southwest-airlinesdoc - PLU - Pacific Lutheran University .doc by censhunay


									                                                                                   Chester Boswell
                                                                                Andrew Dahlhauser
                                                                                   Michele Hulbert
                                                                                     Alvin Quicho

The Mission Statement

       The mission statement of Southwest Airlines declares that it is "dedicated to the highest

quality of Customer Service delivered with a sense of warmth, friendliness, ind ividual pride, and

Company Spirit." And to its employees, Southwest Airlines pledges a commitment "to provide

our Employees a stable work environment with equal opportunity to learn and for personal

growth. Creativity and innovation are encouraged for improving the effectiveness of Southwest

Airlines. Above all, Employees will be provided the same concern, respect, and caring attitude

with the organization that they are expected to share externally with every Southwest Customer."

(, 1998) The mission statement is prominently displayed everywhere within their

system. The employees understand the mission statement because of the creative way the

Employee Communication department distributed the new mission statement. ―Every

Southwest employee received a copy of the mission statement disguised as a prize in an

oversized box of Cracker Jacks.‖ By such innovative means was the mission statement

disseminated throughout the entire organization of Southwest Airlines.(Freiberg, 1996)

       Southwest Airlines is a principal supplier of air transportation in the United States for the

conveyance of passengers for business and leisure purposes. In accordance with its mission

statement, Southwest Airlines has recognized the importance of customer service and has trained

its employees to conform, in accordance with responsible awareness of their customers and their

needs. Southwest Airlines "primarily provides short haul, high frequency, point-to-point and

low- fare throughout the US. It has gained added exposure through an ability to continue to

generate profit despite the presence of a very difficult economic environment, particularly in the

airline industry." (Datamonitor, 2004)

       With its primary focus on customer relations, Southwest Airlines has assumed the

number one ranking in performance within the airline industry. Southwest Airlines was able to

declare 31 years of consecutive profitability, "an airline industry record that has also generated

unprecedented airline job security as exceptional profit-sharing for our marvelous employees, as

well as exceptional investment returns for shareholders, including employee-shareholders."

(, 2004) Southwest Airlines will want to continue to be the number one airline in

the low-fare industry over the next five years. This company has the ability to be at the top of

their industry. Southwest Airlines plans to expanding airport facilities to accommodate future

customer‘s needs in the following cities: Baltimore/Washington, Chicago Midway, Fort

Lauderdale, Houston Hobby, Las Vegas, Long Island/Islip, Oakland, Orange County, Orlando,

Phoenix, and Tampa Bay. They also plan to increase their air fleet by 13 new 737-700s to take

advantage of the new markets being exposed by the failure of other competitors. People are

looking for inexpensive ways to fly from one destination to another. Southwest Airlines will

have some stiff competition, but they are a well-known company and if they continue to operate

as they have been they should be able to weather the changing environment.


       The stated objectives of Southwest Airlines as an organization are reflected in its

performance as the following: "Southwest retained its leadership in Customer Satisfaction, again

receiving the fewest Customer complaints per 100,000 Customers carried, as reflected in DOT

statistics compiled from reports furnished to DOT by the largest domestic air

carriers."(, 2004)

        As part of their objectives, Southwest Airlines will increase their fleet to better serve their

customers. "Southwest expanded its fleet by a net 13 new 737-700s and increased our available

seating miles by 4.2 percent.‖ (, 2004) With a larger fleet, they will be able to

offer more destinations and more frequent service to their cus tomers. With more destinations

and more frequent flights, the profitability of the company will continue to increase.

        ―Southwest continued to equip our new aircraft deliveries, and to refurbish our existing

fleet, with our fresh and attractive Canyon Blue and craft livery; all leather interiors in Blue

Canyon and Saddle Tan; new design seats affording superb personal comfort; and anesthetic

Blended Winglets, improved aircraft performance by extending range, saving fuel, and reducing

engine maintenance costs, and takeoff noise." (, 2004) The Spirit program

introduced in January 2001, a five year seating design change involving padded leather seat

cushions and additional foot room for the customer‘s comfort. At issue is whether the emphasis

should be upon unused seats revealing inability to generate profits versus decreased seating and

declaring a commitment to achieving greater customer comfort as a ploy to fill the available

seating. Corporate management is directing and supporting a progres sive attitude of

achievement shared by the entire structure of the Corporation.

