1. Now get homework help from help from our live expert on rea ltime basis 2. Join Join us us and and get get home homewo work rk hel helpp 3. http://homeworkping.com/ 4. Assess the US Airline industry indust ry in early 1990’s Airlines' profitability is closely tied to economic growth and trade. During the first half of the 1990s, the industry suffered not only from world recession but travel was further depressed by the Gulf ar. !n 1991 the number of international passengers dropped for the first time. "he financial difficulties were e#acerbated by airlines over$ordering aircraft in the boom years of the late 19%0s, leading to significant e#cess capacity in the mar&et. !A"A's !A"A's member airlines suffered cumulative net losses of (0.)bn in the years from 1990 to 199). *ince then, airlines have had to recogni+e the need for radical change to ensure their survival and prosperity. any have tried to cut costs aggressively, to reduce capacity growth and to increase load factors. At a time of renewed economic growth, such actions have returned the industry as a whole to profitability- !A"A airlines' profits were bn in 199/, less than ( of total revenues. "his is below the level !A"A believes is necessary for airlin airlines es to reduce reduce their their debt, debt, build build reserv reserves es and sustai sustain n invest investmen mentt levels levels.. !n addition, many airlines remain unprofitable. "o meet the reuirements of their increasingly increasingly discerning discerning customers, some airlines airlines are having to invest heavily in the uality of service that they offer, both on the ground and in the the air air. "ic& "ic&et etle less ss trav travel el,, new new inte intera ract ctiv ive e ente entert rtai ainm nment ent syst system ems, s, and and mo more re comfortable seating are 2ust some of the product enhancements being introduced to attract and retain customers. "he 3nited *tates is the largest single mar&et in the world, accounting for 44 per cent of sched schedul uled ed 56s 56s 7)1 7)1 per per cent cent of tota totall sched schedul uled ed passe passeng ngers ers88 in 199/. 199/. "he "he mo most st significant change in the history of the industry came in 19/ when the :ivil Aeronautics ;oard 7:A;8 as&ed :ongress to dismantle the economic regulatory system and allow the airlines to operate under mar&et forces. "his changed the face of commercial aviation in the 3nited 3nited *tates. *tates. :ongress :ongress passed passed the Airline Airline Deregul Deregulati ation on Act in 19%, 19%, easing easing the entry of new companies into the business and giving them freedom to set their own fares and fly whatever domestic routes they chose. Deregulation of the industry was followed uic&ly by new entrants, lower fares and the opening of new routes and services to scores of cities. "he growth in air traffic brought on by deregulation's first two years ended in 19%1 when the country's professional air traffic controllers went on stri&e. "raffic surged again after 19%1, adding (0 million new passengers a year in the post stri&e period, reaching a record )// million passengers in 1990. !n 19%9 events began which severely damaged the economic foundations of the industry. "he Gulf crisis and economic recession caused the airlines to lose billions of dollars. "he industry e#perienced the first drop in passenger numbers in a decade, and by the end of the three$year period 19%9$199( had lost about 3*10 billion $ more than had been made ma de sinc since e its its ince incept ptio ion. n. Grea Greatt airl airlin ine e name names s li&e li&e 6an 6an Am Amer eric ican an and and
disappeared, while others, such as "A and :ontinental Airlines, sought shelter from ban&ruptcy by going into :hapter 11. "oday the domestic industry in the 3* is a low cost, low fare environment. ost of the ma2o ma 2orr airl airlin ines es have have unde undergo rgone ne cost cost restr restruct ucturi uring, ng, with with 3n 3nit ited ed Airl Airlin ines es obta obtain inin ing g employ employee ee concess concession ions s in e#chan e#change ge for euity euity ownersh ownership. ip. *om *ome e airlin airlines es sought sought the protection protection of :hapter :hapter 11 ban&ruptcy ban&ruptcy to restructure restructure and reduce costs and then emerged as strong low$cost competitors. "he ma2ority have entered into cross$border alliances to improve profitability through synergy benefits. !n 1994 6resid 6resident ent :linto :linton n appoin appointed ted the =ation =ational al :ommis :ommission sion to ensure ensure a strong strong competitive competitive industry. industry. !ts recommendati recommendations ons see& to establish establish aviation aviation as an efficient, efficient, technologically superior industry with financial strength and access to global mar&ets. "he early early 1990>s 1990>s were were differ different ent years years for the airlin airline e indust industry ry.. !n the period period 1990$9, 1990$9, airlines lost as much profits as they had made since the industry was deregulated in 19%. "he main reasons1. 3* s reduced the load factors factors 4. 6rice 6rice of 2et fuel fuel ? all all time time hig ). 6erceived 6erceived terrorist terrorist threat threat resulted resulted into into decline decline in in demand demand All this lead to destructive competition and the industry waved red flag to this when it forced an unprecedented industry collapse.
