Southwest Airlines Changes

Part 1 

Details of the Organization 

The initial Southwest Airlines® was developed in San Antonio hotel bar by Rolling King and Herb Kelleher in 1967. Originally the business plan entailed a triangle where three lines connecting Houston, San Antonio, and Dallas were drawn on a napkin. This idea worked only in Texas initially due to the fact that before 1979, the government strictly controlled the air industry and had the authority of deciding which airline flew and the prices. At this time competition did not exist since the government rather than the market determined the prices. Major changes were witnessed in October 1978 after President Jimmy Carter signed the deregulation act (Kelly, 2019). Approximately 90 percent of the population in the US has flown using commercial aircraft and Southwest airline have had an impact on that (Bhasin, 2019). Right from the first day, Southwest Airlines is well known due their low-fare branding which contributed greatly to its growth. Currently, Southwest Airlines is among the world’s largest airlines in terms of the number of passengers served. 

The mission of Southwest Airlines is: “Dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit (Southwest).” 

SWOT Analysis 

Southwest Airlines Company is well known for its low fares, low turnaround times and point-to-point services. Instead of the Spoke and Hub system adopted by many airlines, this company focuses on the provision of point-to-point services. Point-to-point services save a lot of customers’ time because they provide direct flights to specific destinations as compared to the Spoke and Hub where the customer is connected to some hub points and end up using a lot of time connecting the flight (Bhasin, 2019). In addition to saving the amount of time used, point-to-point services ensure proper asset utilization. Secondly, the company has a strong fleet base across the United States. It is among the biggest Boeing aircraft in the world with multiple models that ensures effective service delivery. Low turnaround time is also an added advantage of Southwest Airlines (Bhasin, 2019). On average the turnaround time in the airline industry is around 45 minutes. However, Southwest Company ensures that they save at least 20 minutes in each turnaround, which allows it to do more flights per day, therefore, saving a huge sum of money which can essentially be used to either purchase new airplanes or manage other activities. Efficient price leadership allows the company to provide low fare tours. Its model plays a great role in ensuring that a lot of capital is saved either by fueling at large hubs or even low turnaround time. Notably, the company is among the most world’s profitable airlines. The company, however, has several weaknesses just like any other organizations. About 93% of the total revenue in this company is dependent on the passenger contributions and only 1% is dependent on freight (Bhasin, 2019). Reduction in passenger traffic due to cases such as rising fuel prices might greatly affect the revenues. The Southwest Company is also over-dependent on Boeing which is the major supplier of aircraft and has high bargaining power. In a situation where the company disagrees with Boeing, the activities could be significantly disrupted. The involvement of this company in some litigation and lawsuits cases is also major weaknesses. Any negative outcome would affect the image and finances of the company. 

Notably, the South West Airlines has been able to maintain a robust network in the United States market. It has a total share of approximately 20.1% which is slightly lower than that of Delta Airlines which is around 21.8% (Capa, 2014).  

Figure 1 : United States of America capacity by airline (% of seats): 15-Sep-2014 to 21-Sep-2014 (Capa, 2014). 

Capa (2014) also suggest the unpredictable nature of the revenue growth between 2009 and 2013.  

Figure 2 : Growth in Southwest Airlines Co. annual operating revenue: 2009 to 2013 (Capa, 2014) 

South West Airlines has so many opportunities such as global expansion but also has several threats which include competition. In order to increase the customer base, the company aims at expanding both locally (in the US) and also globally. With its high profits and ratings, then this is an opportunity they will definitely exploit and have been on the lookout for the same. Global tourism and travel growth rate was approximately 3.9% by the end of 2018, and there is evidence that the industry will continue to grow further (Bhasin, 2019). Just as any other business organization, Southwest Company also faces major threats. The airline industry in the US has stiff competition which is characterized by price wars. Southwest competes with Delta airlines, SkyWest, American airlines, Jet blue among others. Such competition affects profitability as it compels pricing wars. Strict government regulations are also a major threat. In addition to being subject to legal compliances and stringent regulation, the company is heavily taxed which a direct impact on the profits realized (Bhasin, 2019). Unlike other airlines, the company still uses several measures such as low fares in order to have a competitive advantage. 

