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Southwest Airlines
A Maverick Company with a Maverick CEO 

by
Sherwin Keak

If you think commercial air travel isn’t what it used to be then you haven’t flown Southwest Airlines.  Long distance travel was once a perk limited to the upper crust.  The advent of commercial airline travel has made it possible for virtually anyone to get across the country or across the globe, for what is practically a pittance. But somewhere along the way, most major carriers became too complacent and just could not seem to keep it together.  Enter Southwest Airlines is a maverick company with a maverick CEO.  Southwest Airlines is breaking all kinds of records for affordable airfares, on time service, and customer and employee loyalty.  The airline manages these feats while also also doing what seems to be the impossible for most other airlines, it's profitable!   

It has been over a year since the September 11th attacks and our nation’s airline industry has suffered huge losses in revenues because of them.  Southwest Airlines however, has been the only major U.S. carrier to post a profit, with or without the federal grant, during the fourth quarter of 2001 and for the full year of 2001.  Southwest also happens to be the best U.S. stock of the last thirty years as quoted in the 2002 fall issue of Money.  Jon Birger of Money says that since August 1972, Southwest has produced annualized returns of 25.99%, which means that if you had invested $10,000 in Southwest thirty years ago, it would be worth a little over $10.2 million today.  Southwest Airlines has been able to consistently turnout profit the last twenty-nine years because of their commitment to low fares through innovations such as “ticketless” travel and online reservations, efficient aircraft turnarounds, and excellent customer service.  

Southwest was the first major airline to offer system-wide “ticketless” travel.  The way it works is when a reservation is booked; the customer gets a receipt or an email confirmation for the flight.  All that is needed is a picture identification of the customer to board the plane.  Ticketless flights are far more flexible than ticketed flights because in the event that the flight is cancelled or the customer cannot make it to the flight, there will be a credit made in the purchaser’s name that can be used as funds for a flight for the purchaser or it can be used to issue a ticket to whomever the purchaser decides to give the tickets out to -- for up to a year.  The ticketed flights are not as flexible.  The credit from a flight in which the tickets were not used can be used for a ticket that is issued only in the purchaser’s name -- for up to a year. 

Southwest was also the first major airline to use an efficient no-seat assignment boarding process that facilitates quick turnarounds.  In this manner, the planes can be in and out of the airport faster than the other airlines that do not use the no-seat assignment boarding process.  Southwest planes are generally at the gate less than 25 minutes.  The less the amount of time at the gates means less money that the plane, their primary profit maker, is wasting at the gates.  The planes are up in the air earning money for the company.

Jeffrey Pfeffer, a Stanford professor who studies organizational behavior, states in the fall 2002 issue of Money, “I used to have my students go to the San Francisco airport to compare how long it takes Southwest to turn around a plane vs. how long it takes a major airline like United.  It takes the majors more people and twice as long to turn around the very same aircraft.”  Furthermore, Southwest uses only one type of airplane, the Boeing 737.  Using only one type of airplane significantly simplifies scheduling, operations, and maintenance, thus minimizing costs.  And lastly, Southwest was the first major airline to create its own homepage on the Internet offering online booking.  This expands the ways in which a customer can obtain tickets, making it easier for customers to obtain flights so that a customer can reserve a flight through a travel agency, ticket agent at the airport, on the phone, or online.  About 45% of the company’s reservations are received over the Internet.  This cuts costs by having the customer directly ordering the tickets for themselves, instead of having a ticket agent order the tickets for them.  It also allows the customer to compare prices of different flights that Southwest offers. 

Customer service at Southwest is very important to the employees and to the customers they serve, and my recent experience with them shows that they care for their customers.    Through an employee stock-purchasing program, which was started in 1973, employees own about 13% of the company’s stock.  This enables the employee to feel that in a sense, they are working for themselves.  Whether just asking a question on the phone with a Southwest representative, or help from a flight attendant, Southwest employees’ customer service skills shine brilliantly compared to other major airlines. 

I scoped up one of Southwest Airlines great airfares from Southern California to the Bay Area and took SWA on a test drive.  As I approached the gate agent at the start of my trip, I was greeted with a warm smile and informed that they would start boarding passengers on the plane soon.  I don’t fly too often, and I usually don’t like flying on a plane, because I get motion sickness.  I suppose I had some anxiety about flying in the wake of the terrorist attacks too.  But when I entered the Southwest plane, the warm smile and greeting from the flight attendant and the comradely between the passengers and the flight crew helped me feel a bit more relaxed. 

I choose a seat (you get your choice) and settled in for the flight.  I don’t usually notice this but as the flight attendants showed us our emergency oxygen masks, emergency exits and whatnot.  They made the mundane announcement many passengers ignore interesting and they manner was professional and their attitude was reassuring.  The second we reached cruising altitude an attendant came over with a pad to take my drink order.  Then a few minutes later it was served to me.  Rather than a single snack packet I was encouraged to take as many as I wanted. They also were more than happy to keep my drink refreshed until it was time to prepare for final approach.  The flight crew was busy the entire time serving the passengers and they seem genuinely happy to be doing so.  What I like about the way they handle thing is there is no cart blocking your way so you can get in and out of your seat without being trapped.  Also they come through the isles frequently to refill your drinks or collect refuse so that you don’t end up stuck with trash on your tray or seat pocket for extended periods.

I found the flight crew to be courteous, friendly, and efficient.  The flight did not seem to last that long and before I knew it we had landed in San Jose.  At that time, the flight attendants let us out of the cabin and wished us a pleasant stay in San Jose. 

That is one more reason Southwest does well: the deliver efficient service with a smile.  Those were just some of the reason Southwest does so well compared to its competitors, but one may stop and wonder how did Southwest get to where it is now? Southwest started as an idea on a cocktail napkin between herb Kelleher, an attorney, and Rollin King, a businessman.  It started off with a three-plane fleet and was inaugurated on June 18, 1971 with flights to Houston, Dallas, and San Antonio.  The creation of Southwest Airlines officially created the low-fare category in the airline industry.  Within three years, Southwest was operating profitably and carried their millionth customer.  Today Southwest is the fourth largest airline in the United States (in terms of domestic customers carried).  And in the aftermath of the terrorist attack, Southwest is still continuing its growth in the east; it now flies to 59 airports in 30 states from coast to coast and border to border.  

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About the Author

Sherwin Keak writes about snow and water sports, travel, and dining when he is not studying social ecology and communications at the University of California, Irvine.   Sherwin is on the swim team and is an avid polo player and alpine skier.  Although  English is his first language, Sherwin is also fluent in Fukienese Chinese, and Tagalog.  He doesn't have much free time because of school and work, so when he does have some free time he makes the best use of it he can.  You can reach Sherwin at:  sherwin@travel-watch.com.

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