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Southwest Airlines Southwest Airlines 9 July 2005 9 July 2005

Southwest Airline

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Page 1: Southwest Airline

Southwest AirlinesSouthwest Airlines

9 July 20059 July 2005

Page 2: Southwest Airline

History ofHistory of Southwest Airlines Southwest Airlines

�� 19671967 ����ก�� �������ก�� ���

�� 19711971 ������������������������ TexasTexas ������� ������������� ������ 33 "#$"#$

�� 19731973 �%�ก"�&'()ก$�"��$�$ �*�"���+��,�+��-$ก�.�/0���%�ก"�&'()ก$�"��$�$ �*�"���+��,�+��-$ก�.�/0�� ��'&ก'1�������'&ก'1����� /"2'&ก�'1������/"2'&ก�'1������

�� 19771977 �#$,&���0�$-�'2��1���� "$�,&���#$,&���0�$-�'2��1���� "$�,&�� Down Jones (Down Jones (LUVLUV))

Gary KellyHerb Kelleher

Page 3: Southwest Airline

History ofHistory of Southwest Airlines Southwest Airlines

�� 19791979 0�$��=��'$�ก$������ก��ก���0�$��=��'$�ก$������ก��ก��� Texas Texas

�� 19901990 �?@�=$����,"�ก0��?�2�'A�?@�=$����,"�ก0��?�2�'A 1�$�B��=.�$กก��$1�$�B��=.�$กก��$ $$11 D��"�$�D��"�$�

�� 19941994 ��ก�-ก$�ก����ก�-ก$�ก�� Morris Air Morris Air /"2�����,����ก$�/"2�����,����ก$� TicketlessTicketless TravelTravel

�� 19961996 �������ก$�-�� �*�O�$��������ก$�-�� �*�O�$� www.southwest.comwww.southwest.com

�� 20002000 �?@�=$�ก$������กU)�,V��������?@�=$�ก$������กU)�,V������� 55 0��=,���X0��=,���X

�� 20052005 1D��ก�$�1D��ก�$� 31,00031,000 ���� ��� ��������� ������ Boeing Boeing 429429 "#$"#$ �����&�����& 6060 � ��� �� 3131 ������

Page 4: Southwest Airline

Airlines IndustryAirlines Industry ’’s Fact s Fact withwith Southwest AirlinesSouthwest Airlines

�� ���������������� ��������������ก������������������ ��������������ก�� ““TheThe lowestlowest costcost

providerprovider inin thethe industryindustry””

�� ��������ก����������ก�� �������������� �ก�� !�����"��������������� �ก�� !�����"� �� �������#�ก�$�%�!���!��������#�ก�$�%�!���!� "�����ก�����&��%!�ก���'������(��"�����ก�����&��%!�ก���'������(�� ExpressExpress wayway

�� ������ ���()������������ ���()������ ��)*+�"�� ���������ก��)*+�"�� ���������ก ����()�������ก����()�������ก �� ��� �����,�����&ก��� �����,�����&ก ()�� �� �������ก()�� �� �������ก�� � ��!�)$������� ����ก����ก��ก� ��!�)$������� ����ก����ก��ก ���� )�������()�,�ก����-������� )�������()�,�ก����-��� �� � ),!���ก� ),!���ก ���� )!������ก������ )!������ก�� �ก��ก��ก&��!�.%�!�!��ก��ก��ก&��!�.%�!�!�

Page 5: Southwest Airline

Southwest Strategies Southwest Strategies

1. ก$���กU$�2��� ��'&��,���.����2��� �#$��.��=�

4. -���-����ก$����,$����U�'������$�2���2���B���$-2�?@�%����A�U�ก�-0+��,� �"�

2. ก$� ��=���-'1��1D����#$����ก$�'1������\�0��O.����,$�/"2���U�'3. ก$����������ก$�/"2D�]�$=����,�^ ���$�=�#$�=�

Page 6: Southwest Airline

Low Cost Airlines in IndustryLow Cost Airlines in Industry

Domestics AirlinesDomestics Airlines�� Jet Blue AirwaysJet Blue Airways�� TravelocityTravelocity�� Air Tran AirwaysAir Tran Airways

International AirlinesInternational Airlines�� RyanairRyanair -- IrelandIreland�� Easy Jet Easy Jet -- UKUK�� Virgin Blue Virgin Blue �� AustraliaAustralia�� Air Asia Air Asia �� MalaysiaMalaysia�� NokNok Air Air -- ThailandThailand

