8/8/2019 Organizational Design & Analysis Case11 Southwest Team2
1/20
Page1
Case #11: Southwest Airlines
Group MembersMuhammad KashifMuhammad Sarfraz
8/8/2019 Organizational Design & Analysis Case11 Southwest Team2
2/20
Page 2
Contents
Overview of the case
Question # 1
Question #2
Question # 3
Question # 4
Southwest Airline Today
8/8/2019 Organizational Design & Analysis Case11 Southwest Team2
3/20
Page 3
Whats in the case?
wIt cover Two aspects
wSouthwest airlines intial war with its environment forces
wSouthwests growth while fighting with its competitors
wThat was Rollin King who put the idea on a cocktail napkin byMaking a triangle.
w
The proposed route of southwest airline
Houston San antonio
Dallas
Texas
Overview Of the Case
Question # 1
Question # 2
Question # 3
Question # 4
Southwest Airline Today
8/8/2019 Organizational Design & Analysis Case11 Southwest Team2
4/20
Page 4
Whats in the case?
w Initial capital 560000
wLgal Battle for thre years fought by Kelleher
w For three years
wNo mangement
wNo Air planes
wNo employe
wAnd almost no capital
w
w
Overview Of the Case
Question # 1
Question # 2
Question # 3
Question # 4
Southwest Airline Today
8/8/2019 Organizational Design & Analysis Case11 Southwest Team2
5/20
Page 5
Whats in the case?
New legal issue(Just before 48 hours)
Restraining order from District court for ban the southwest
Kelleher approach another time & get approval
1st flight on 1971
No profits for One & half years
Reasons
Dallas to Houston route was okay but Dallas to san Antonio was in loss
Low price strategy
Deregulation in 1978 as an advantage for southwest
Expansion of operation outside Texas
Chicagopartnership
California Competition
Next Target Florida
Overview Of the Case
Question # 1
Question # 2
Question # 3
Question # 4
Southwest Airline Today
8/8/2019 Organizational Design & Analysis Case11 Southwest Team2
6/20
Page 6
What environmental forces affect thesouthwest airline initially?
wTwo Major Forces
Legal Rules & Regulatory issues
w CAB (Civil aeronautical Board) Federal regularity body
w Under CAB REGULATION, investment and operating decisionswere highly constrained
w(CAB) controlled entry, exit, and the pricing of airline services, aswell as inter carrier agreements, mergers, and consumer issues
w Also Didn't permit any airline forinterstate activities
w For avoid competition
Overview of the case
Question # 1
Question # 2
Question # 3
Question # 4
Southwest Airline Today
http://www.econlib.org/library/Enc/Regulation.htmlhttp://www.econlib.org/library/Enc/Regulation.html8/8/2019 Organizational Design & Analysis Case11 Southwest Team2
7/20
Page 7
What opportunities southwest airline seek?
Improper service of Existing airlines at that time
Fares are high
Flight are delay
Bad scheduling
Demand of passengers still exist
That led the Rollin king & Herb Kelleher for new horizon
They seek the hidden opportunity & decided to go for a airlinewho can provide better service at reasonable fares
Kelleher also found that although CAB restrict interstateairline activities but intrastate activities can be channelizedby fulfilling legal formalalities.
Overview of the case
Question # 1
Question # 2
Question # 3
Question # 4
Southwest Airline Today
8/8/2019 Organizational Design & Analysis Case11 Southwest Team2
8/20
Page 8
Southwest airlines Business Strategy(Model).
Profitability
Overview of the case
Question # 1
Question # 2
Question # 3
Question # 4
Lower cost Increase Revenue
More Customer
Lowest PricesReduced Turnaround Time
Allign Ground Crew
On Time FlightsSouthwest Airline Today
Increase Revenue
8/8/2019 Organizational Design & Analysis Case11 Southwest Team2
9/20
Page 9
It is realization that a politically controlled economy served no continuing publicinterest.
The 1978 Airline Deregulation Act partially shifted control over air travel fromthe political to the market sphere.