Change that is taking place 

Recent changes have occurred in the organization. Earlier, whenever a customer changed a refundable fare flight, the new flight would become nonrefundable. However, Southwest Airlines decided that any changed fare flight would still remain refundable (Matyszczyk, 2018). When they were asked why they made the changes they said that: 

“ Our new reservations system grants us functionality that now allows us to modify certain refundable tickets without needing to cancel, refund the original reservation, and start a new reservation. This refundability change applies to Business Select, Anytime, and Senior Tickets purchased on October 10, 2018, and beyond (Southwest Airlines FAQs).” 

Travelers appreciated this little but significant gesture. Normally, the only option was to cancel and rebook the flight and in case a passenger had booked an early bird check in then a huge sum of money would be lost (Matyszczyk, 2018). Such changes are designed to maintain a good relationship between the passengers and the airline. 

There has been a change in the color and design of Southwest airline. Bold color has over time been used as Southwest’s DNA signature. The original color was Desert Gold then Canyon Blue and now to the bold palette. Warm Red, Bold Blue, Summit Silver, and Sunrise Yellow are the new primary colors, used in the symbol of a heart on all the planes. The deeper Bold Blue was settled upon with the aim of evoking the exploration spirit in order to reach new heights. Warm Red suggests the passion of the company and their warrior spirit of delivering excellent services to their customers (Southwest Airlines). Sunrise Yellow signifies a beginning of new chapter in Southwest’s history. The silver shimmer adds modern-day energy to the lively design and encompasses the jewel theme of the logo. The color intensity is enhanced in order to showcase the excitement and energy associated with the company’s brand. Proudly displaying the Heart logo on the bellies of their planes is a new way of showing the world their hard work, dedication, and passion (Southwest Airlines). It is also a representation of the employees’ heart of service to their customers. In fact, the new name for the lively design is “Heart”. The interior of the plane is also expected to change with silver heart logos on the front bulkhead. The heart design will, however, be changed to the “Heart” design. The seat design will not change but they promise to give any updates of the development. The specialty planes will also change into the new heart design. 

Earlier this year, the company announced several leadership changes. The retirement of Chris Wahlenmaier as Vice President Customer support & services, James Ashworth who previously worked as the director of customer services & support was promoted to replace him (Southwest Airlines, 2019). Landon Nitschke was also promoted to Senior Vice President technical operations whose major roles are overseeing the Engineering departments and maintenance operations which care for more than 750 aircraft. Justin Jones was appointed Vice President Tech Ops Planning & Performance whose responsibilities include business intelligence, fleet planning, field services, and reliability maintenance, among others (Southwest Airlines, 2019). Mark Wibben was promoted to Vice President engineering and programs, Kurt Kinder became Vice President Maintenance Operations, Erika Linford was appointed Vice President Technology – Commercial Portfolio. These are just a few positions but essentially there were changes in almost every office. The Southwest Company says that they have the strongest leadership in their history, leaders with a capability of assuming their roles effectively and increasing the success of the airline. 

As the airline struggles to increase their sources of revenue, the CEO, Gary Kelly, stated that three things will have to be put three off the table; assigned seating, baggage fees, and ticket-change fees. Regarding the assigned seating, he said that , “Let me be very blunt, we are not looking at assigning seats right now. We are not talking about assigning seats now. And we're not talking about looking at it sometime in the future (Gilbertson, 2018, par.4).” 

He acknowledged that open boarding often discourages some potential customers and did not completely rule it out. He continued to point out that the company is neither thinking about baggage fees or change fees (Gilbertson, 2018). Instead, the airline focuses on other income-generating initiatives such as Early Bird Check-in. The airline did not report any updates on Hawaii flights services. 