Page 7: Southwest Airline

Overall US Airlines Overall US Airlines Performance in 2004 Performance in 2004

0

10

20

30

40

50

60

70

80

90

Millions

American

Americ

a Wes

t

Contin

enta

l

Delta

Northw

est

South

west

United

US Airw

ays

Domestic Passengers Carried

Page 8: Southwest Airline

Southwest 34Southwest 34 --Year Year Comparison Comparison

313,000,000433,400,000(3,753,000)Net Income (Losses)

6.5 billion4.2 billion2,133,000Total Operating Revenues

1,022,000602,5786,051Number of trips flown

59553Number of cities served

70,900,00052,600,000108,554Number of passengers carried

31,00029,005195Number of Employees

4173064Size of Fleet

200419991971

Page 9: Southwest Airline

Question 1Question 1

�� :;<=>=?<กABCกD<กEBFGHCID>กD<JK;:;<=>=?<กABCกD<กEBFGHCID>กD<JK; SouthwestSouthwest L<=IJL<=IJLMNODPQD;กROSD>TUVWGPWQD;กD<FGHCID>กD<JK;:OSE:;<GXLMNODPQD;กROSD>TUVWGPWQD;กD<FGHCID>กD<JK;:OSE:;<GX ?Y=:ZQ[\YD:;กD<]BC<QBC_C?Y=:ZQ[\YD:;กD<]BC<QBC_C 33 LaLa TbD:OQ[กKPLMNODPQD;TbD:OQ[กKPLMNODPQD;กD<[CK;FDSSDPQ\>กD<[CK;FDSSDPQ\>

At the beginning, what forces in the At the beginning, what forces in the environment most affected Southwest Airlines, environment most affected Southwest Airlines, and what opportunity was Southwest founded and what opportunity was Southwest founded to take advantage of?to take advantage of?

Page 10: Southwest Airline

�� Opportunity which Southwest founded to take Opportunity which Southwest founded to take advantage ofadvantage of

–– Southwest Southwest SBC[Oc;YdETDC\EDSBC[Oc;YdETDC\ED ID>กD<JK;<DWD_dกTUVSUID>กD<JK;<DWD_dกTUVSUกD<:OQJ<KกD<TUVPUกD<:OQJ<KกD<TUVPU F<CFEB[\YDF<CFEB[\YD >GC[Le;IKVCTUVBfFIDOก<<S>GC[Le;IKVCTUVBfFIDOก<<SID>กD<JK;FQBCกD<ID>กD<JK;FQBCกD<

–– SouthwestSouthwest gPQhQDCidQJ<KOD<?Y=j;GกCD;TUVSUgPQhQDCidQJ<KOD<?Y=j;GกCD;TUVSUL<=IJกD<klhDกID>กD<JK;BmV;:;<=>=?<กABCกD<[<KVSL<=IJกD<klhDกID>กD<JK;BmV;:;<=>=?<กABCกD<[<KVSJK;JK;

–– SouthwestSouthwest IDSD<_nmHB[W<mVBCJK;IDSD<_nmHB[W<mVBCJK; Boeing 737Boeing 737 --200 200 gPQgPQ:;<DWD_dก:;<DWD_dก [;mVBChDกTDC[;mVBChDกTDC Boeing Boeing iYKFg\Q[กK;BBiYKFg\Q[กK;BB[PB<l[PB<l

Question 1Question 1 (continue) (continue)

Page 11: Southwest Airline

Question 2Question 2

�� กD<FGHCF;\EDh=ID>กD<JK;TUVWEDoP>ID<_dกTUVIfPกD<FGHCF;\EDh=ID>กD<JK;TUVWEDoP>ID<_dกTUVIfP JK;F<CJK;F<C[\YD?Y=[<c\[\YD?Y=[<c\ oP>กD<<GกpD<=PGJFQ;Tf;:OQB>dE:;<=PGJFVbDoP>กD<<GกpD<=PGJFQ;Tf;:OQB>dE:;<=PGJFVbDB>dE[ISBB>dE[ISB

�� h<KChGC:;กD<J<KOD<J<KpGTPQ\>W\DS<=SGP<=\GCgSE\EDh=h<KChGC:;กD<J<KOD<J<KpGTPQ\>W\DS<=SGP<=\GCgSE\EDh=[Le;ZE\C[q<pXกKhAH;O<mBYC[Le;ZE\C[q<pXกKhAH;O<mBYC

How would you chart the development of How would you chart the development of SouthwestSouthwest ’’s businesss business --level strategy over time?level strategy over time?