SWOT Analysis

        The Strength, Weakness, external Opportunities, Threats (SWOT) Analysis for

Southwest Airlines determined the company strengths to be the following:


   1.   A sensible expansion policy -- paying particular attention not to strain the balance sheet.

        "Southwest has been able to become a national airline by strategic expansion to airports

        where there is less competition. … The continued growth of the company is testament to

     the strategic direction its management has taken, but quickly considering the difficult

     environment.‖(Datamonitor, 2004) for example, business. The acquisition of ATA gate

     facilities at Chicago Midway is instrumental for Southwest Airlines to realize expansion

     into the Midwest market. This also indicates other competitors, who are suffering

     financial difficulties, are inadvertently contributing to future expansions which are

     unforeseen advantageous opportunities. (Airline Industry News, 2004)

2.   Business model -- "Due to a change in passenger profile, business class and first class

     have suffered declining demand. Many companies have therefore been forced to

     introduce low-cost fair options. Since Southwest provides low-cost, standardize travel

     options, it has no need to change strategy -- saving massively on restructuring cost. The

     company also benefits from its long establishment in the low-cost airline market,

     allowing the company to capitalize on significant customer awareness of the brand. On

     the efficiency front Southwest was first to introduce to the airline industry the 10- minute

     turnaround (between arrival at the gate and departure). This subsequently increased

     demand for short flight routes."(Datamonitor, 2004) We agree with this official

     statement to some extent. However, by varying pricing to encourage seasonal and

     volume usage will further increase profitability and public relation advantages.

3. Very strong financial -- "Southwest has the strongest market capitalization and balance

     sheet of all rivals in the sector. A market capitalization of $14,022 million accounts for

     twice the market capitalization of the five largest rivals put together. In the current

     volatile market now, it should allow Southwest to overcome short-term downturns in

     demand more successfully than the other main carriers. The continued ability of

     Southwest to produce positive results highlights it among all rivals. 2003 saw quarter on

     quarter on quarter increases in income, representing 51 consecutive quarterly profit rises.

     Revenues for the full year 2003, which were $5,937 millions, increased 7.5% against

     2002 revenues." (Datamonitor, 2004) The biggest reason Southwest Airlines was able to

     weather 9/11 was ―because we were financially prepared we were able to persevere

     through these difficult times and build a stronger Southwest.‖ (, 2004)

     The contracts for the new airplanes had already been paid for and a decrease in passenger

     revenues was not so extensive as to prevent rapid recovery. Other airlines also lacked the

     foresight that Southwest Airlines achieved by arranging fuel credits with its suppliers as

     an offset for rising fuel costs.


  1. Little room for strategic development -- "The main weakness of the company results from

     operating in a highly competitive market, one that is increasingly susceptible to a volatile

     political environment. The airline industry is highly competitive as to fares, frequent-

     flier benefits, routes, and services. Some carriers competing with Southwest have larger

     fleets and a more established name. Many carry passengers from the major hubs in the

     US, holding long-standing relationships with these airports.‖ (Datamonitor, 2004)

  2. No established alliances -- "Certain major US airlines have established marketing

     alliances with each other, including Northwest Airlines/Continental Airlines, American

     Airlines/Alaskan Airlines, and Continental Airlines/America West Airlines. In 2001,

     AMR Corp., parent of American Airlines, completed its acquisition of the asse ts of Trans

     World Airlines. This put enormous strain on the company to maintain its position in the

     industry while running a smaller fleet." We think this is a customer service weakness

     because when a customer changes carriers on a flight, say from Southwest to Alaska, a

   customer needs to pick up their luggage from Southwest and then check their luggage in

   with Alaska. This can create problems for the customer if the customer has a short

   layover, they could potentially miss their connecting flight. Also, some customers do not

   know that they have to collect their luggage and recheck it in with their new carrier,

   many times they will lose their baggage in transit.


1. Develop low cost offering further—Southwest must maintain the link between their

   brand and low cost airfare. The incident on September 11th left many potential flyers

   grounded. A way for the company to regain the trust of the public was to lower their

   already low prices. ―The company must keep prices as low as possible in order to

   stimulate demand, and look to redistribute expenses though other areas.‖ (Datamonitor,

   2004) The external environment represents the economic downfall, reluctance to travel

   long distances for vacations and uncertainty of employment opportunities as jobs become


2. Streamlining and automation—Streamlining and automation is necessary in hastening the

   airport experience, especially, in this time of increased security. The company has

   already expanded ticket counters and security checkpoints. They also have replaced the

   traditional plastic boarding card system with an automated-one and soon to roll out with

   self-check- in technology that will reduce boarding time and separate them from

   competitors who will still have longer waiting.