What Happened: Ethical Issues, Social Cultural Shifts, Technology Use, Globalization Concerns, Political Change 

Southwest Airlines makes more trips per day and this increases deterioration on parts such as the engine. At some point, the CEO, Gary Keller, was required to answer questions on whether the low-cost model endangered the lives of the passengers (Friedman, 2018). Aviation safety experts reported that there was no reason for alarm and that in the 47-year history of the organization no deaths had been reported. In 2016, the aircraft’s engine blew over Florida due to metal fatigue of the engine but no death was reported (Friedman, 2018). In 2018, the second case of engine breakdown was reported, and it led to the death of a 43-year-old mother who was blown out of a broken window (Friedman, 2018). Considering the fact that the company has a large fleet, experts say that they would not consider Southwest airlines unsafe because of the few cases. 

After the Pennsylvania accident that resulted in the death of one passenger, investigators found that there exists mistrust between the mechanics and suggested that this could risk the passengers’ lives. The FAA found that the Southwest supervisors discouraged the mechanics from reporting some aircraft hitches (Friedman, 2018). In Dallas, one mechanic was questioned for discovering corrosion which was not one of the assignments; he was rather subjected to disciplinary interrogations by the supervisors. This action particularly raised concern as it did not make any sense to respect the line of duty and ignore the safety of the passengers. In another post, Geske (2018) reports the five major scandals that this company has been associated with. These issues were flight delays, baggage issues, engine problems, price increases and safety violation. 

In 2017, Southwest airline had a challenge of digitalizing their activities. This would mean that the employees would switch from using logbooks, whiteboard, and radio to digital communications. The major part of this migration was the OpsSuite which is a web-based package that handles many tasks to ensure that the customers arrive safely to their destination. Unlike most of their competitors who use laptops and tablets, Southwest still had not made any effort to digitize their operations perhaps due to a large amount of money required (Ungerleider, 2017). However, there is hope that by 2020 there will be significant work improvement and software development that will boost their earnings. David Loose who is a senior technologist in the company suggested that the worst enemy of any airline delays. OpsSuite helps the airline to effectively deal with issues such as cancellation and bad weather by providing timely information to the personnel and enhancing communication between different departments (Department). OpsSuite is being used by Southwest to manage turns, gates, tarmac delays, and also as a tie for persons with the Baker system. The system helps search alternative routes for passengers in case their flights are canceled or delayed. 

Success and Failures 

The success of Southwest Airline is felt in all parts of the world. The airline has managed to win more passengers and therefore increasing profitability. The company is able to reduce the turnaround time and therefore it is able to make more trips compared to all other airlines in the industry. The big question is what exactly makes this company succeed despite the stiff competition in the industry. Cost leadership is a quality that sets Southwest Airlines apart from the competition. Cost leadership means that a company is able to offer its services at the lowest cost. Notably, cost and prices are two different terms; a company can provide low-cost services but still be the most profitable (Schleckser, 2018). The company depends majorly on Boeing as their major supplier and this cuts maintenance cost since the planes are all the same. The plane employees begin cleaning the plane even before all the passengers alight and this saves on the turnaround time. In addition, the boarding time for the Southwest airline is faster than other airlines and this implies that more revenue is realized. Ashutosh (2011) suggests that there are three factors that have contributed to the huge success of the airline; process, people and physical evidence. In order to encourage the employees, the company planned an annual event where employees could be recognized and appreciated for their length of service and/or outstanding performance. Other factors such as team building, collective decision making, profit sharing, training, and positive attitude also aided the success of the airline (Ashutosh, 2011). The process involved in the flights is standardized, low cost and efficient and this was an incentive to the customers. The physical evidence which is the design also has an influence on the customers. The heart design, for example, reduces the intangibility problem which in turn increases their success. 

Part 2 

Description of the Nature of Change in Details 

In the recent past, Southwest Airlines have implemented some key transformational changes that seek to spur the organization to better performance in terms of service delivery to customers (Palmer, Dunford, & Akin, 2006). The company was required to effect a strategic change by creating a new business model. The changes have seen the organization change its leadership structure, flight ticket policies, and the organization’s corporate color and design on its logo. The company has been struggling to increase their sources of revenue which prompted the changes to ensure the right personnel is in place to effect the policy changes of scrapping off assigned seats, ticket changes fees, and baggage fees.