5. How is southwest positioned positioned within the industry? What What is the Competitie strate!y? "he mission of *outhwest Airlines is dedication to the highest uality of customer service delivered with a sense of warmth, friendliness, individual pride, and company spirit. Southwest "ositionin! only low$fare short$haul high$freuency point$to$point carrier fun to fly
At a glance, the company's source of competitive advantage is its low price tic&ets. ost of its customers are people who are willing to forego in$flight meals, direct routes and fancy seats if that would mean for a cheaper tic&et. =ot to imply that *outhwest doesn't
provide direct flights, but that is offered at a higher price. *outhwest Airlines was in better shape than its for a simple reason- their low$cost model. "here were three &eystones &eystones to *outhwest Airlines> Airlines> competitive advantage. "he first first lied in its employee employees s and how they were were managed. managed. *econdly *econdly,, the the firm sought sought to identify identify ma2or threats and opportunities in their competitors, and assess how *outhwest could improv improve e and capital capitali+e i+e on mar&et mar&ets s where their their competit competition ion faile failed. d. And the final final significant success factor was the company>s cost structure. :<@, erb Belleher, was a prime e#ample of how *outhwest fostered a healthy internal environment. e interacted interacted with with customers and employees, employees, promoted company parties and and under underst stoo ood d that that the firm firm was was only only as strong strong as its its em empl ploy oyee ees. s. . *outhwest remained aware of their ever$changing strengths, wea&nesses, opportunities, and threats. "hey sei+ed opportunities to e#pand when other airlines closed their airline services services to some cities cities that they they deemed deemed unprofitabl unprofitable. e. "hey concentra concentrated ted on flying flying to airports airports that were were underutili+e underutili+ed d and close to metropoli metropolitan tan areas. areas.
#. How would you des$ri%e the stru$ture and $ulture o&& Southwest Airline? Stru$ture' :entered on team$building :ross$training encouraged ;road latitude offered 10 of stoc& held by employees *outhwest Airlines is an upside$down pyramid. "he upper management is at the bottom and supports the front line employees, who are the e#perts. "his is erb Belleher's unorthodo# leadership style, in which management decisions are made by everyone in the organi+ation, not 2ust the head e#ecutives. "he company is described to not have much emphasis on structureF instead employees are encouraged to thin& freely without constraints such as titles. *outhwest Airlines values employees, initiating the first profit$sharing plan in the 3.*. airline industry in 19) and offered it ever since. Culture' "he culture of this company is what helps ma&e it a wonderful place to wor& for. "he leaders of this company have tried their best to develop a place where everyone loves to
come to wor& and wants to wor&. anagers who do not follow this theory are stuc& with employees who 2ust come to get as little done and still get paid. !t's !t's a comp compan any y that that not not only only nurt nurtur ures es nutt nuttin ines ess s but but also also ma ma&e &es s its its plea pleasu sure re a reuirement for employment. And it's a company uniue culture, which includes a order that people have fun at wor& which are part of *outhwest, *outhwest, which set itself on low fares and low frills, serving peanuts instead of meals. s a good home Attributes:asual dress code Hield visits *trong guidelines to everyone :elebrations uite common 5ecognition ? an important element *outh est Airlines built numbers on its culture where as most competitors let the culture to shape up by their focus on number s
(. How do Southw Southwest est’s ’s Human Human )esour )esour$e $e *ana!e *ana!eme ment nt pra$ti pra$ti$es $es suppor support+ t+ rein&or$e+ and maintain the $ulture o& the $ompany? *outhwest>s philosophy $ C*ervice for *miles and 6rofits :<@ Belleher, IWe I We want people who do thin!s well+ with lau!hter and !ra$e.I !ra$e. I *outhwest Airlines values employees, initiating the first profit$sharing plan in the 3.*. airline industry in 19) and offered it ever since. *outhwest encourages employees to treat customer service as the most important aspect of their 2ob. !t encourages employees to be innovative, to communicate, understand, and care, to be individualsJ maveric&s even. *outhwest is not afraid to use the Cp words- people, personal, personalities.