3. Expand geographically—with a market share of 50% and growing, and the increase in the

   number of cities and networks it is linked to, ―Southwest could begin to target large city

   markets and with such a strong brand name, both marketing and public relations costs

   will reduce.‖ (Datamonitor, 2004) Also, with the dilemma other airline companies are

   facing, this is the perfect time for the expansion to new markets. Rather, than engage in

   mergers or alliances, Southwest Airlines is finding it more advantageous to acquire

   needed resources left exposed by competition failures (i.e. ATA)


1. Costs of Operations—With all the heightened security resulting from the terrorist attacks,

   commercials airlines have taken on a variety of different costs. Southwest now faces

   higher ―war risk insurance and passenger security costs‖ (Datamonitor, 2004) due to the

   rowing security laws that are being established. Since Southwest focuses mainly on

   budget flights, it will be difficult for them to see a return from the passengers on these

   extra costs. For the taxes and insurance costs this is the same payments that all the other

   airlines are equally exposed. Recently, Southwest Airlines raised the prices on their

   promotional deals instead of flights costing $99 the flights now cost $149. This change

   in pricing could be a result of the increased risk insurance and security costs. (Industry

   Briefs, 2004)

2. Commercial airline environment—the well known day of September 11th has played, and

   will continue to play, a large role in the costs increases in the commercial airline

   environment over the past few years. ―Despite the threat abating slightly, the political

   environment is no more stable, questioning the benefit of forecasting and the security of

   the future.‖ (Datamonitor, 2004) Southwest has been capable of offsetting the added

   costs by cutting cost in other areas within the company. The company feels that they will

   ―be able to continue to offset future cost increases resulting from the changing

   commercial airline environment.‖ (Datamonitor, 2004) This external environment is

       changeable as economic recovery occurs. Also, at issue is decreasing concern evidence

       by holiday travel with security and decreasing service previously required or expected.

       People are exchanging financial advantage/savings for benefits now being slowly

       eliminated by the airline industry.

  3.   Varied competitive factors—Due to the ―varying degrees of competition from surface

       transportation in its short-haul markets, particularly the private automobile‖

       (Datamonitor, 2004) Southwest could be threatened. Although, price is one of the most

       competitive factors in this competition between short-haul air services and surface

       transportation, factors such as, ―frequency and convenience of scheduling, facilities,

       transportation safety and security procedures, and customer service may be of equal or

       greater importance.‖ (Datamonitor, 2004) If the consumer decided to seek comfort rather

       than cost, Southwest would encounter trouble because Southwest focuses on non- luxury,

       efficient flights this could prove to be a downfall for the company. When people expect

       less service, they expect less cost. The end result is the establishment of what is regarded

       as being normal and accepted. This in turn enhances the value created any environmental

       changes to affect customer comfort. ―It is all about reeducating the passenger to accept a

       lower level of service.‖ (Johnson, 2004)

Marketing Strategy

       Target Market Strategy

      Southwest airlines 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

       darn sure they have a good time doing it, people will fly your airline." (Freiberg, 1996)

       This simple statement paints the picture of their target market. They are a cost-conscious,

    value-driven people. They simply want to get where they are going at the lowest possible

    price without the extra over priced features. Southwest airlines found a market segment

    niche which was not being served by the current market and acted on it. Before

    Southwest airlines, there were only two market segments: ―those who could afford to fly

    and those who couldn't‖ (Freiberg, 1996). Southwest also wanted travelers to get out of

    their cars and onto planes by enticing them with bargain fares. Because of this, they

    considered cars their biggest competitor. The customers in this niche market are

    homogenous in respect to their behavioral characteristics. Customers who want to go

    from point A to point B are looking for an inexpensive; no frills flight so that they do not

    have to drive their cars.

   The market segment niche, of course, is large and important enough to warrant a unique

    marketing mix because the sole purpose of Southwest airlines is to serve the people who

    are not being served by the current market. Even companies such as Jet blue and Sky

    Europe are paying attention to this niche market and following in the steps of Southwest.

