Did culture help Southwest’s performance over the years? Here think of performan

Question

Did culture help Southwest’s performance over the years? Here think of performance in quantitative and qualitative [or non-quantitative] terms. Performance in quantitative terms includes non-financial, e.g. passenger miles, employee productivity, market share etc. and also financial information in case exhibits. Use necessary number crunching to evaluate quantitative performance in both terms. Evaluate company’s quantitative and qualitative performance historically and relative to its competitors. In your judgement, which elements of its culture helped? Give reasons why.

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

SOUTHWEST’S PEOPLE MANAGEMENT PRACTICES AND CULTURE Whereas the litany at many companies was that customers come first, at Southwest the operative principle was that “employees come first and customers come second.” The high strategic priority placed on employees reflected management’s belief that delivering superior service required employees who not only were passionate about their jobs but who also knew the company was genuinely concerned for their wellbeing and committed to providing them with job security. Southwest’s thesis was simple: Keep employees happy—then they will keep customers happy. had continuously echoed the views of his predecessors: “Our People are our single greatest strength and our most enduring long term competitive advantage.”19 The company changed the personnel department’s name to the People Department in 1989. Later, it was renamed the People and Leadership Development Department. Recruiting, Screening, and Hiring Southwest hired employees for attitude and trained for skills. Herb Kelleher explained:20 We can train people to do things where skills are concerned. But there is one capability we do not have and that is to change a person’s attitude. So we prefer an unskilled person with a good attitude . . . [to] a highly skilled person with a bad attitude. Management believed that delivering superior service came from having employees who genuinely believed that customers were important and that treating them warmly and courteously was the right thing to do, not from training employees to act like customers are important. The belief at Southwest was that superior, hospitable service and a fun-loving spirit flowed from the heart and soul of employees who themselves were fun-loving and spirited, who liked their jobs and the company they worked for, and who were also confident and empowered to do their jobs as they saw fit (rather than being governed by strict rules and procedures) Southwest recruited employees by means of newspaper ads, career fairs and Internet job listings; a number of candidates applied because of Southwest’s reputation as one of the best companies to work for in America and because they were impressed by their experiences as a customer on Southwest flights. Recruitment ads were designed to capture the attention of people thought to possess Southwest’s “personality profile.” For instance, one ad showed Herb Kelleher impersonating Elvis Presley and had the message:21 Work In A Place Where Elvis Has Been Spotted. The qualifications? It helps to be outgoing. Maybe even a bit off center. And be prepared to stay for a while. After all, we have the lowest employee turnover rate in the industry. If this sounds good to you, just phone our jobline or send your resume. Attention Elvis. Colleen Barrett elaborated on what the company looked for (see Exhibit 11) in screening candidates for job openings:22 We hire People to live the Southwest Way. They must possess a Warrior Spirit, lead with a Servant’s Heart, and have a Fun-LUVing attitude. We hire People who fight to win, work hard, are dedicated, and have a passion for Customer Service. We won’t hire People if something about their behavior won’t be a Cultural fit. We hire the best. When our new hires walk through the door, our message to them is you are starting the flight of your life. All job applications were processed through the People and Leadership Development Department.EXHIBIT 11 Personal Traits, Attitudes, and Behaviors That Southwest Wanted Employees to Possess and Display Living the Southwest Way Warrior Spirit Servant’s Heart Fun-LUVing Attitude • Work hard • Follow The Golden Rule • Have FUN • Desire to be the best • Adhere to the Basic Principles • Don’t take yourself too seriously • Be courageous • Treat others with respect • Maintain perspective (balance) • Display a sense of urgency • Put others first • Celebrate successes • Persevere • Be egalitarian • Enjoy your work • Innovate • Demonstrate proactive Customer Service • Be a passionate team player • Embrace the SWA FamilyScreening Candidates In hiring for jobs that involved personal contact with passengers, the company looked for people-oriented applicants