Southwest Airlines in 2016: Culture, Values, and Operating Practices Do you appr

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Southwest Airlines in 2016: Culture, Values, and Operating Practices

Do you approve of the AirTran acquisition and the way Southwest has gone about integrating AirTran's into its operations?    Support your answer citing evidence from the case.

C-332 PART 2 Cases in Crafting and Executing Strategy Delta began in September 2013. The company did not want to keep Boeing 717-200 planes in its air- craft fleet because of the added maintenance and repair costs associated with having a second type of plane in its fleet. Moreover, replacing the Boeing 717 aircraft capacity with Bocing 737 capacity pro- vided incremental revenue opportunities with more seats per aircraft, while costing approximately the same amount to fly on a per-trip basis as the smaller Boeing 717 aircraft. adding seats to such destinations without increas- ing the number of flights; and (3) boost overall fuel efficiency to reduce overall costs. Additionally, the aircraft would enable Southwest to profitably expand its operations to new, more distant destina tions (including extended routes over water) such as Hawaii, Alaska, Canada, Mexico, and the Carib- bean. Southwest management expected that the new Boeing 737-MAX planes would have the lowest operating costs of any single-aisle commercial air- plane on the market. Incorporating Larger Boeing Aircraft into Southwest's Fleet Starting in 2012, South west began a long-term initiative to replace older Southwest aircraft with a new generation of Boeing aircraft that had greater seating capacity, a quieter interior, LED reading and ceiling lighting, improved security features, reduced maintenance require ments, increased fuel efficiency, and the capability to fly longer distances without refueling. Of the 704 active aircraft in Southwest's fleet at year-end 2015 the company had plans to remove 122 Boeing 737 300 aircraft (with 143 seats and an average age of 20 years) and 15 Boeing 737-500 aircraft (with 122 seats and an average age of 22 years) from its fleet over the next five years and replace them with new Boeing 737-700s (143 seats), 737-800s (175 seats), and 737-MAX aircraft (up to 189 seats). While Southwest had added 54 new Boeing 737-700 and 737-800 planes to its fleet in 2012-2013 and 52 Boeing 737-800 aircraft delivered in 2014-2015, 56 Growing Southwest's Rapid Rewards Fre- Boeing 737-700 aircraft were scheduled to be deliv- quent Flyer Program Southwest's current ered in 2016-2018 (with options to take delivery on Rapid Rewards frequent flyer program, launched in an additional 36 planes) and 200 737-MAX aircraft March 2011, linked free travel awards to the num to be delivered during 2017-2024 (with options to ber of points members earned purchasing tickets to take delivery on an additional 83 planes-Southwest fly Southwest (the previous version of the Rapid was Boeing's launch customer for the 737-MAX.Rewards program had ti Plans called for some of the new aircraft to be leased number of flight segments flown during a 24-month from third parties rather than being purchased-of period). The amount of points earned was based the company's current fleet of 704 aircraft, 581 were on the fare and fare class purchased, with higher owned and 123 were leased Launching International Service and a New Reservation System In January 2014, South- west launched an international reservation system separate from its domestic reservation system (but linked to and accessible from www.southwest.com) and began selling tickets for its inaugural interna tional daily nonstop service on Southwest aircraft beginning July 1, the Bahamas (Nassau), and Aruba (Oranjestad) The company added service to new Latin Ameri- can destinations in 2015, including San Jose, Costa Rica; Puerto Vallarta, Mexico; Belize City, Belize; and Liberia, Costa Rica. The company expected to add flights to additional near-international locations in 2016 after the terminal and customs facility and Hobby Airport in October 2015. Southwest also operated international flights from Fort Lauderdale, Florida. 2014, to Jamaica (Montego Bay), opening of a five-gate international ed free travel awards to the fare products (like Business Select) earning more Southwest expected that the new Boeing 737- 800 and 737-MAX aircraft would significantly enhance the company's capabilities to (1) more eco- nomically fly long-haul routes (the number of short- haul flights throughout the domestic airline industry had been declining since 2000); (2) improve sched- uling flexibility and more economically serve high- demand, gate-restricted, slot-controlled airports by points than lower fare products (like Wanna Get Away). Likewise, the amount of points required to be redeemed for a flight was based on the fare and fare class purchased. Rapid Rewards members could also earn points through qualifying purchases with South- west's Rapid Rewards Partners (which included car rental agencies, hotels, restaurants, and retail loca tions), and they could purchase points. Members

Explanation / Answer

Answer:- Yes, the AirTran acquisition can be seen as a good strategic sense for Southwest. The total revenue generated by AirTran accounted for $2.5 billion with an operating income of $128 million. The acquisition of AirTran will facilitate the entry of Southwest in Atlanta which is considered to be gate constrained. Apart from this, the airline can also see the opportunity to cover Milwaukee, Caribbean, Orlando and Baltimore. Southwest can also be benefitted by transitioning towards the international destinations and this will also add to the new dimension sin the Rapid Reward Program by offering more tourist destinations. By all this , it is expected that Southwest can attract more than 2 million passengers who travel to and fro Atlanta each year.

The management should continue with the free baggage policy as this provides them the competitive advantage over other competitors. They should also focus on customer service and addressing the customer complaints as soon as possible.

Due to increased fuel prices, there is a pressure on the management to increase the fares but I would suggest the management rather than increasing the fares, the airline should focus on increasing r adding new destination and thus increasing the revenue .

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