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Business Integration

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1. Introduction

Background

Southwest Airlines is one of the major organizations in the airline industry. Actually, it is a highly recognized airline in the United States of America. The report basically focuses on the performance of Southwest Airlines which has illustrated steady growth in the industry where failure is very common. Unfortunately, certain best minds in business have engaged in the airline industry and have turned unsuccessful. Southwest Airlines was founded by Rollin King and Herb Kelleher and it took its first flight in 1971. During that period, the airline served at least three major cities which are Dallas, Houston, and San Antonio. The report will also focus on the operation performed within the airline that either boosts the profits or causes losses in the organization. At some point, the airline suffered huge losses and was obliged to make a difficult decision. The organization had to sell one of its aircrafts instead of laying off its workers (Lauer 2010).

 

Objectives

Essentially, it is the report’s objective to examine the competitive market of the airline industry. Still, it will focus on the resources of the Southwest Airlines that put it at an advantage in the competitive market. The report also aims at examining the operations of the Southwest Airlines. This mainly focuses on the performance and maintenance of the business. It also discusses the culture and management of Southwest Airlines and organization’s ability to handle different challenges. The report also seeks to discuss weaknesses and strengths present with the Southwest Airlines. These strengths and weaknesses illustrate the way organization handles any threatening occurrences that may emerge. Basically, the business report aims at analyzing the entire performance and growth of the Southwest Airlines. It also focuses on the management of the Airline especially its leaders in pursuit of analyzing their competence.

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Scope

The Southwest Airlines actually realized its primary annual profit in 1973. It continually expanded and this was illustrated through its addition of more aircrafts. The number of its customers also skyrocketed greatly to several millions. Moreover, the Southwest Airlines gained more flight destinations such as Austin, Rio Grande Valley, Corpus Christi, Lubbock, and Midland. The organization also established a training center for flight crews. As it was earlier mentioned, it is clear that Southwest Airlines experienced steady growth. Fundamentally, Southwest Airlines highly regarded its customers and commonly focused on their satisfaction. In the airline industry, it was essential to have minimum customers’ complaints. All its steady achievements over the years enabled the organization to acquire the billion-dollar revenue point, and thus it became a chief airline (Books LIc 2002).

Consequently, the airline began serving many more cities since it had increased its number of aircrafts. After a prolonged service of Southwest Airlines to its customers, it established a fuel cost management program. The Southwest Airlines took advantage of the plummeted Asian market and received an opportunity to market its fuel. Basically, Southwest Airlines has steadily expanded especially in tangible asset and technology.

2. Discussion and Analysis

Southwest Airlines has had many competitors in the airline industry. Actually, the organization views any airline granting a flight to customers on the same route as its competitor. The organization does not undermine its competitor based on the size of its operation. Several organizations within the airline industry compete to take the place of Southwest Airlines. However, these organizations have not survived the competition from Southwest Airlines. Some of these companies that failed to survive originated from the ex-employees of Southwest Airlines. Basically, these organizations would not manage the destabilized state of economy and the elevating fuel costs. The Southwest Airlines has had to expand its asset such as aircrafts in order to remain at the top of the competitive market.

Moreover, it has boosted its technology for instance by establishing a website. Through the website, the customers are able to access vital information regarding the airline. Moreover, it has also invested in other opportunities in order to keep up with the competition in the market such as the fuel business. Southwest Airlines continually sorts ways of differentiating itself from other airlines in the market. This is due to a number of other airlines that are also developing at a very high rate. In order to sustain its lead in the market, Southwest Airlines worked on its marketing strategy. The organization developed an eccentric, humor-driven advertising that highly attracted its customers. Evidently, it featured one of its adverts that had the slogan “How do we love you? Let us count the ways”. This was meant to show the customers that many flights that it offered during the day to the first three destinations were a sign of love to its customers. Still, advertised its “no fees” policy for the checked bags unlike the other airlines. This was also a way of attracting more customers to the airline. Southwest Airlines continually establishes its exceptional position in the airline market in order to acquire success as a low-cost provider by distinguishing itself using the quantitative and qualitative characteristics (Hill 2010).

