customers can book a meal beforehand for a price not included in the
flight charges.
Fuel Hedging: it is like insurance in case the fuel charges have high fluctuations; this
would help have a standardized pricing.
No reservation system: First come, first serve basis is the strategy it follows. This
although lead to negative feedback from customers, reduced the management costs of the
airlines.
CHANGING EXPERIENCE:
Though the flight caters to a large set of customers, the business class was a necessary feature
which was not included in their previous propositions. The new value propositions have been
developed keeping in the mind the premium customers and their needs along with a firm
foundation in the economic flyers. Few things that the brand is now offering besides the original
value proposition is that:
1. Adding flight to important destinations: Few of the capital cities in US required more
options to travel with the fact that different customer segments required different aircraft
and its services.
2. Assigned seating system: earlier when competitors were offering reserved seats, the
south west airlines maintained no such system which led to confusion and negative word
of mouth among the customers. But the market requirement of maintaining a reservation
system was quickly identified and it was implemented further in the company’s offering.
3. Early Bird fares: with this strategy the airline offered a discount in charges to those
customers who booked their flight early which in turn helped the airline have data about
the demand for a flight at a specific time period. This further was used by the company to
increase the price pertaining to the demand.
4. Business select program: The business flyers had less options earlier with south west
airlines as they were focusing more on economy class but understanding the business
flyers needs, they have started business class with longer leg room, comfortable push
back seats, etc.
5. Rapid rewards: The frequent flyers needed an economical pricing, so the airlines
provided loyalty points to these specific flyers so that they continue use the airline service
and have a higher customer lifetime value.
6. Bags fly free policy: For business class customers who pay a premium price for the extra
services also get a bag fly for free facility. For economy class up to 2 bags can fly free of
cost.
7. Senior discounts: irrespective of the class, the senior citizens are given a discount for
their trip along with few extra perks such as wheelchair assistance, early flight boarding
etc.
8. On board internet: for business customers with long duration flights need the internet
connectivity on board to have an uninterrupted business transaction on the go.
9. Cashless cabin: this feature helped in flight purchases faster and smooth. The credit card
purchase option not only reduces the issues regarding hectic cash transactions but also
improves the overall customer experience.
10. Speedy reservations and check in procedures: the faster reservation helped on time
flight takeoff and check in option to go online so that we can reduce the steps while
getting on a flight.
LOW COST STRATEGY – South west airline is a low-cost company which is focused mainly
on low airlines tickets costs and quick service delivery which has helped airline to be at the
position they are right now. Its low-cost carrier concept helps them to achieve their target with
very less service modifications compared to its competitors. Convenient airports helped to
provide on-term service for their business travelers, and they provided fares which rivalled the
costs of driving an auto in the city
EMPLOYEE DRIVEN STRATEGY – South west management focused on hiring agents and
staff who are having positive personality, high sense of humor who are ready to make flight
journey experience livelier by making humorous announcements which got the tagline “the
airline that made it fun to fly”. While other companies focused on cutting back the costs by
simply firing their employees south west airlines can pay more than their cuts. Having a happy
staff makes a customer happy and would like to travel with them again.
DIFFERENTIATION STRATEGY – From the customers point of view low cost and
employee driven strategies can be seen but there are few more internal strategies which helps
south west airline to different itself from the competitors. Some of them are
Rewards Flyer Program – This is one of their key differentiators as this program has
helped them to gain more customers. In this system southwest has redesigned it enter
system so that it helps its members to redeem their points whenever there is an
availability for seat or on any day of the year and for every flight available at that time.
And these points are not expired for a 24month period if member has points this system is
similar to other airlines but they have more complicated system compared to south west
airlines.
Chase Visa Credit Card – This system is mainly focused to bring in new customers and
will increase revenue from their existing customers and this system also helps them to
strengthen their reward partnerships.
OPERATIONS STRATEGY – South west airlines are best known for their operational
excellence. It is the only company which focused more on its operations and efficient core
competencies to drive outstanding delivery of its service and to maintain a low-cost structure.
One of the main strategies which it used is its low turnaround time that is from arrival at the gate
to push back from the gate is less than 10minutes.
Because its flights are generally 90minutes or less like other providers it didn’t
provide any additional services like other than peanuts no other food is served. There are no first-
class seats or assigned seats and there is no interlining with other airlines of bags or passengers,
there is no code sharing with other airlines flights to extend routes and there is no use of popular
hub and spoke route structure.
Some of the other strategies it used to attract more customers and retain them are –
The customer journey map helps in tracking what drives the customer it also uses visuals and
storytelling to demonstrate the customer company relationship it helps to address the customer’s
expectations and critical points as the customers experience the products or service. By
Website
Advertising
Awareness Word of mouth
Social media
Customer referrals
performing this analysis cue to improve the quality of the customer experience. It also provides
birds eye view of the customers experience.
Promotional offers
Customer referrals
Consideration
HOW CUSTOMER EXPERIENCE
Website
Ease of contacting the Airline Brand
HAS CHANGED IN AIRLINE
Past experience
INDUSTRY OVER A PERIOD
People mindset change over a period of time like the technology keeps on changing and
Price the life simple. Customers before expected only the
developing modern features to make
Compliment
experience in the airline to reachPast
a place which takes many days to reach.
experience
Decision Ease of bookings
After that there were many airliner carriers which connected various places and provided
Availability
many values added services to customers like providing
Facilities(alerts,Basic first class seats
amenities,boarding and foods in the
process)
Food
flights. Customer experience were calculated on the leisure services that an airline
provides to the customer.
In the late 1990s when southwest airlines came into the picture the customer experience
Hospitality/Contact
in the airline industry have beenCustomer
totally changed.
feedback Majority
forms of the customers travel in the
airlines expect on time reaching Communications
flights, boardingpost the flight
process to be quick and easy.
Post-decision Providing extra services(pick up, drop)
In early 2000s after the internetRecieving
boom customers expect
and following internet connection in the flight
up complaints
Signing up for loyalty programs
carriers and business class customers expect comfortable seat cabin in their long flights.
Customer experience one of the crucial factors for any company and it depends upon the
company to maintain good customer experience with the service they provide to the
customer. Customer churn rate should be maintained low and customer loyalty should be
increased.
We can divide customer on two different types in airlines they are Business class and
Economy class. Business class customer expect a leisure experience in their flight trip.
Economy class customers expect a low fare flight which follow strict timing in reaching
the destination.
Currently customer experience is satisfied with the airline providing hassle free boarding,
comfortable seats, providing food, Wi-Fi connection and reaching destination on time.