Southwest Airline
Southwest Airlines
Tracy D. Braswell
Benedictine University
The domestic airline industry is emerging from its lost decade. Carriers suffered two recessionary swoons (one due to September 11) and a fivefold jump in fuel prices causing fifteen carriers to go bust. As frequent fliers know too well the salvation for most airlines has been to stick passengers with fees, reservation changes, bags, food, movie and headset to name a few. None of it, however, went to Southwest Airlines two and a half years ago the Dallas Texas based carrier decided to defy industry convention and handle bags and tickets changes for free. In the end by refusing to nickel and dime customers, Southwest added two percentage points of market share, increased passenger loads by 10% and brought in $2 billion in annual revenues—at a cost of $500 million in forgone bag fees. (Whelan, 2011) Chief executive Gary Kelly says “something’s for Southwest aren’t going to change”. Southwest still does not have assigned seating, it does not work with big online ticketing agents like expedia and it has no business calls, though it does allow people to pay fees to get an early boarding spot and increase the likelihood of getting a good seat. Here are six comparisons of how southwest made changes to increase their overall revenue. Routes- From direct short haul flights only with an average distance of 250 miles to national network with Midway, St. Louis as anchors with an average distance of 450 miles. (Schroeder, Goldstein, & Rungtusanatham, 2011) Schedules- From bus like hourly flights meant lots of empty seats with an average load factor of 60% to fewer dawn and late night flights meaning fuller planes with the average load factor increasing to 80%. Flight Attendants- No more hot pants, loungewear or knee high boots, but now informal polo shirts and shorts, crews still crack jokes and sing over the loudspeaker. Ticketing- From no tickets and passengers with plastic colored
Tracy D. Braswell
Benedictine University
The domestic airline industry is emerging from its lost decade. Carriers suffered two recessionary swoons (one due to September 11) and a fivefold jump in fuel prices causing fifteen carriers to go bust. As frequent fliers know too well the salvation for most airlines has been to stick passengers with fees, reservation changes, bags, food, movie and headset to name a few. None of it, however, went to Southwest Airlines two and a half years ago the Dallas Texas based carrier decided to defy industry convention and handle bags and tickets changes for free. In the end by refusing to nickel and dime customers, Southwest added two percentage points of market share, increased passenger loads by 10% and brought in $2 billion in annual revenues—at a cost of $500 million in forgone bag fees. (Whelan, 2011) Chief executive Gary Kelly says “something’s for Southwest aren’t going to change”. Southwest still does not have assigned seating, it does not work with big online ticketing agents like expedia and it has no business calls, though it does allow people to pay fees to get an early boarding spot and increase the likelihood of getting a good seat. Here are six comparisons of how southwest made changes to increase their overall revenue. Routes- From direct short haul flights only with an average distance of 250 miles to national network with Midway, St. Louis as anchors with an average distance of 450 miles. (Schroeder, Goldstein, & Rungtusanatham, 2011) Schedules- From bus like hourly flights meant lots of empty seats with an average load factor of 60% to fewer dawn and late night flights meaning fuller planes with the average load factor increasing to 80%. Flight Attendants- No more hot pants, loungewear or knee high boots, but now informal polo shirts and shorts, crews still crack jokes and sing over the loudspeaker. Ticketing- From no tickets and passengers with plastic colored
References: CAPA. (2011, 3 22). Southwest Airlines grows up. Retrieved 3 11, 2012, from CAPA Centre for Aviation: http://www.centreforaviation.com/analysis/southwest-grows-up-48149 Schroeder, R., Goldstein, S., & Rungtusanatham, M. J. (2011). Operations Management Contemporary Concepts and Cases. New York, NY: McGraw-Hill. Whelan, D. (2011, 06 29). All Grown Up. Retrieved 03 11, 2012, from Forbes: http://www.forbes.com/forbes/2011/0718/features-southwest-airlines-gary-kelly-midway-grown-up.html