South West Airlines Analysis

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Table of Contents

Introduction
Changes That Could Occur
Measures Taken by Southwest Airlines
Kotter’s Eight Step Change Model
The Effectiveness of the Changes Implemented by the Southwest Airlines
References

Introduction

All business organizations operate in a dynamic environment that keeps on changing from time to time. This environment refers to all the elements that exist either outside or within the organization that affect the organization both positively and negatively.

Therefore, for an organization to ensure its continued survival, it has to adapt accordingly to these changes. Failure to which, it risks collapse. This paper, therefore, seeks to analyze ways in which an organization can implement changes so as to ensure its survival. Southwest airlines will be used as a case study for better understanding.

Changes That Could Occur

Every business, irrespective of the industry in which it operates, faces the risk of change in the business environmental conditions. Some of these changes may be due to; changes in technology, political instability, terrorist threats, natural disasters, rising prices of energy, changes in consumer preferences, increased costs of production and many more.

However, since this case study is in the airline industry, only a number of those mentioned above will be applicable. Southwest Airlines is a renowned airline in Dallas which, due to the recent upheaval in the business environment, has had to come up with measures to ensure that it remains in business. It is one of the few businesses that have managed to make profits despite the constant changes (Kathleen, 2008).

Before going into detail, it is critical to analyze the problems that the airline industry encountered as a whole. Being an industry that heavily relies on energy, it is, therefore, normal that the fluctuating prices in energy, specifically oil, will be a significant set back. Fluctuating oil prices have been an enormous headache to the economy as a whole.

In the airline industry, a rise in oil prices means a subsequent rise in fuel prices. Airlines are, therefore, forced to transfer these increasing costs to passengers through increased air fare. As a result of this vicious cycle, airlines have been experiencing low demand for their services hence reduced revenues as compared to increased unit costs.

Another significant problem has been the rising inflation rates which have led to a general and persistent increase in the prices of labor, airport cost and maintenance costs. The current weather conditions have also been a dominant problem. It has led to losses in revenue in the airline industry due to cancellations in flights emanating from poor visibility. Others include increased competition within the industry and rising unit costs.

Measures Taken by Southwest Airlines

With this in mind, we shall now concentrate on the measures that southwest airlines have taken so as to ensure continued growth, profitability and customer satisfaction. One of the effective measures taken that has seen Southwest Airlines emerge as one of the most profitable firms in the United States is the low air fares that it offers compared to its competitors.

Southwest Airlines, unlike its competitors, chose to stick to charging lower rates despite the low demand of airline services by customers without compromising the quality of services offered. By using this strategy, it aimed at increasing the number of people who chose to fly with the airline despite the reduced demand. This has seen them increase their revenues as more people opt to fly with them especially in these hard economic times as opposed to their competitors (Kathleen, 2008).

To ensure its survival and its continued market dominance, Southwest airlines also introduced new products, which included the “early bird check in”, and a package that allowed passengers to travel with their pets at an affordable rate. The “early bird check in” gives passengers the luxury of checking-in in advance.

These new products have contributed to increased revenues, due to an increase in the number of passengers using the airline as it has given them an edge over other airlines. To deal with the increasing rise in costs, the airline, instead of downsizing in the normal way, the airline has come up with a plan that gives the employees an option to retire earlier than they are required by law.

This move has worked to their advantage as a number of employees have welcomed this plan. This has enabled the company to reduce the number of employees to a reasonable size without causing any conflict between senior management and lower level employees. This has also ensured that the employees remain loyal and highly motivated towards their work (Hewlett, 2006).

The airline, in these turbulent business environmental conditions, has given great importance to financial management. It has done this by ensuring that it maintains healthy cash balances by constantly looking at a new way to generate revenue. It has also resorted to selling and leasing some of its aircrafts as a way of raising more money to cater for the rising unit costs.

The airline is also keen on maintaining a minimum level of debt so as to reduce chances of insolvency. Due to the ever changing consumer behavior and preferences, the airline has introduced a range of new products so as to enhance customer loyalty and attract new customers. Some of these products were mentioned above.

They include the “early bird check in”, the package that allows passengers to travel with pets, and an internet package that allows passengers to browse while on board, a Wi-Fi enabled aircraft and not charging the passengers for their luggage. This has seen an increased market share and has warded off some of competition from other airlines (Hall, 2008).

In these turbulent business environmental conditions, the airline recognizes that it does not have enough capital at its disposal and has, therefore, taken to postponing the expansion of the airline. It has instead identified the unprofitable areas in the business and ceased their operations with the aim of transferring this man power to areas that are more profitable. This has led to a significant increase in the airline’s revenues.

It should, however, be noted that there are certain elements that are beyond an organization’s control. In our case, they include; natural disasters, unfavorable weather, for example, the recent case of snow which has seen many airlines cancel their flights and lose billions of dollars in revenues, and political instability (Yilmaz, 2008).

Kotter’s Eight Step Change Model

One can use Kotter’s eight step change model to describe the changes that have been implemented by the airline. Kotter’s model recommends that the first step to change is dependent on the top management identifying the need for change and subsequently creating pressure and urgency for the change to occur.

With respect to this, it is clear that the management of the airline identified the current turbulent business environment conditions and quickly created the urgency and need for change as they realized that change was necessary if they were to thrive in the airline industry. The second step in this model is to educate and communicate the need for change to other subordinate employees so as to minimize chances of resistance in the implementation stage (Global Literacy Foundation, 2010).