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Southwest Airlines developed its business model that has efficiently improved its profitability. The technique of standardizing its fleet has saved the organization both time and expense. Actually, Southwest Airlines put into practice the “one-model-fleet” technique which has efficiently worked over the years. The one-fleet-model means that the organization focused solely on buying only a single aircraft model. For instance, the organization began with a flotilla of Boeing 737-200s and has continued to use a series of this model over the years. Actually, the mentioned model has been considered the workhorse of the aviation business. This model has acquired a reputation of being exceptional in the aspects of reliability, cost, and flexibility. The one-model-fleet is highly advantageous for the operations in the Southwest Airlines. Primarily, the single aircraft model minimizes the inventory, maintenance costs, record keeping, and quantity of technical manuals, tools and spare parts.

Moreover, the management of the fleet is highly cut down thus reducing the task of the maintenance crew since they do not have to adjust their routines to service diverse models. Still, Southwest Airlines employs fuel equivocation as a technique of maintaining its low costs. The organization has sustained this practice for many years and has played a huge role in its profitability. Southwest Airlines is commonly acknowledged for this technique, although it is well-known in the airline industry (Pfeffer 2000). The organization takes advantage when other organizations are suffering from financial difficulties and hedges at least 70% of its oil utilization. Southwest Airlines practiced alternative cost-saving techniques concerning fuel consumption like the implementation of blended winglets on all the 737-700s.

Basically, these winglets would elevate performance by expanding the airplane’s range, minimizing engine maintenance costs, saving fuel, and minimizing the takeoff noise. This was a technique that was based on enhancing the performance of the aircrafts. Southwest Airlines was eager to take vital measures not only to save on costs but also to maintain its reputation for being punctual and consistent. Actually, Southwest Airlines commonly focused on maintaining punctuality in performing its operations. Over the years, timeliness has been a key aspect of the Southwest Airlines policy. The organization is able to maintain quick turnaround rate because it employs point-to-point service in order to restrain luggage transfers and connection times.

Moreover, it uses secondary airports in order to minimize possible congestion. On the other hand, other airlines actually use a hub-and-spoke system which involves the minute feeder airlines feed into bigger global airlines. The boarding process of Southwest Airlines is another aspect that differentiates it from other airlines. However, the unassigned seating tactic has received mixed reviews from the consumers. The organization believes that this method aids in faster gate turnaround. Basically, this method highly favors customers that arrive at the gate earlier than the rest no matter when the customer bought the ticket. However, the organization had to respond to the complaints of the customers and established a new check-in procedure in 2007. Evidently, Southwest Airlines highly appreciates its customers and always focuses on fully attending to their needs. The organization believes that excellent customer service should be initiated from home. Therefore, the organization also focuses on the needs of its employees (Gittell 2005).

Southwest Airlines treats its employees with high regard so that the same employees can acquire the zeal to attend to the customers wholeheartedly. Basically, the organization focuses on effectively treating its employees on a daily basis. This is one of the techniques of Southwest Airlines to sustain its niche in the competitive market. It is evident that once the employees are satisfied with their working conditions, they are able to deliver services to the customers with sense of care and friendliness. In the airline industry, Southwest Airlines has an excellent reputation for being an exceptional employer. The company receives numerous resumes from different people seeking for employment opportunities. Actually, these are some of the factors that make the company enjoy minute turnover rate.

However, there are other activities within the organization that would tarnish the reputation of the company as an employer such as complaints of unequal pay for the ground crew. In the airline industry, airlines strive at sustaining and improving the loyalty and motivation of employees through establishing reward programs. Inherently, these reward programs usually motivate the employees to improve on their efficiency in the organization. These reward programs grant repeat customer perquisites like free flights, hotel stays, upgrades, and hastened check-in procedure. However, these reward programs have proved to be debatable on their effectiveness (Grubbs-West 2005). Consequently, the final result of these reward programs has not been highly effective for the Southwest Airlines. The management of the company considered expanding the organization beyond the sixty cities it was serving. On the hand, Southwest Airlines has been cutting down routes that were less profitable. The organization seeks to increase the number of flights especially domestically. Despite the fact that Southwest’s strategy is limited to the domestic expansion, it is still seeking ways of establishing services to the Caribbean and England. Basically, the airline highly focuses on growth initiatives that include acquiring flights of defunct airlines like Ted (Freiberg, K. & Freiberg 2000).