its name. *outhwest doesn>t have a uman 5esource DepartmentJit has a 6eople and Keadership Development DepartmentL *outhwest is turning around long$held corporate beliefs by acting on the conviction that a business is not an entityJ it>s people. erb Belleher, chairman and one of *outhwest Airlines> founders, states emphatically Ccompetitors have tried and failed failed to copy us because they cannot copy our people. "he airline believes the best way to succeed is to treat employees with respect and give them the latitude and encouragement they need to do their 2obs better than anyone thought possible. *o how does an airline support individuality, innovation, and fun without creating chaos and anarchyM !n large part, success is due to employee education, much of which ta&es place in *outhwest Airlines> festive learning center- the 3niversity for 6eople. Hirin! !dentify attitudes rather than s&ills 5igorous interviewing 6eer hiring Compensation Naried with position At par with industry norm 6ension through a profit$sharing plan Culture :asual dress code Hield visits *trong guidelines to everyone ave Hun "ogether "reat "reat employees as family ire people who form the fit !nvolve employees
,. How do Southwest’ Southwest’s s Stru$ture+ Stru$ture+ pro$esses+ pro$esses+ $ulture and Human Human )esour$e )esour$es s *ana!ement pra$ti$es relate to the $ompany’s strate!y and its $ompetitie -nironment? hil hile e *o *out uthw hwest est Airl Airlin ines es offe offers rs no fril frills, ls, *o *out uthw hwest est Airl Airlin ines es do me meet et custo custome merr e#pectations when it comes to service. "hey base their model on the motto, which states that Iif they're happy, satisfied, dedicated, and energetic, they'll ta&e real good care of the customers. hen the customers are happy, they come bac&. And that ma&es the shareh sharehold olders ers happy happy,,I *outhw *outhwest est has very very good good relati relations ons with with all their their employ employees. ees.
Airlines Airlines consists solely of ;oeing 4s and offers only coach seats 7there is no business business or first class8. *outhwest Airlines also do not offer in$flight meals, only peanuts and other snac&s. *outhwest is simple and direct at the goal of their serviceF Ia primarily short$haul airline that flies directly from city to city, with 2ust one type of plane$$the ;oeing 4 $ and the lowest costsI. *ervices, such as in$flight meals and lu#ury seats, which have become standard to competitors, have been seen as unnecessary for an airline that provides a short$haul trip from city to city at the lowest cost. "o have opted for a first class, business class, or any form of lu#ury class seat would have been e#cess baggageF most people would prefer to do without it if it meant for cheaper tic&et price. @ne @ne ma ma2o 2orr oppo opport rtun unit ity y for for *o *out uthw hwest est woul would d be to push push the the use use of thei theirr websi website te,, www.southwest.com to www.southwest.com to employ the Ctic&etless passenger strategy. "ic&etless travel cuts the cost in half in comparison to use of a travel travel agency, agency, and with the rising rising price of oil, *outhwest will need to find new ways to &eep costs down and in turn pr ices down. Hirst, Hirst, the com compan pany y is define defined d as Ce#cel Ce#cellen lent t accordi according ng to the criteri criteria a establ establish ished ed by 6eters and aterman. *econd, management$employee relations, organi+ational training and strong leadership are identified as the sources of employee motivation. "hird, loss of strong leadership and organi+ational structure are discussed as possible future problems influencing motivation and service. *outhwest Airline>s concept of service is the true source of motivation and e#cellence. Apart, *outhwest were the first airline with a freuent flyer program to give credit for the number of trips ta&en and not the number of miles flown. "ro$esses and perations 1. Did Did all of its tic&e tic&eti ting ng 7not ma&i ma&ing ng seats seats avai availa labl ble e through through comp comput uteri eri+e +ed d systems8 (. Did not not operate operate in the the hub$and hub$and spo&e spo&e route route system system 4. Hlew Hlew into into uncongest uncongested ed airports airports of small cities, cities, less congest congested ed airports airports of large large cities ). Did not not transfer transfer bagga baggage ge directl directly y to other other airlin airlines es @nly @nly drin&s drin&s and snac&s snac&s often often peanuts served on board 1. "ravel "ravel agents agents had to contact contact the the airlines airlines directly directly to boo& boo& seats seats (. *A passengers passengers flew flew non$stop non$stop origin origin to destination. destination. Did Did not promote promote connecting connecting services 4. *avings *avings in reduced reduced ta#i time, time, fewer fewer gate holds holds and less in$air in$air waiting waiting time time ). !t doesn>t doesn>t coordinat coordinate e its services services with other airlines airlines
%) unioni+ed labor force but its labor relations were e#cellent @nly flew ;oeing 4 $ Hleet of 10 and avg of 100 trips per day. Average age of *A was years7lowest in the industry8 Differentiation in terms of Cturnaround time , ( out of 4 planes were turned$ around in 1 mins. 3sually do not share the ground handling crew until unavoidable @ther airlines flew variety of 2et aircrafts, as many as distinct ones including cDonnell Douglas, Airbus and ;oeing 4>s had average life of (0 years 3* industry average was mins.
Cost Control CAirlines CAirlines don>t have revenue problems, they have cost problems
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:ost :utting 6ilots contributing new ideas to save fuels Huel costs ;uying fuel from vendors who offer best prices - :arry inventory if possible Gate costs O landing Hees Average - (.0 pp, *mall airports- (.00 pp, Karge airports- / $ % pp =o. of Departures a#imi+e productivity of people and machinery .Atleast (0 departures per day Kow cost service @ffering great service at low cost - *A cost per passenger was .4 cents in 1994.