Based on the successes of the strategies that the airline implemented, it can therefore be said that they successfully carried out the second step of Kotter’s model of change. Kotter then goes on to give the third step as generating ideas or coming up with a vision. This idea or vision could be a model or a concept that could be implemented by the organization.

In the case of the airline, the changes that were implemented in the end were the ideas that were generated in this step (Global Literacy Foundation, 2010). Some of them include; the introduction of new products by the airline, sticking to their low air fares policy, coming up with the voluntary early retirement policy and many more.

The fourth step is communicating the ideas to every one in the organization to allow for debating and also to ensure that everyone in the organization is involved and catered for so as to avoid future resistance especially in the implementation stages. Still, given the success of the changes that were implemented by the airline, it can be safely assumed that this step was also carried out successfully (Hewlett, 2006).

The fifth step, according to Kotter involves eliminating the objects or the people who are resisting the change. This can be done through educating the people who are resisting the change and allowing them to air their grievances. The organization should also ensure that the leaders in charge of supervising are qualified for the jobs.

This step still falls in the planning stages of Kotter’s model for change and, therefore, we can only assume that it was a success for the airline given that they were able to see their visions and ideas to the end. The sixth step according to Kotter is to create short term goals which are achievable. It should be noted that it is of vital importance for these short term goals to be achieved by the organization.

Failure to achieve these goals will only prove the critics and the people resistant to the change right. This will in turn make it very difficult for the organization to progress with its plans hence making it vulnerable to failure. It is also a very important step as the achievement of short term goals motivates the employees of the organization (Hall, 2008).

Southwest Airlines in light of this ensured that they put in place short term goals. These goals were in the form of quarterly reports, which were supposed to show the airline’s progress in terms of it financial position, its market share, its efficiency in managing its finances and whether its aim to reduce capital spending had been achieved. The seventh step entails seeking to improve the changes already realized through the short term goals. This plays a key role of ensuring that the organization remains keen on continued growth and improvement.

Using the Southwest Airlines as an example, it can be seen that the airline did not stop at the successes that were achieved as shown by their quarter year reports. They went the extra mile and looked for more ways in which they could improve the changes already implemented. They did this by looking for more products that they could offer the passengers, more ways of raising more capital that they could use for other profitable ventures (Yilmaz, 2008).

The last step according to Kotter’s model is reinforcing and implementing the change into the organization. It is the responsibility of management to ensure that the changes are accepted and internalized by everyone in the organization. This step requires the change to be introduced on a large scale level, with the result being its absorption into all parts of the organization.

In addition to the reinforcement, there should be a regular follow up of the changes that have been implemented, so as to ensure that things continue to run smoothly and also to provide room for improvement. Using the Southwest Airlines as an example, it can be noted that these changes were reinforced and they became a part of the airline. Some of these changes have largely contributed to the airline’s success (Yilmaz, 2008).

It can be seen that the airline made the strategy for charging low air fares a part of it and the airline even became popular because of this. In addition, it adapted a plan that gave its employee the option of leaving employment voluntarily even before they had reached the proper retirement age.

This brought about a culture of respect among the employees and management. The new products that were introduced by the Southwest Airlines for example “the early bird check in”, the package that allowed passengers to travel with pets and the package that made it possible for passengers to access the internet also became a part of the organization. The importance that the Southwest airlines attached to proper financial management also became a part of the organization (Hewlett, 2006).

The Effectiveness of the Changes Implemented by the Southwest Airlines

Every organization is always faced with a dilemma when it comes to change. This is because of the uncertainties that change brings with it. However from the above analysis, it is evident that for an organization to survive in the current turbulent times, change is inevitable. The effectiveness of the changes implemented by the Southwest Airlines can be seen in their annual reports.

The airline’s returns have greatly improved despite the current poor economic conditions. The company recorded losses in the first quarter. However, the airline was able to turn this around and report profits unlike it competitors. The effectiveness of these changes can also be seen as passengers have increasingly become more loyal to the airline compared to others. The airline has also recorded an increase in new passengers who now prefer the airline as opposed to other airlines (Hall, 2008).

Southwest airlines have also experienced a reduction in operating costs due to the measures that it put in place to curb the rising costs of operation for example the postponement of expanding the airline, introducing a voluntary retirement scheme for the employees, and looking for different ways to deal with the rising energy costs.

Due to its insistence on the need for proper financial management, the airline has been able to maintain very low levels of debts hence eliminating the possibility of insolvency. It has also been able to find new and innovative ways to improve its liquidity position. Therefore, when all is said and done, the changes that the Southwest Airlines implemented have been more effective than disadvantageous (Kathleen, 2008).

References

Global Literacy Foundation. (2010). Kotter’s 8-Step Change Model. Web.

Hall, A. (2008). Organizational Pay Analysis: A Case Study of Southwest Airlines. Web.

Hewlett, R. (2006). The Cognitive leader. London: Rowman & Littlefield Pub Inc.

Kathleen, B. H. (2008). From Analyst to Leader: Elevating the Role of the Business Analyst Management Concepts. London: Free Press.

Yilmaz, A.K. (2008). The Corporate Sustainability Model for Airline Business. Web.

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