Southwest Airlines Case Analysis
Southwest History
1966: Rollin King marched into Herb Kelleher’s law office with a plan to start a low-cost/low-fare airline that would shuttle passengers between San Antonio, Dallas, and Houston. Thought of this idea because businessmen were complaining about the commute.
1967: Kelleher filed papers to incorporate the new airline and submitted an application to the Texas Aeronautics Commission for the new company to serve Dallas, Houston, and San Antonio.
------4 year legal and regulatory battle from rival airlines------
1971 (January): Lamar Muse brought in as the CEO to get operations under way. Boeing supplied three new 737s, discounted price by $1 million (5>4) and financed 90% of the $12 million deal.
1971 (June): Southwest initiated its first flights with a schedule that soon included 6 round-trips between Dallas and San Antonio and 12 round-trips between Houston and Dallas. Disappointing results despite only $20 fare compared to rivals $27-28. Their funds stretched thin and they were putting fuel on Muse’s credit card. Employee morale was high.
1971 (November): Muse came up with idea to offer $10 fare to passengers on the Friday-night Houston>Dallas flight. The flight sold-out without advertising. Muse came up with a two-tier on-peak and off-peak pricing structure. BEGINNING OF THE NO-LAYOFF POLICY, they have never laid off or furloughed any employees.
1972: Moved flights in Houston from the newly opened Houston Intercontinental Airport to the abandoned Houston Hobby Airport (for money and location reasons).
1973: Reported its first-ever annual profit in 1973. Introduced a profit-sharing plan for senior employees (first in the airline industry)
-------Rest of the 1970s consisted of legal battles-------
1977: Listed on the NYSE
1978: Muse resigned; Howard Putnam became CEO after Kelleher turned down the offer.
1979: First route outside Texas (New Orleans)
1981: Putnam resigned; Kelleher became CEO. Southwest
1966: Rollin King marched into Herb Kelleher’s law office with a plan to start a low-cost/low-fare airline that would shuttle passengers between San Antonio, Dallas, and Houston. Thought of this idea because businessmen were complaining about the commute.
1967: Kelleher filed papers to incorporate the new airline and submitted an application to the Texas Aeronautics Commission for the new company to serve Dallas, Houston, and San Antonio.
------4 year legal and regulatory battle from rival airlines------
1971 (January): Lamar Muse brought in as the CEO to get operations under way. Boeing supplied three new 737s, discounted price by $1 million (5>4) and financed 90% of the $12 million deal.
1971 (June): Southwest initiated its first flights with a schedule that soon included 6 round-trips between Dallas and San Antonio and 12 round-trips between Houston and Dallas. Disappointing results despite only $20 fare compared to rivals $27-28. Their funds stretched thin and they were putting fuel on Muse’s credit card. Employee morale was high.
1971 (November): Muse came up with idea to offer $10 fare to passengers on the Friday-night Houston>Dallas flight. The flight sold-out without advertising. Muse came up with a two-tier on-peak and off-peak pricing structure. BEGINNING OF THE NO-LAYOFF POLICY, they have never laid off or furloughed any employees.
1972: Moved flights in Houston from the newly opened Houston Intercontinental Airport to the abandoned Houston Hobby Airport (for money and location reasons).
1973: Reported its first-ever annual profit in 1973. Introduced a profit-sharing plan for senior employees (first in the airline industry)
-------Rest of the 1970s consisted of legal battles-------
1977: Listed on the NYSE
1978: Muse resigned; Howard Putnam became CEO after Kelleher turned down the offer.
1979: First route outside Texas (New Orleans)
1981: Putnam resigned; Kelleher became CEO. Southwest