External and Internal Forces Driving the Change 

Southwest airlines faced both internal and external pressures to change. Internally there has been evidence of authoritarian leadership, which resulted in poor employee coordination in delivering excellent services to customers. An existence of mistrust between the company's mechanics was revealed during the investigation of the Pennsylvania accident that involved one of the company's aircraft. The investigation further revealed that the southwest airline supervisors discouraged the mechanics from reporting some aircraft hitches, and at one point, one mechanic in Dallas faced disciplinary actions for the same (Friedman, 2018).

Technological changes from the external environment also triggered the need for changes in the organization. In response to the recent technological advancements, the company adopted a digital customer management system called OPsSuite in 2017. The company struggled to implement it, but it has proved to be much more effective. The affected technological change also demanded appropriate personnel to oversee its full implementation, which made the company appoint Erika Linford as the Vice President Technology – Commercial Portfolio (Friedman, 2018).

Impact of the Change on the Company 

The OPsSuite has helped the company to manage delays, which is as admitted by David Loose is the worst enemy of any airline. OPsSuite has helped the company in finding an alternative route for their clients in case their flights are delayed or canceled. The system is also being used by the company to manage gates, tarmac delays, and turns. The overall impact is that the company has been able to win more passengers, and the reduction in turnaround time has helped the company airlines make more trips, resulting in increased earnings. All these signals increased efficiency within the organization and high customer satisfaction, particularly from the influx of passengers who use the airline.

7s Model Diagnosis 

Strategically Southwest Airlines wanted to create a new business model that would enable it to achieve competitive advantage in the industry. In designing the strategy, the company considered the crucial factors which will help in achieving the objective, which are staff, skill, shared value, structure, and system. The company aligned its system by introducing the OPsSuite and upgraded its staff’s digital skills to enable effective execution of its strategy. To ensure that the organization’s shared values are well maintained and upheld, the company ordered changes in its leadership structure, which saw some senior leaders being replaced. The seven internal factors were perfectly matched with each other to effect the proposed change (Greene, 2019).

Obstacles to Change 

Organizations may see the need for change but may face the following constraints in trying to implement the change. There may exist Lack of an experimental mindset within the organization which ultimately restrains the members of the organization from trying different approaches to situations thereby hindering a change (Palmer, Dunford, & Akin, 2006). Secondly, the business processes within the organization may not be flexible to accommodate new dimensions. The third obstacle to change may be the inability of the organization to find staffs with digital skills. Additionally, an organization’s structure may not be suitable for the proposed change, thereby blocking any attempt to effect the change. Lastly, an organization may lack quality information that may assist in implementing the change resulting in failure.

The Efforts the Leadership Is Taking To Ensure Smooth Transition 

Southwest airlines have focused more on their culture and implemented a more action based transition (Palmer, Dunford, & Akin, 2006). The company relies on workplace culture as shown by their action of replacing some leaders whose departments were not reflecting the appropriate cultural standards within the organization. The approach is right because an organizational culture always defines the organization's objectives and is a marketing tool if well implemented and maintained. Southwest airline has changed its business model but for the change to succeed the shared values within the organization must be well articulated to every member of the organization.

The Current State of the Company Including Its Profits 

Southwest airline has seen much improvement since it started implementing the changes within its ranks. The company's profits have increased as a result of more passengers. The effective use of OPsSuite has resulted in more trips for the company’s airlines due to reduced turnaround time. The use of OPsSuite has also enabled the company to manage delays, turns, and gates. It helps in managing delays by finding alternative routes for customers whose flights have been delayed or canceled. Effective and efficient aircraft management has also been achieved by the company part of this is owed to the use of Boeing company as the sole supplier to the company. This has made the company realize more revenues due to the cutting of maintenance cost.

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