For 32 years, Southwest Airline has used the same formula to maintain its position as the most profitable in the U.S. It offers low fares, high-frequency flights, and good service; it flies only Boeing 737s; it doesn’t offer connecting expensive, secondary airports; and it prides itself on having the hardest-working and most productive employees in the industry. The company believes its true competitive advantage is its workforce. Most of the major airlines’ cost per seat-mile is nearly 100 percent higher than Southwest. The company gets this cost advantage by paying its pilots and flight attendants considerably less than the competition and having them fly more hours. It has made up for the lower pay with generous profit sharing and stock option plans. In addition because of Southwest’s rapid growth , it has provided its employees with something rare in the airline industrial: job security. Because a large portion of a Southwest employees’ compensation come in the form of stock options, they have worked harder and more flexible than their peers at other airlines. For instance, pilots will often help ground crew move luggage and work extra hard to turn planes around fast. Of course, many Southwest employees originally joined the company and have stayed because of its spirit of fun. The company has always encouraged employees to work hard but to also have a good time. A sense of humor, for instance, has long been a basic criterion in he selection of new employees.
In the last couple of years, the environment has been changing for southwest. First, it face a number of new, upstart airline in many of its markets. JetBlue, Frontier, AirTrans, Song, and Ted are matching Southwest’s low prices but offering benefits like reserves seating and free live-satellite TV. They’re able to do this because they have newer, more fuel-efficient planes and have young, lower paid workforces. IN many markets, Southwest’s planes and service look dated. The declining stock. The company’s stock option plan no longer looked so attractive to employees. Third, Southwest has to deal with the reality that it is no longer the underdog. For decades, employees enjoy the challenge of competing against United, American, Delta, and other major airlines, They loved role of being the underdogs and having to work harder to survive. Southwest’s employees are increasingly vocal and aggressive in demanding higher wages and shorter hours. In the past, workers were willing to go beyond the call of duty to help the airline thrive. It’s harder for management to motivate employees now by portraying the airline as the underdog. Finally, as the company has grow and matured, management has become more remote from the rank and file. When the company had a few hindered employees, it was for management to communicate its message. Now, with 35,000 workers, it’s much tougher.
Southwest’s management realizes that times have changed. Now they face the question of whether they need to make changes in their basic strategy and, if they do, the effect it will have on the company’s culture. For instance, in the fall of 2003, the company was considering adding in-flight entertainment, although it would cost millions to install and many more to maintain; and purchasing smaller jets to maintain competitiveness in smaller markets. The operating cost of these smaller jets would be 15 to 25 percent higher than those of its current fleet.
For 32 years, Southwest Airline has used the same formula to maintain its position as the most profitable in the U.S. It offers low fares, high-frequency flights, and good service; it flies only Boeing 737s; it doesn’t offer connecting expensive, secondary airports; and it prides itself on having the hardest-working and most productive employees in the industry. The company believes its true competitive advantage is its workforce. Most of the major airlines’ cost per seat-mile is nearly 100 percent higher than Southwest. The company gets this cost advantage by paying its pilots and flight attendants considerably less than the competition and having them fly more hours. It has made up for the lower pay with generous profit sharing and stock option plans. In addition because of Southwest’s rapid growth , it has provided its employees with something rare in the airline industrial: job security. Because a large portion of a Southwest employees’ compensation come in the form of stock options, they have worked harder and more flexible than their peers at other airlines. For instance, pilots will often help ground crew move luggage and work extra hard to turn planes around fast. Of course, many Southwest employees originally joined the company and have stayed because of its spirit of fun. The company has always encouraged employees to work hard but to also have a good time. A sense of humor, for instance, has long been a basic criterion in he selection of new employees.In the last couple of years, the environment has been changing for southwest. First, it face a number of new, upstart airline in many of its markets. JetBlue, Frontier, AirTrans, Song, and Ted are matching Southwest’s low prices but offering benefits like reserves seating and free live-satellite TV. They’re able to do this because they have newer, more fuel-efficient planes and have young, lower paid workforces. IN many markets, Southwest’s planes and service look dated. The declining stock. The company’s stock option plan no longer looked so attractive to employees. Third, Southwest has to deal with the reality that it is no longer the underdog. For decades, employees enjoy the challenge of competing against United, American, Delta, and other major airlines, They loved role of being the underdogs and having to work harder to survive. Southwest’s employees are increasingly vocal and aggressive in demanding higher wages and shorter hours. In the past, workers were willing to go beyond the call of duty to help the airline thrive. It’s harder for management to motivate employees now by portraying the airline as the underdog. Finally, as the company has grow and matured, management has become more remote from the rank and file. When the company had a few hindered employees, it was for management to communicate its message. Now, with 35,000 workers, it’s much tougher.Southwest’s management realizes that times have changed. Now they face the question of whether they need to make changes in their basic strategy and, if they do, the effect it will have on the company’s culture. For instance, in the fall of 2003, the company was considering adding in-flight entertainment, although it would cost millions to install and many more to maintain; and purchasing smaller jets to maintain competitiveness in smaller markets. The operating cost of these smaller jets would be 15 to 25 percent higher than those of its current fleet.
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