Saturday, April 14, 2012

Often Imitated, Never Duplicated

According to the U.S. Department of Transportation (a pretty reliable source), Southwest is the United States' most successful low fare, high-frequency, point-to-point carrier. They operate over 3,300 flights a day, and are the largest U.S. carrier based on domestic passengers boarded as of March 31, 2011. But how did Southwest reach such a high level of success? Well, it all started with an innovative idea...

Southwest Airlines was created in 1966 when Herb Kelleher and Rollin King famously drew up a business plan on a cocktail napkin. In the early days of air travel the U.S. government regulated prices, keeping them high so to encourage airline companies to invest in the latest technology. The problem was that flights were so expensive only the wealthy could afford to fly. The planes were big and fancy, but they were also empty. In creating Southwest, Herb Kelleher and Rollin King hoped to create a company that would demonstrate what the airline industry could be if there were no restraint of federal price regulations. Southwest was able to do this because it didn't cross state borders. They only flew within Texas, and therefore didn't have to adhere to the federally mandated prices. Southwest was able to dramatically reduce fares and became an immediate hit.

Southwest has been able to continue its success in the same way it started, with great service at a lower price.  They strategically enter regions by purchasing terminal space in airports that offer it for less. They then steal the ticket bookings away from their competitors with much lower fares. Southwest flies "point to point", unlike the hub-and spoke model of most other airlines. They also fly only one plane, the Boeing 737, enabling their pilots to fly any plane at any time. They serves no meals, only snacks. They charge no fees to change tickets and have no assigned seats. 

Many traditional airline companies have tried to copy Southwest’s success by creating discount fleets, but have failed miserably as it is too out of line with the core of their business. Still, some companies, such as JetBlue, have entered the discount airline industry and achieved moderate success. However they may try, no airline has been able to achieve the success of Southwest Airlines. Why? Though Southwest is often imitated, its culture cannot be duplicated.

In Southwest’s early days they ran into some financial trouble. They were faced the choice of either selling one of its planes or laying off some of its employees. They made an unconventional, but powerful choice and sold the plane. In return, they asked their employees to cut gate turn-arounds down to 15 minutes. The employees met this goal, and established an executive-employee relationship that lives on today. This relates to the organizational behavior concept of giving employees more autonomy. If employees are given more autonomy, they will be happier even when facing an undesirable situation. Employees with autonomy have greater job satisfaction and less absenteeism. This is important because Kelleher attributes the airlines success to its employees. He says he “simply hires the best people, treats them with respect, and gives them the freedom to make decisions and to have fun just being themselves.” Southwest does have its pick of the best employees. In 2010, Southwest received 143,143 resumes and hired just 2,188 new employees. Southwest’s position is that the happiest worker creates the happiest customer, leading both to stick around with Southwest. Happier workers work harder and stay with the company. The employees will likely be more conscientious and have a vested interest in seeing the company succeed. This culture leads employees to not only give their best efforts, but work to improve. Later blog posts will explore this culture on an in depth level, but it all started with the great ideas of Herb Kelleher and Rollin King on a cocktail napkin. Watch the video below to hear from “Luv Herb” himself why Southwest has been able to be so successful.

Want to check out Southwest but scared to fly? 

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