The Civil Aeronautics Board (CAB), which had previously controlled entry, exit,and the pricing of airline services, as well as intercarrier agreements, mergers,
and consumer issues, was phased out under the CAB Sunset Act and expiredofficially on December 31, 1984.
CAB rules limiting routes and entry and controlling prices meant that airlineswere limited to competing only on food, cabin crew quality, and frequency. Asa result, both prices and frequency were high,
w
Question # 2
Question # 3
Question # 4
How would you describe the airline industry afterderegulation?
Overview of the case
Question # 1
Southwest Airline Today
8/8/2019 Organizational Design & Analysis Case11 Southwest Team2
10/20
Page 10
Advantages of Deregulation
The air transport market after deregulation is remarkably different. Because
airlines compete on price, fares are much lower.
Airline deregulation was a monumental event. Its effects are still being felttoday, as low-cost carriers (LCCs) challenge the legacy airlines that were inexistence before deregulation (American, United, Continental, Northwest, USAir, and Delta)..
Even the partial freeing of the air travel sector has had overwhelmingly positive
results. Air travel has dramatically increased and prices have fallen.. Since passenger deregulation in 1978, airline prices have fallen 44.9 percent in
real terms according to the Air Transport Association.
In (1997) estimated that when figures are adjusted for changes in quality andamenities, passengers save $19.4 billion dollars per year from airlinederegulation.
How would you describe the airline industry afterderegulation?
Question # 1
Question # 2
Question # 3
Question # 4
Overview of the case
Southwest Airline Today
8/8/2019 Organizational Design & Analysis Case11 Southwest Team2
11/20
Page 11
Advantages of Deregulation
The airlines have the freedom to innovate in routes and pricing.
Over time, the legacy carriers and the LCCs(low-cost carriers) willlikely use some combination of point-to-point and network hubs tocapture both economies of scope and pricing advantages.
.As prices have decreased, air travel has exploded. The total number ofpassengers that fly annually has more than doubled since 1978.
Travelers now have more convenient travel options with greaterflight frequency and more nonstop flights.
The LCCs have thus far successfully competed on price due to lowerhourly employee wages, higherPRODUCTIVITY, and no pensiondeficits
How would you describe the airline industry afterderegulation?
Question # 1
Question # 2
Question # 3
Question # 4
Overview of the case
Southwest Airline Today
http://www.econlib.org/library/Enc/Productivity.htmlhttp://www.econlib.org/library/Enc/Productivity.html8/8/2019 Organizational Design & Analysis Case11 Southwest Team2
12/20
Page 12
Disadvantages of deregulations
Although the gains of economic liberalization have been substantial,
fundamental problems plague the industry. Some of these problems are transitional, the massive adjustments required by
the end of a half century of strict regulation.
The regulated airline monopolies received returns on capital that were supposedto be reasonable (comparable to what a company might expect to receive ina competitive market), but these returns factored in high costs that often
would not exist in a competitive market. For example, the airlines unionized workforce, established and strengthened
under regulation and held in place by the Railway Labor Act, gainedgenerous salaries and inefficient work rules compared with what would beexpected in a competitive market. Problems remain in todays market,especially with the legacy airlines.
.
How would you describe the airline industry afterderegulation?
Overview of the case
Question # 1
Question # 2
Question # 3
Question # 4
Southwest Airline Today
8/8/2019 Organizational Design & Analysis Case11 Southwest Team2
13/20
Page 13
Disadvantages of deregulations
Consumers became more price-sensitive and gravitated toward the lower-cost
carriers. High labor costs and the network hub business model hurt legacy airlines
competitiveness. Hub-and-spoke systems created high fixed costs thatrequired larger terminals, investments in INFORMATION technologysystems, and complex revenue management systems.
Restrictive foreign ownership and COMPETITION laws. While labor contracts,airport asset management, and other business practices are themselves highbarriers to restructuring,
How would you describe the airline industry afterderegulation?
