Soutwest Airline

SOUTHWEST AIRLINES

1. EXECUTIVE SUMMARY

^[1]Southwest Airlines is America's largest low-fare carrier, serving more Customers domestically than any other airline with a unique combination of low fares with no annoying fees, friendly Customer Service delivered by outstanding People, safe and reliable operations, and an extraordinary corporate Culture that extends into the communities they serve.

With the CEO’s announcement of retirement, the management is with the problem on profitability while ensuring the continuation of its unique culture. The sudden change in the management, which incorporated to the change in management style helped the company reach its potential ranking at 7th in Fortune’s list of the World’s Most Admired Companies. The timely renovation of facilities with the implementation of technological initiatives while maintaining the low-fare, low-cost policy lure more and more customers. Increased labor cost which deemed necessary by the new CEO Gary Kelly helped the airline move forward, “pushing the boundary of what we can afford with our wages”, he said.

1. STATEMENT OF THE PROBLEM.

Will the new management be able to maintain the profitability of the airline while ensuring the continuation of Southwest’s unique culture?

1. CAUSES OF THE PROBLEM

James Parker, Southwest Airlines’ CEO announced that he would be stepping down, citing personal reasons for his retirement. Parker who had been appointed to his position by Kelleher three years earlier, was credited with guiding Southwest through the turbulent period after September 11, 2001. In fact, Southwest was the only major airline to post a profit in every quarter following the September 11 terrorist attacks.

With the mushrooming of low-cost carriers that tried to emulate, and in some cases, improve upon the Southwest’s model, the company faces flooding of cheap fares. It is expected that by 2010 the low-fare, low-cost carriers would dominate up to 50 percent market share.

From the time of Herb Kelleher up to the time of James Parker the company managed to have a “family-friendly place”, where people care about one another’s families. The organization was able to maintain its secret weapon, its affable employees. Southwest employees, however, were becoming tired of being in the bottom half of the industry with regards to pay. Tension between management and labor get worse.

1. DECISION CRITERIA AND ALTERNATIVE SOLUTION

Change is the only constant thing in this world. Change in management is expected in every company or organization. Change is also the major obstacle of any management since this comes in various scenarios.

Southwest change of competitors, the new generation of low-fare, low-cost carriers held its profitability. JetBlue for instance, became the Southwest’s most formidable competitor. Like Southwest, JetBlue provided point-to-point service to large metropolitan areas with high average fares or to highly travelled markets that were underserved. It also offered low fares, reliable performance, and high-quality customer service. But unlike Southwest JetBlue offered luxurious leather seating on brand-new planes and free live TV at every seat.