Page 12: Southwest Airline

Question 2Question 2 (Continue) (Continue)

BusinessBusiness --level strategy over timelevel strategy over time

�� [YmBก:ZQ[W<mVBCJK;[rjD=[YmBก:ZQ[W<mVBCJK;[rjD= Boeing Boeing <fE;<fE; 737 737�� :ZQกY>fTslกD<YP<DWDFGt\oP>ID<:ZQกY>fTslกD<YP<DWDFGt\oP>ID<�� YPFQ;Tf;oP>กD<FGPJ<KกD<FEDCuYPFQ;Tf;oP>กD<FGPJ<KกD<FEDCu TUV[กK;W\DShbD[Le;BBกTUV[กK;W\DShbD[Le;BBก�� [YmBก:ZQI;DSJK;[Ycก[YmBก:ZQI;DSJK;[Ycก OYUก[YUV>CกD<:ZQ<=JJOYUก[YUV>CกD<:ZQ<=JJ HubHub--andand--Spoke Spoke

[OSmB;ID>กD<JK;BmV;[OSmB;ID>กD<JK;BmV; oP>:ZQ<=JJoP>:ZQ<=JJ PointPoint--toto--Point Point ?T;?T;�� LxKJGFKFEBj;GกCD;B>EDCPULxKJGFKFEBj;GกCD;B>EDCPU ?Y=\Gy;s<<STUVPU:;กD<TbDCD;?Y=\Gy;s<<STUVPU:;กD<TbDCD;�� gPQTbDกD<AD>FGt\oP>ID<[BCTGHCOSPgPQTbDกD<AD>FGt\oP>ID<[BCTGHCOSP gSESUกD<AD>iED;FG\?T;gSESUกD<AD>iED;FG\?T;�� gSE:OQW\DSIbDWGNSDก;Gก[กUV>\กGJWEDTbDกD<FYDPgSE:OQW\DSIbDWGNSDก;Gก[กUV>\กGJWEDTbDกD<FYDP�� กD<FGPIK;:hTUVPUj<QBSPbD[;K;กD<TUV<\P[<c\ABCidQJ<KOD<กD<FGPIK;:hTUVPUj<QBSPbD[;K;กD<TUV<\P[<c\ABCidQJ<KOD<

Page 13: Southwest Airline

Question 3Question 3

�� W\DSLYBPzG>:;กD<[PK;TDCW\DSLYBPzG>:;กD<[PK;TDC (Security)(Security)

�� <DWDWEDFGt\oP>ID<<DWDWEDFGt\oP>ID< (Ticket price)(Ticket price)

�� W\DSjCjB:hABCidQoP>ID<W\DSjCjB:hABCidQoP>ID< (Customer satisfaction)(Customer satisfaction)

�� WEDJbD<fC<GกpD[W<mVBCJK;:;<=>=>D\WEDJbD<fC<GกpD[W<mVBCJK;:;<=>=>D\ (Aircraft Maintenance)(Aircraft Maintenance)

�� W\DS<\P[<c\?Y=F<CFEB[\YDW\DS<\P[<c\?Y=F<CFEB[\YD (Air(Air--Traffic Delays)Traffic Delays)

What kinds of dynamics characterize What kinds of dynamics characterize competition in the airline industrycompetition in the airline industry

Page 14: Southwest Airline

Question 4 & Question 5Question 4 & Question 5

�� FBก>HbDFBก>HbD Brand Brand ||Southwest AirlinesSouthwest Airlines}}

�� FQBCWC<=PGJWfkzDjABCกD<J<KกD<TUVPUg\QFQBCWC<=PGJWfkzDjABCกD<J<KกD<TUVPUg\Q

�� TbDTbD Vertical Integration Vertical Integration

�� TbDTbD Horizontal Integration Horizontal Integration

If you were the CEO of Southwest Airlines. If you were the CEO of Southwest Airlines. What would be your action plan in the future?What would be your action plan in the future?

What do you think the future holds for What do you think the future holds for Southwest?Southwest?

Page 15: Southwest Airline

Question 4 & Question 5Question 4 & Question 5(continue) (continue)

�� [jKVS<dL?JJกD<:OQJ<KกD<TUV?LYก:OSE[jKVS<dL?JJกD<:OQJ<KกD<TUV?LYก:OSE

�� [jKVSกYfESYdกWQDFYDPJ;JQDC[jKVSกYfESYdกWQDFYDPJ;JQDC

�� W\<TbDกD<TPYBCJK;<=>=gกYSDกAH;W\<TbDกD<TPYBCJK;<=>=gกYSDกAH;

�� ODjG;sSKF<:;กD<PbD[;K;sf<กKh[jKVS[FKSODjG;sSKF<:;กD<PbD[;K;sf<กKh[jKVS[FKS

Page 16: Southwest Airline

Thank you very much.Thank you very much.