who were extroverted and had a good sense of humor. It tried to identify candidates with a knack for reading people’s emotions and responding in a genuinely caring, empathetic manner. Southwest wanted employees to deliver the kind of service that showed they truly enjoyed meeting people, being around passengers, and doing their job, as opposed to delivering the kind of service that came across as being forced or taught. Kelleher elaborated: “We are interested in people who externalize, who focus on other people, who are motivated to help other people. We are not interested in navel gazers.”23 In addition to a “whistle while you work” attitude, Southwest was drawn to candidates who it thought would be likely to exercise initiative, work harmoniously with fellow employees, and be community-spirited. Southwest did not use personality tests to screen job applicants nor did it ask them what they would or should do in certain hypothetical situations. Rather, the hiring staff at Southwest analyzed each job category to determine the specific behaviors, knowledge, and motivations that job holders needed and then tried to find candidates with the desired traits—a process called targeted selection. A trait common to all job categories was teamwork; a trait deemed critical for pilots and flight attendants was judgment. In exploring an applicant’s aptitude for teamwork, interviewers often asked applicants to tell them about a time in a prior job when they went out of their way to help a co-worker or to explain how they had handled conflict with a co-worker. Another frequent question was: “What was your most embarrassing moment?” The thesis here was that having applicants talk about their past behaviors provided good clues about their future behaviors. To test for unselfishness, Southwest interviewing teams typically gave a group of potential employees ample time to prepare five-minute presentations about themselves; during the presentations in an informal conversational setting, interviewers watched the audience to see who was absorbed in polishing their presentations and who was listening attentively, enjoying the stories being told, and applauding the efforts of the presenters. Those who were emotionally engaged in hearing the presenters and giving encouragement were deemed more apt to be team players than those who were focused on looking good themselves. All applicants for flight attendant positions were put through such a presentation exercise before an interview panel consisting of customers, experienced flight attendants, and members of the People and Leadership Department. Flight attendant candidates who got through the group presentation interviews then had to complete a three-on-one interview conducted by a recruiter, a supervisor from the hiring section of the People and Leadership Department, and a Southwest flight attendant; following this interview, the threeperson panel tried to reach a consensus on whether to recommend or drop the candidate. Training Apart from the FAA-mandated training for certain employees, training activities at Southwest were designed and conducted by Southwest Airlines University (formerly the University for People). The curriculum included courses for new recruits, employees, and managers. Learning was viewed as a never-ending process for all company personnel; the expectation was that each employee should be an “intentional learner,” looking to grow and develop not just from occasional classes taken at Southwest Airlines University but also from their everyday on-the-job experiences. Southwest Airlines University conducted a variety of courses offered to maintenance personnel and other employees to meet the safety and security training requirements of the Federal Aviation Administration, the U.S. Department of Transportation, the Occupational Safety and Health Administration, and other government agencies. And there were courses on written communications, public speaking, stress management, career development, performance appraisal, decision making, leadership, customer service, corporate culture, environmental stewardship and sustainability, and employee relations to help employees advance their careers. Leadership development courses that focused on developing people, team-building, strategic thinking, and being a change leader were keystone offerings. New supervisors attended a four-week course “Leadership Southwest Style” that emphasized coaching, empowering, and encouraging, rather than supervising or enforcing rules and regulations. New managers attended a two-and-a-half-day course on “Next-Level leadership.” There were courses for employees wanting to explore whether a management career was for them and courses for high-potential employees wanting to pursue a long-term career at Southwest. From time to time, supervisors and executives attended courses on corporate culture, intended to help