Overview of the case
Question # 1
Question # 2
Question # 3
Question # 4
Southwest Airline Today
http://www.econlib.org/library/Enc/Information.htmlhttp://www.econlib.org/library/Enc/Competition.htmlhttp://www.econlib.org/library/Enc/Competition.htmlhttp://www.econlib.org/library/Enc/Information.html8/8/2019 Organizational Design & Analysis Case11 Southwest Team2
14/20
Page 14
Conclusion
The industry is still structurally adjusting to a more competitive situation and
remains subject to a large number of regulations. The capital, work rules, andcompensation practices of the airline industry still reflect almost fifty years ofpolitical protection and control.
We are finally seeing the kinds of internal restructuring among airlines that wasexpected from deregulation. Yet, government still has much to do to ensurethat the airline market will thrive in the future. Land slots and airport spaceshould be allocated using market prices instead of through administrativefiat..
If the government deregulates the grid and transitions toward a market solution,the benefits of flow deregulation will increase, and costs for air travelers willfall even more.
How would you describe the airline industry afterderegulation?
Overview of the case
Question # 1
Question # 2
Question # 3
Question # 4
Southwest Airline Today
8/8/2019 Organizational Design & Analysis Case11 Southwest Team2
15/20
Page 15
Southwest Airline Today.
Southwest is the largest airline in the world by number of passengers carried peryear (as of 2009).
As of May 3, 2009, Southwest operates approximately 3,510 flights daily
Nearly 35,000 total Employees throughout the Southwest system.
Today, Southwest operates 541 Boeing 737 aircraft between 69 cities.
Mission Statement
The mission of Southwest Airlines is dedication to the highest quality ofCustomer Service delivered with a sense of warmth, friendliness, individualpride, and Company Spirit.
To the employees
We are committed to provide our Employees a stable workenvironment with equal opportunity for learning and personal
growth. Creativity and innovation are encouraged for improvingthe effectiveness of Southwest Airlines. Above all, Employeeswill be provided the same concern, respect, and caring attitudewithin the organization that they are expected to share externallywith every Southwest Customer.
Overview of the case
Question # 1
Question # 2
Question # 3
Southwest Airline Today
Question # 4
8/8/2019 Organizational Design & Analysis Case11 Southwest Team2
16/20
Page 16
Vision
To have a conservative increase growth, capitalize and cutback schedules of
other airlines. To continue expanding conservatively in long-haul success.
OrganizationalStructure
Flat & decentralized structure
Only three layer of management
According to southwest philosophy bureaucracy influence the entrepreneurspirit in a negative way
No Red Taping Kelleher himself sometimes approaches to all staff to knowabout their feedback & suggestions.
Employee can voluntarily swap their job with a colleague in a differentdepartment one day
A negative aspect is job specialization doesn't go as for as other airline e.g.
To reduce the turnaround time pilots also help to clean the plane
Southwest Airline Today.
Overview of the case
Question # 1
Question # 2
Question # 3
Southwest Airline Today
Question # 4
8/8/2019 Organizational Design & Analysis Case11 Southwest Team2
17/20
Page 17
Organizational Culture
Southwest airline have a real fun working, friendly & family oriented culture
Strong internal relationship with employees
Celeberation on the achievments
Motivational Factors Besides the usual package of secondary
Employment benefits, like free airline tickets, profit sharing, stocks, and in-
Surance, and the employee of the month election,
To create a real family spirit, All the corridors of all SWA buildings are full of pictures and memo-ries of all the parties
celebrated by the employees.
Presents are sent to people who get sick, are having a baby, and so on.
All this is done
Because
The employees comes first at southwest airlines.
Southwest Airline Today.
Overview of the case
Question # 1
Question # 2
Question # 3
Southwest Airline Today
Question # 4
8/8/2019 Organizational Design & Analysis Case11 Southwest Team2
18/20
8/8/2019 Organizational Design & Analysis Case11 Southwest Team2
19/20
8/8/2019 Organizational Design & Analysis Case11 Southwest Team2
20/20
Top Related