Southwest Airlines

Southwest Airlines

Introduction

Service is any act or performance that one party can offer to other that is essentially intangible and does not lead to the ownership of anything. It may or may not be tied to a physical product. Services offers could range from a tangible good with accompanying services to a purely intangible service. Services are inseparable, variable, intangible and perishable. To manage these characteristics, the service firms have to develop a differentiated offer and keep on introducing innovations. The example used for a service organisation here is Southwest Airlines which offers a major service with accompanying goods. It is one of the most profitable and successful airlines in the world. It is known as an unusual company because it does not operate in the same way as all the other airline companies.

Southwest Airlines, Inc. is a low fare airline based in Dallas, Texas. It is the largest airline in the United States by number of passengers carried domestically for any one year. Southwest Airlines carried more customers than any other U.S. airline in August 2006, marking it the first time that Southwest Airlines topped the monthly list for combined domestic and international passengers. Southwest Airlines is one of the industry's most profitable airlines and in January 2007, posted a profit for the 34th consecutive year. Its reputation of having low prices and a fun filled atmosphere has made it an icon of pop culture.

In May 1988, it was the first airline to win the coveted Triple Crown for a month - Best On-time Record, Best Baggage Handling, and Fewest Customer Complaints. Since then it has won the award thirty one times, as well as five annual Triple Crowns for 1992, 1993, 1994, 1995, and 1996.

History

In 1967, Southwest Airlines was a vision by an investment advisor Rollin King and his lawyer Herb Kelleher, they wanted to start a different kind of airline. Rollin King already had a small charter that ran between the smaller Texas cities. They began with one simple notion, If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make certain that they have a good time doing it, people will fly your airline. This new airline at first was to fly between the three largest cities in Texas, Dallas, Houston, and San Antonio. Because of the fact that, U.S government was imposing very strict regulations regarding commercial airlines by regulating airline route entry and exit, passenger fares, mergers and acquisitions, and airline rates of return, the primary idea was to focus on a single state area (avoiding governments interfering) and to a substitute market (local) where major operators weren’t giving the proper attention.

The next year in 1968 the Texas Aeronautical Commission approved their planes to fly between the three major cities. In early 1971, Air Southwest changed its name to Southwest Airlines, and the first flight was on June 18, 1971. Its first flights were from Love Field in Dallas to Houston and San Antonio. It offered short hops with no-frills service and a simple fare structure, features that became the basis for Southwest's popularity and rapid growth in the coming years.

In the next couple of years the company went off to a flying start and by the next couple of years it had acquired four planes and employed about 200 people. In the first year of operation the company lost over $3.7 million dollars. It wasn’t until the next year and a half that it was able to turn a profit and ever since then has been doing tremendous. By 1978, Southwest was the most profitable airline in the industry, and had already carried its 5 millionth passenger. The stock for Southwest was listed in the New York Stock Exchange as “LUV.”

Herb Kelleher, in 1982 took over as President, CEO, and Chairman of the board. He was well respected in his position focusing on employee and customer satisfaction. By 1996 the market had added Florida and California to expand in their services. By the year 1999, in the summer Southwest had acquired 55 cities and 29 states that they operated out of, they flew more than 2400 flight a day. In 2006, Southwest was able to fly into Buffalo-Niagara International Airport, and became the the 5th largest in the industry.

The success and profitability of Southwest's business model led to a common trend being named after the company: The Southwest Effect. Since Southwest's original mission in Texas was to make it less expensive than driving between two points (in the early 1970s, during the first major energy cost crisis in the U.S.), they developed a template for entering markets at rates that