instill, ingrain, and nurture such cultural themes as teamwork, trust, harmony, and diversity. All employees who came into contact with customers, including pilots, received customer care training. Altogether, Southwest employees spent over 1.7 million hours in training sessions of one kind or another in 2015:24 Job Category Amount of Training Maintenance and support personnel 148,300 hours Customer support and services personnel 214,700 hours Flight attendants 241,700 hours Pilots 476,300 hours Ground operations personnel 656,400 hours The OnBoarding Program for Newly Hired Employees Southwest had a program called OnBoarding “to welcome New Hires into the Southwest Family” and provide information and assistance from the time they were selected until the end of their first year. All new hires attended a full-day orientation course that covered the company’s history, an overview of the airline industry and the competitive challenges that Southwest faced, an introduction to Southwest’s culture and management practices, the expectations of employees, and demonstrations on “Living the Southwest Way.” The culture introduction included a video called the Southwest Shuffle that featured hundreds of Southwest employees rapping about the fun they had on their jobs (at many Southwest gatherings, it was common for a group of employees to do the Southwest Shuffle, with the remaining attendees cheering and clapping). All new hires also received safety training. Anytime during their first 30 days, new employees were expected to access an interactive online tool—OnBoarding Online Orientation—to learn more about the company. During their first year of employment, new hires were invited to attend a “LUV@First Bite Luncheon” in the city where they worked; these luncheons were held on the same day as Leadership’s Messages to the Field; at these luncheons, there were opportunities to network with other new hires and talk with senior leaders.An additional element of the OnBoarding program involved assigning each new employee to an existing Southwest employee who had volunteered to sponsor a new hire and be of assistance in acclimating the new employee to the job and Living the Southwest Way; each volunteer sponsor received training from Southwest’s OnBoarding Team in what was expected of a sponsor. Much of the indoctrination of new employees into the company’s culture was done by the volunteer sponsor, co-workers, and the new employee’s supervisor. Southwest made active use of a one-year probationary employment period to help ensure that new employees fit in with its culture and adequately embraced the company’s cultural values. Promotion Approximately 80 to 90 percent of Southwest’s supervisory positions were filled internally, reflecting management’s belief that people who had “been there and done that” would be more likely to appreciate and understand the demands that people under them were experiencing and, also, more likely to enjoy the respect of their peers and higher-level managers. Employees could either apply for supervisory positions or be recommended by their present supervisor. Employees being considered for managerial positions of large operations (Up and Coming Leaders) received training in every department of the company over a six-month period in which they continued to perform their current job. At the end of the six-month period, candidates were provided with 360-degree feedback from department heads, peers, and subordinates; personnel in the People and Leadership Department analyzed the feedback in deciding on the specific assignment of each candidate.25 Compensation and Benefits Southwest’s pay scales and fringe benefits were quite attractive compared to other major U.S. airlines (see Exhibit 12). Southwest’s average pay for pilots in 2013 was anywhere from 31 to 92 percent higher than the average pay for pilots at American Airlines, Delta Air Lines, and United Airlines; the average pay for Southwest’s flight attendants ranged from as little as 12 percent higher to as much as 38 percent higher than these same rivals. Its benefit package was the best of any domestic airline in 2013. In 2016, in addition to vacation, paid holidays, and sick leave, Southwest offered full-time and (EXHIBIT 12 Employee Compensation and Benefits at Selected U.S. Airlines, 2005, 2009, and 2013 Southwest Airlines American Airlines Delta Air Lines United Airlines Average pilot wage/salary 2005 $157,420 $137,734 $155,532 $114,789 2009 176,225 137,482 137,948 125,465 2013 229,290 144,266 174,196 153,786 Averageflightattendantwage/salary 2005 $ 42,045 $ 46,191 $ 40,037 $ 35,450 2009 46,839 50,933 39,161 40,559 2013 61,277 52,000 45,945 47,588 All-employeeaveragewage/salary 2005 $ 62,122 $ 57,889 $ 57,460 $ 49,863 2009 75,624 62,961 56,030 58,239 2013 81,675 68,269 72,960 68,056 Averagebenefitsperemployee 2005 $ 26,075 $ 24,460 $ 39,379 $ 20,980 2009 