In the airline industry, there are many challenges that have impact Southwest Airlines. Fuel is an important aspect in the airline industry and its increased cost is a huge challenge to the airlines. There are other negative factors, such as minimal number of travelers because of budget cuts, other high operating expenses, and increased regulation. Consequently, numerous airlines have failed to survive in the market thus disappearing, while others have been acquired by their competitors. Actually, the airlines that have been in the market for several decades have decreased to six chief companies that dominate the airline industry. These airlines include American, Continental, Delta, United, US Airways, and Southwest the low-cost leader. Actually, the five airlines apart from Southwest Airlines are traditional airlines. Due to the numerous challenges, other airlines have been forced to file for bankruptcy. Therefore, fuel costs and other operating costs have been a great challenge to the Southwest Airlines and also other airlines. Airlines in the industry have embraced technology by establishing websites where customers can easily book their flights. The organization was the first airline to establish a website for its customers. Unfortunately, it has become a challenge for the Southwest Airlines since it has elevated pressure on the consumers about the ticket prices. Basically, there is increased competition on the website regarding ticket prices (Menteges & Renga 2010).

However, Southwest Airlines has been adamant on displaying information about its pricing in the website. This means that it does not allow the purchase of tickets online. There are numerous airlines online and insignificant switching costs. Evidently, airline industry fails to portray customers’ loyalty because majority of these customers do not have to stick to the same airline especially due to the switching costs. Still, violations of safety requirement is a challenge that Southwest Airlines encounters in the airline market. At some point, it was realized that Southwest Airlines had actually flown around 200 aircrafts which were in violation of compulsory safety checks. This was a very dangerous act and especially on behalf of the customers. Therefore, the Southwest Airlines was obliged to ground fifty of its aircrafts for thorough re-inspection. Consequently, the airline was highly penalized since it had to pay a fine of $10 million. Evidently, this was a substantial loss to the airline and it had to seek the inspection area in order to have all the potentially affected aircrafts inspected. However, the FAA inspectors allege that the southwest airline continued using the aircrafts even before the inspection process was complete thus failing to take up immediate corrective actions.

On the other hand, Southwest’s management claims that the FAA inspectors clearly stated that the organization was in full compliance with the laws and regulations. Still, the management claims that the mode of operations has been safe over the years and it is evident from the history of Southwest Airlines (Muse 2002).

3. Conclusion

Moreover, Southwest Airlines was considered as an organization that had the privilege of having strong employee relations in comparison to its competitors. As earlier stated, Southwest Airlines had an excellent relation with the employees and many people sort after the airline for employment. However, the organization ran into problems with its employees who made alleges of unequal pay and nil raise of pay especially for the ground crew. The employees made complaints of no raise of wages from 2005 and this impelled a walkout by the labor union in 2008 (Hallowell 2000). It is part of Southwest Airlines’ culture to consider its employees as an integral part of its success. Therefore, it was not challenging for the union and the airline to come to an agreement. The union and the airline discussed a contract that highly considered the contribution of the employees to the organization. Therefore, the airline’s attendants gained wage increases but the airline would maintain its low-cost advantage.

4. Recommendations

Gary C. Kelly is the President of Southwest Airlines and actually one of its founders. Currently, there are numerous challenges within the airline industry and one would question whether this man is still the right individual to head the organization in the midst of unending challenges. Challenges that affect the industry include increased fuel prices, potential security threats, ever-rising operational costs, and the present global economic predicament. Kelly, as the founder of this major airline is capable of heading the organization despite the numerous challenges. He has gained great experience because he has taken the company through many levels of growth ever since it was founded. Moreover, he understands the airline industry perfectly to manage Southwest Airlines. Actually, he is best suited to head the organization during this period of ever-escalating crisis.

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