TED-001
College of International Tourism and Hospitality Management
Maranan, R, Ariate, R. & Murod, J.
I. Introduction
In mid-1990’s many airlines are having trouble meeting the demand for
airline travel due to the expand of competition and lower fares. Despite of the
financial problems that the industry experienced many fledgling airlines
started after deregulation and new firms continued to enter in the market and
the new low-fare airlines created a second tier of service providers that
actually save many consumers billions of dollars.
Southwest Airlines has gained position as America’s most consistent
profitable airlines in the US at there time before having a plan to move in to
Florida. Before their success in the industry the airline first experience two
company case prohibiting the airline from flying, second is pressure in the
industry like cost pressures from expected factors. The first factor is aircraft
maintenance,second is fuel cost and lastly air traffic delays. The management
also experience problem in man-power having only 25 employees in three
aircraft’s and one of Southwest’s problems was convincing passengers that its
low fares were not just introductory promotions but regular fares.
II. Background
The Southwest Airlines was raised by Herb Kelleher and Rollin King in
1966 and filed for regulatory approval from the Texas Aeronautics Commission
but other Texas-based airlines opposed the idea and waged a battle to prohibit
Southwest from flying. In the end Kelleher win the company’s case in Texas
Supreme Court and the court refused to hear an appeal filed from other
airlines. Southwest began building a management team and purchased three
surplus Boeing 737s. Meanwhile, Braniff and Texas International continued
their efforts to prevent Southwest from flying. Kelleher again argued his
company’s case before the Texas Supreme Court, which ruled in Southwest’s
favour a second time, lifting the restraining order. Southwest Airlines began
flying the next day, 18 June 1971. When Southwest began there operation to
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Case Study: (Southwest Airlines, 1996)
three Texas cities, the firm had three aircraft and 25 employees and the
original flights were staffed by flight attendants in hot-pants. In 1996 flight
attendant had evolved into khaki’s and polo shirts. The southwest quickly
discovered two types of traveller: time oriented business traveller and price
sensitive leisure traveller. To cater to both groups, Southwest developed a two-
tiered pricing structure.
This case begins with the overview of the US Airline Industry and a brief
history of Southwest Airline providing a background to the current situation of
the airline. The case will also discuss the airline operation and performance
under Southwest Airlines and its imitators in the industry. This will also discuss
the commitment of CEO to the company and employees making the southwest
spirit remarkable and lastly its expansion into northeast.
III. Alternatives
Apparently Southwest was the only major airline to operate without
hubs.The alternative approach is the hub-and-spoke approach was generally
assumed to generate cost savings for airlines through operational efficiency.
However, Southwest saw it another way: hub-and-spoke arrangements
resulted in planes spending more time on the ground waiting for customers to
arrive from connecting points creating delays to the total time of the trip.
IV. Proposed Solution
The propose solution to this problem is a Point-to-point service to
provide maximum convenience for passengers who wanted to fly between two
cities where it allows for direct nonstop routing by minimizing connections,
delays, trip time and congested airport, rather than hub-and-spoke service
provided by major US Airlines. Planes were used an average of 11.5 hours a
day, compared with the industry’s 8.6 hours per day average.15 Southwest’s
cost per available seat-mile was the lowest in the industry (Exhibit 4) and the
average age of its fleet in 1995 was 7.9 years, the lowest for the major carriers.
Southwest also had the best safety record in the airline business. Kelleher
explained: ‘It used to be we only had about four people on the whole plane, so
the idea of assigned seats just made people laugh. Now the reason is you can
turn the airplanes quicker at the gate.And if you can turn an airplane quicker,
you can have it fly more routes each day. That generates more revenue,so you
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Case Study: (Southwest Airlines, 1996)
can offer lower fares.’ And other than that,to not cause any more delays due to
the numbers of employee in the airline, and when schedules are tight, pilots
helps the gate crew unload the bags and flight attendants regularly assisted in
cleaning the planes between flights to lessen the turnaround time and
compare to the average industry time that takes 45 minutes they only
accumulated 15 minutes.
V. Recommendations
1. Company communication and camaraderie must be highly valued to
maintain the esprit de corps found in the firm having a great emphasis in
maintaining cooperative labour relations.
2. The company should implement regular training and various classes
including team building, leadership and cultural diversity.
3. Proposing to only have one type of aircraft makes lowers maintenance,
training and inventory cost a huge extent.
4. Should seek more opportunities for the airlines outside the region.
5. They should upgrade their airline entertainment to gain more consumers.
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