23,820 30,516 28,279 22,749 2013 34,573 27,028 32,638 32,222) part-time Southwest and AirTran employees a benefits package that included: ? A 401(k) retirement savings plan ? A profit-sharing plan ? Medical and prescription coverage ? Mental health chemical dependency coverage ? Vision coverage ? Dental coverage ? Adoption assistance ? Mental health assistance ? Life insurance ? Accidental death and dismemberment insurance ? Long-term disability insurance ? Dependent life insurance ? Dependent care flexible spending account ? Health care flexible spending account ? Employee stock purchase plan Wellness program ? Flight privileges ? Health care for committed partners ? Early retiree health care Company contributions to employee 410(k) and profit-sharing plans totaled $1.74 billion during 2009–2013. In 2013, Southwest’s contribution to the profit-sharing plan represented about 6 percent of each eligible employee’s compensation. Employees participating in stock purchases via payroll deduction bought 1.7 million shares in 2011, 2.2 million shares in 2012, and 1.5 million shares in 2013 at prices equal to 90 percent of the market value at the end of each monthly purchase period. Employee Relations About 83 percent of Southwest’s 45,000 employees belonged to a union. An in-house union—the Southwest Airline Pilots Association (SWAPA)— represented the company’s pilots. The Teamsters Union represented Southwest’s stock clerks and flight simulator technicians; a local of the Transportation Workers of America represented flight attendants; another local of the Transportation Workers of America represented baggage handlers, ground crews, and provisioning employees; the International Association of Machinists and Aerospace Workers represented customer service and reservation employees, and the Aircraft Mechanics Fraternal Association represented the company’s mechanics. Management encouraged union members and negotiators to research their pressing issues and to conduct employee surveys before each contract negotiation. Southwest’s contracts with the unions representing its employees were relatively free of restrictive work rules and narrow job classifications that might impede worker productivity. All of the contracts allowed any qualified employee to perform any function—thus pilots, ticket agents, and gate personnel could help load and unload baggage when needed and flight attendants could pick up trash and make flight cabins more presentable for passengers boarding the next flight. Except for one brief strike by machinists in the early 1980s and some unusually difficult negotiations in 2000–2001, Southwest’s relationships with the unions representing its employee groups had been harmonious and nonadversarial for the most part. However, the company was engaged in difficult contract negotiations with its pilots in 2016. Contract Negotiations with the Southwest Airlines Pilots’ Association Contract negotiations between Southwest Airlines management and SWAPA involved a number of issues, including pay. In 2015, the contracted hourly rate of pay for a Boeing 737 captain at Southwest Airlines was $216 with 78 guaranteed hours per month. The hourly rate of pay for an American 737 captain was $235 with 73 guaranteed hours, while Delta 737 captains were paid $217 per hour for 65 guaranteed hours and captains of United Airlines Boeing 737s were paid $236 per hour for 70 guaranteed hours per month. In mid-2016, SWAPA and its member pilots were concerned with an hourly rate of pay that was the lowest among major carriers and had been unchanged since 2011. Pilots were also seeking improvements to work rules and flying schedules and a separate wage rate for larger 737-MAX aircraft. It was typical in the airline industry for pilot hourly rates of pay to increase with the size of the aircraft. Southwest’s pilots were concerned that the company had made a firm order for 200 Boeing 737- MAX aircraft and had options on an additional 191 planes for delivery between 2017 and 2027, but had not negotiated a wage rate with pilots who would fly the larger planes. The SWAPA and management had sent a tentative agreement to membership for a vote in September 2015, but the terms were rejected by Southwest’s pilots in November 2015. The SWAPA filed suit against Southwest Airlines in May 2016 concerning the lack of a contract with pilots to fly the 737-MAX planes scheduled for delivery in 2017. The No-Layoff Policy Southwest Airlines had never laid off or furloughed any of its employees since the company began operations in 1971. The company’s no-layoff policy was seen as integral to how the company treated its employees and management efforts to sustain and nurture the culture. According to Kelleher,26 Nothing kills your company’s culture like layoffs. Nobody has ever been furloughed here, and that is unprecedented in the airline industry. It’s been a huge strength