Sw Airlines Notes

In 1992 Southwest Airlines was the only major airline in the US to post a profit. In 1993 the same airline outperformed its competitors. The CEO, Herb Kelleher stated the primary and most challenging SWA goal is to offer great service at low cost. SWA was able to meet and exceed this goal by competing using a new-game strategy. They sought to restructure the airline’s business to match company strengths. Instead of adapting to the way that other airlines operated, they created their own set of rules. They took their competitors by surprise by breaking away from the conventional wisdom of the marketplace. SWA differentiated itself by focusing on the SWA model which addressed this goal by; creating a matchless perspective on cost control, combining unique operations, championing a successful marketing campaigns, offering great service , retaining affable people and encouraging a culture focused on community and fun. An analysis of these elements and how they are interrelated allows evaluation of SWA’s ability to outperform other airlines in 1993.
First and foremost, SWA performed so well compared to other airlines due to their matchless perspective on cost control. SWA managers emphasized that “Airlines don’t have revenue problems, they have cost problems.” SWA watched its costs so carefully that their CEO approved any expense over $1000. This encouraged employees to be cost conscious because they knew expenses were being monitored. SWA strategy deemed their costs must be lower than their competitors, and they were. SWA cost per airplane seat mile was 7.03 cents in 1993 in comparison to an industry average of 9.35. (See exhibit 8). SWA kept costs low compared to their competitors in all departments, particularly with their short haul, high frequency, low cost (LUV) strategy. The average flight was 65 minutes in 1993. They saw their competition as the car, and targeted customers who would normally drive those shorter distances. They cut costs in