of ours. It’s certainly helped negotiate our union contracts. . . . We could have furloughed at various times and been more profitable, but I always thought that was shortsighted. You want to show your people you value them and you’re not going to hurt them just to get a little more money in the short term. Not furloughing people breeds loyalty. It breeds a sense of security. It breeds a sense of trust. Southwest had built up considerable goodwill with its employees and unions over the years by avoiding layoffs. Both senior management and Southwest employees regarded the three recent buyout offers as a better approach to workforce reduction than involuntary layoffs. Operation Kick Tail In 2007, Southwest management launched an internal initiative called Operation Kick Tail, a multiyear call to action for employees to focus even more attention on providing high-quality customer service, maintaining low costs, and nurturing the Southwest culture. One component of this initiative involved giving a Kick Tail Award to employees when they did something exemplary to make a positive difference in a customer’s travel experience or in the life of a co-worker or otherwise stood out in exhibiting the values in Living the Southwest Way (Exhibit 11). Gary Kelly saw this aspect of Operation Kick Tail as a way to foster the employee attitudes and commitment needed to provide “Positively Outrageous Customer Service;” he explained: One of Southwest’s rituals is finding and developing People who are “built to serve.” That allows us to provide a personal, warm level of service that is unmatched in the airline industry. Southwest management viewed the Operation Kick Tail initiative as a means to better engage and incentivize employees to strengthen their display of the traits in Living the Southwest Way (and achieve a competitive edge keyed to superior customer service). Management Style At Southwest, management strived to do things in a manner that would make Southwest employees proud of the company they worked for and its workforce practices. Managers were expected to spend at least one-third of their time out of the office, walking around the facilities under their supervision, observing firsthand what was going on, listening to employees and being responsive to their concerns. A former director of people development at Southwest told of a conversation he had with one of Southwest’s terminal managers:27 While I was out in the field visiting one of our stations, one of our managers mentioned to me that he wanted to put up a suggestion box. I responded by saying that, Sure—why don’t you put up a suggestion box right here on this wall and then admit you are a failure as a manager?” Our theory is, if you have to put up a box so people can write down their ideas and toss them in, it means you are not doing what you are supposed to be doing. You are supposed to be setting your people up to be winners. To do that, you should be there listening to them and available to them in person, not via a suggestion box. For the most part, I think we have a very good sense of this at Southwest. I think that most people employed here know that they can call any one of our vice presidents on the telephone and get heard, almost immediately. The suggestion box gives managers an out; it relinquishes their responsibility to be accessible to their people, and that’s when we have gotten in trouble at Southwest—when we can no longer be responsive to our flight attendants or customer service agents, when they can’t gain access to somebody who can give them resources and answers. Company executives were very approachable, insisting on being called by their first names. At new employee orientations, people were told, “We do not call the company chairman and CEO Mr. Kelly, we call him Gary.” Managers and executives had an open door policy, actively listening to employee concerns, opinions, and suggestions for reducing costs and improving efficiency. Employee-led initiatives were common. Southwest’s pilots had been instrumental in developing new protocols for takeoffs and landings that conserved fuel. Another frontline employee had suggested not putting the company logos on trash bags, saving an estimated $250,000 annually. Rather than buy 800 computers for a new reservations center in Albuquerque, company employees determined that they could buy the parts and assemble the PCs themselves for half the price of a new PC, saving the company $1 million. It was Southwest clerks that came up with the idea of doing away with paper tickets and shifting to e-tickets. There were only four layers of management between a frontline supervisor and the CEO. Southwest’s employees enjoyed substantial authority and decision-making power. According to Kelleher:28 We’ve tried to create an environment where people are able to, in effect, bypass even the fairly lean structures that we have so that they don’t have to convene a meeting of the sages in order to get something done. In many cases, they can just go ahead and do it on their own. They can take individual responsibility for it and know they will not be crucified if it doesn’t work out. Our leanness requires people to be comfortable in making their own decisions and undertaking their own efforts. From time to time, there were candid meetings of frontline employees and managers where operating problems and issues between and among workers and departments were acknowledged, openly discussed, and resolved.29 Informal problem avoidance and rapid problem resolution were seen as managerial virtues. Southwest’s Two Big Core Values—LUV and Fun Two core values—LUV and fun—permeated the work environment at Southwest. LUV was much more than the company’s ticker symbol and a recurring theme in Southwest’s advertising campaigns. Over the years, LUV grew into Southwest’s codeword for treating individuals—fellow employees and customers—with dignity and respect and demonstrating a caring, loving attitude. LUV and red hearts commonly appeared on banners and posters at company facilities, as reminders of the compassion that was expected toward customers and other employees. Practicing the Golden Rule, internally and externally, was expected of all employees. Employees who struggled to live up to these expectations were subjected to considerable peer pressure and usually were asked to seek employment elsewhere if they did not soon leave on their own volition. Fun at Southwest was exactly what the word implies and it occurred throughout the company in the form of the generally entertaining behavior of employees in performing their jobs, the ongoing pranks and jokes, and frequent company-sponsored parties and celebrations (which typically included the Southwest Shuffle). On holidays, employees were encouraged to dress in costumes. There were charity benefit games, chili cook-offs, Halloween parties, new Ronald McDonald House dedications, and other special events of one kind or another at one location or another almost every week. According to one manager, “We’re kind of a big family here, and family members have fun together.” Culture-Building Efforts Southwest executives believed that the company’s growth was primarily a function of the rate at which it could hire and train people to fit into its culture and consistently display the traits and behaviors set forth in Living the Southwest Way. Kelly said, “some things at Southwest won’t change. We will continue to expect our people to live what we describe as the ‘Southwest Way,’ which is to have a Warrior Spirit, Servant’s Heart, and Fun-Loving Attitude. Those three things have defined our culture for 36 years.”30 The Corporate Culture Committee Southwest formed a Corporate Culture Committee in 1990 to promote “Positively Outrageous Service” and devise tributes, contests, and celebrations intended to nurture and perpetuate the Southwest Spirit and Living the Southwest Way. The committee was composed of 100 employees who had demonstrated their commitment to Southwest’s mission and values and zeal in exhibiting the Southwest Spirit and Living the Southwest Way. Members came from a crosssection of departments and locations and functioned as cultural ambassadors, missionaries, and storytellers during their two-year term. The Corporate Culture Committee had four all-day meetings annually; ad hoc subcommittees formed throughout the year met more frequently. Over the years, the committee had sponsored and supported hundreds of ways to promote and ingrain the traits and behaviors embedded in Living the Southwest Way—examples included promoting the use of red hearts and LUV to embody the spirit of Southwest employees caring about each other and Southwest’s customers, showing up at a facility to serve pizza or ice cream to employees or to remodel and decorate an employee break room. Kelleher indicated, “We’re not big on Committees at Southwest, but of the committees we do have, the Culture Committee is the most important.”31 In addition, there was a Culture Services Team in Southwest’s executive office dedicated solely to ensuring that the culture of Southwest Airlines remained alive and well; the team’s duties included coordinating the yearly Messages to the Field, planning Spirit Parties at various locations, writing commendations and congratulatory notes to employees exhibiting outstanding performances, organizing the company’s Annual Awards Banquet, and supporting the Corporate Culture Committee. Each major department and geographic operating unit had a Local Culture Committee charged with organizing culturebuilding activities and nurturing the Southwest Spirit within their unit. More recently, the company had created a new position in each of its major operating departments and largest geographic locations called Culture Ambassador; the primary function of cultural ambassadors was to nurture the Southwest Spirit by helping ensure that the Local Culture Committee had the resources needed to foster the culture at each of their locations, planning and coordinating departmental celebrations and employee appreciation events, and acting as a liaison between the local office and the corporate office on culture-related matters. Efforts to Nurture and Sustain the Southwest Culture Apart from the efforts of the Corporate Culture Committee, the Local Culture Committees, and the cultural ambassadors, Southwest management sought to reinforce the company’s core values and culture via a series of employee recognition programs to single out and praise employees for their outstanding contributions to customer service, operational excellence, cost-efficiency, and display of the Southwest Spirit. In addition to Kick Tail awards, there were “Heroes of the Heart” awards, Spirit magazine Star of the Month awards, President’s Awards, and LUV Reports whereby one or more employees could recognize other employees for an outstanding performance or contribution. Other culture-supportive activities included a CoHearts mentoring program, a Day in the Field program where employees spent time working in another area of the company’s operations, a Helping Hands program where volunteers from around the system traveled to work two weekend shifts at other Southwest facilities that were temporarily shorthanded or experiencing heavy workloads, and periodic Culture Exchange meetings to celebrate the Southwest Spirit and company milestones. Almost every event at Southwest was videotaped, which provided footage for creating such multipurpose videos as Keepin’ the Spirit Alive that could be shown at company events all over the system and used in training courses. The concepts of LUV and fun were spotlighted in all of the company’s training manuals and videos. Southwest’s monthly employee newsletter often spotlighted the experiences and deeds of particular employees, reprinted letters of praise from customers, and reported company celebrations of milestones. A quarterly news video, As the Plane Turns, was sent to all facilities to keep employees up to date on company happenings, provide clips of special events, and share messages from customers, employees, and executives. The company had published a book for employees describing “outrageous” acts of service. In 2012, Southwest launched the SWAG (Southwest Airlines Gratitude) initiative, which included a software tool that enabled each employee to set up a profile that listed all the recognitions and awards he or she received. This tool also allowed the employee to send commendations to other employees recognizing their hardworking efforts and/or exemplary performance. Employees who won Kick Tail, Heroes of the Heart, Star of the Month, and President’s Awards were credited with SWAG points that could be redeemed in the company’s SWAG Shop, which contained thousands of items and enabled employees to reward themselves however they found most meaningful.Employee Productivity Management was convinced the company’s strategy, culture, esprit de corps, and people management practices fostered high labor productivity and contributed to Southwest having low labor costs in comparison to the labor costs at its principal domestic rivals (Exhibit 9). When a Southwest flight pulled up to the gate, ground crews, gate personnel, and flight attendants hustled to perform all the tasks requisite to turn the plane quickly—employees took pride in doing their part to achieve good on-time performance. Southwest’s turnaround times were in the 25- to 30-minute range, versus an industry average of around 45 minutes. In 2015, just as had been the case for many years, Southwest’s labor productivity compared quite favorably with its chief domestic competitors: Productivity Measure Employees per Plane, 2015 Passengers Enplaned per Employee, 2015 Southwest Airlines 2,869 72 American Airlines 1,147 109 Delta Air Lines 1,633 104 United Airlines 1,129 116 Source: Bureau of Transportation Statistics, various data tables. Southwest Airlines’s Competitive Standing in 2016 Under Herb Kelleher, instituting practices, procedures, and support systems that promoted operating excellence had become a tradition and a source of company pride. Much time and effort over the years had gone into finding the most effective ways to do aircraft maintenance, to operate safely, to make baggage handling more efficient and baggage transfers more accurate, and to improve the percentage of on-time arrivals and departures. Believing that air travelers were more likely to fly Southwest if its flights were reliable and on-time, Southwest’s managers constantly monitored on-time arrivals and departures, making inquiries when many flights ran behind and searching for ways to improve ontime performance. One initiative to help minimize weather and operational delays involved the development of a state-of-the-art flight dispatch system. Southwest’s current CEO, Gary Kelly, had followed Kelleher’s lead in pushing for operating excellence. One of Kelly’s strategic objectives for Southwest was “to be the safest, most efficient, and most reliable airline in the world.” Southwest managers and employees in all positions and ranks were proactive in offering suggestions for improving Southwest’s practices and procedures; those with merit were quickly implemented. Southwest was considered to have one of the most competent and thorough aircraft maintenance programs in the commercial airline industry and, in 2016 was widely regarded as the best operator among U.S. airlines. Exhibit 13 presents data comparing Southwest against its four domestic rivals on four measures of operating performance.EXHIBIT 13 Comparative Statistics on On-Time Flights, Mishandled Baggage, Boarding Denials Due to Oversold Flights, and Passenger Complaints for Major U.S. Airlines, 2000, 2005, 2010, 2013, 2015–2016 Percentage of Scheduled Flights Arriving within 15 Minutes of the Scheduled Time (during the previous 12 months ending in May of each year) Airline 2000 2005 2010 2013 2015 2016 American Airlines 75.8% 78.0% 79.6% 77.6% 76.3% 81.7% Delta Air Lines 78.3 76.4 77.4 84.5 85.2 87.2 Southwest Airlines 78.7 79.9 79.5 76.7 76.8 81.1 United Airlines 71.6 79.8 85.2 79.3 76.3 80.9 Mishandled Baggage Reports per 1,000 Passengers (in May of each year) Airline 2000 2005 2010 2013 2015 2016 American Airlines 5.44 4.58 4.36 3.02 4.38 3.08 Delta Air Lines 3.64 6.21 4.90 2.15 1.82 1.56 Southwest Airlines 4.14 3.46 4.97 3.72 3.20 2.77 United Airlines 6.71 4.00 4.13 3.47 2.85 2.29 Involuntary Denied Boardings per 10,000 Passengers Due to Oversold Flights (January through March of each year) Airline 2000 2005 2010 2013 2015 2016 American Airlines 0.59 0.72 0.75 0.36 0.79 0.84 Delta Air Lines 0.44 1.06 0.29 0.52 0.22 0.10 Southwest Airlines 1.70 0.74 0.76 0.66 1.04 0.91 United Airlines 1.61 0.42 1.00 1.37 1.00 0.49 Complaints per 100,000 Passengers Boarded (in May of each year) Airline 2000 2005 2010 2013 2015 2016 American Airlines 2.77 1.01 1.08 1.99 3.32 1.99 Delta Air Lines 1.60 0.91 1.21 0.53 0.56 0.45 Southwest Airlines 0.41 0.17 0.29 0.36 0.40 0.29 United Airlines 5.07 0.87 1.47 1.89 2.32 1.99

Explanation / Answer

Southwest Airlines is regarded as a low-cost carrier which indeed has been able to effectively administer the decisive factors of success such as cost and consumer satisfaction. Furthermore it preserves a set of competitive advantage which indeed facilitates them to efficiently differentiate their business from their competitors.

Its business model efficiently leverages operations, concentrates on consumer satisfaction, low-cost pricing, effective logistic solutions, active forward thinking and motivated workers and associates. Through this sound strategy Southwest has been able to attain several competitive advantages which indeed have facilitated them to stay significant and profitable in business.

Southwest Airlines concentrates on recruiting the right employees as it prides itself on being the people-oriented airline that operates with responsive and open-minded workers and team members. Thus it indulges in hiring individuals who indeed can represent the business brand messaging and have a passion for helping customers.

Southwest Airlines by focusing on customer's experience has been able to develop an effectual business policy thus to ensure its consumers acknowledge a pleasant experience Southwest Airlines has set various policies and procedures which in fact facilitates flying with airline enjoyable. Furthermore it also ensures consumers satisfaction even when they need to they cancel their flight tickets thus this facilitates the airline to develop an effective brand loyalty program.

Southwest Airlines offers one of the lowest-priced air ticket solutions thus its pricing policies when compared to other airlines such as Delta facilitates to offer extremely low priced air tickets. Thus it has successfully been able to build a business model which indeed facilitates low operating costs for instance it doesn’t include amenities such as in-flight movies which in fact has helped the airline to effectively reduce its costs.

Southwest Airlines maintains a track record of being very forward thinking boosted by flexible business model which indeed facilitates to support rapid change. Southwest acquired Air Tran which indeed has helped them to gain market share and expand its services. Furthermore it also tries to upgrade its fleet of airplanes with low cost solutions which indeed facilitates to add more capacity which in fact would facilitate them to enhance its earnings and profit potentialities.

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