    ―In recent years, Southwest, Jet Blue and Air Tran have delighted flyers with a low-cost

    business model and managed to grow in the most commoditized travel industry by

    delivering better service and consistently cheaper fares.‖ (Beirne, 2004)

 Southwest Airline‘s target market is customers who want to fly for low-fares. ―We are
    devoted to the low-fare, point-to-point market niche and have a highly efficient route

    structure. (SW Annual Report, 2004) Southwest Airlines has chosen a segment of the

    market that is not being serviced by the major airlines (i.e. Delta or United). Many

    people cannot afford to fly the main airlines; because they are too expensive. Southwest

    Airlines also provides frequent flights as a convenience to their customers. ―Our high

    frequencies and expansive route system offer our customers convenience and reliability

    with lots of options to get where they want to go, when they want to go there.‖ (SW

    Annual Report, 2004) The employees are given the responsibility and the ability to help

    their customers to the best of their ability. Since the employees are allowed to make

    some independent decisions; they are able to help the customers immediately, instead of,

    calling manager or supervisors to their workstation.

 The benefits that this company offers to its customers are used by many other airline
    companies. The examples of benefits are purchasing the tickets on- line, ticketless travel

    options, and Rapid Rewards. The Southwest Airlines internet site is used by 54% of their

    customers, while the ticketless travel options are used by 85% of their customers. Rapid

    Rewards is somewhat different than Frequent Flyer Miles. In the Rapid Rewards

    program, once a customer has completed eight round trips or received 16 points in a 12

    month period; they are awarded a free trip anywhere Southwest Airlines flies. (SW

    Annual Report, 2004)

 Flights are not a product that is unique, but how Southwest Airlines provides these flights
    are unique. They were one of the first airlines to offer low-priced airfare. This product is

    needed by the obvious success of this company. Southwest was very profitable in their

    third quarter; the company had earnings of $119 million. (, 2004)

   Southwest Airlines has rapidly increased its success over the years due to both its

    increasing customer base, as well as, those customers that frequently revisit the company.

    A large portion of the company‘s return customers are shown in the number of increasing

    Frequent Flyer Awards that are awarded each year.(SW Annual Report, 2004) Over the

    three year period from 2001-2003 Southwest customers ―redeemed approximately 2.5

    million, 2.2 million, and 1.7 million Award Tickets and flights on Companion Passes… ‖

    (SW Annual Report, 2004). Not only that, ―the number of Award Tickets outstanding at

    December 31, 2003 and 2002 was approximately 1.4 million‖ (SW Annual Report,

    2004). Over those three years the highest percentage of free travel awarded as compared

    to the total revenue passengers carried was 7.5%. This shows that one would think that,

    of the remaining percentage of passengers carried, a great portion of these are return

    customers. However, even though a large portion of the company‘s business comes from

    return customers, the number of new users is increasing. In 2003, profits were increased

    from $198 million in 2002 to $298 million, not to mention southwest ―expanded its fleet

    by a net of 13 new 737-700s‖ (SW Annual Report, 2004). Southwest is increasing the

    destinations that they currently fly to and because of this increase; they need to expand

    their fleet to better serve their customers.

   The current target market for Southwest Airlines rates them high in terms of reputation,

    quality, and price. Since Southwest puts so much effort into customer service, the

    consumer is generally pleased with their performance. They work towards improving the

    little things within their company. One of the most important concepts for Southwest

    Airlines is making their customers travel plans as convenient as possible.

    ―…approximately 79 percent of the company's customers fly nonstop. In addition,

    Southwest serves many conveniently located satellite or downtown airports…which are

    typically less congested than other airlines' hub airports and enhance the company's

    ability to sustain high employee productivity and reliable on time performance‖ (SW

    Annual Report, 2004). Even though Southwest makes travel convenient, expansion into

    areas like Dallas-Fort Worth International Airport could prove to be more profitable.

    Southwest has developed a great reputation with their target market because of their

    philosophy towards their business. ―We tell our people ‗Don‘t worry about profit. Think

    about customer service.‘ Profit is a by-product of customer service. It‘s not an end in and

    of itself‖ said Kelleher, the former CEO of Southwest Airlines (McConnell, 2001).

 Southwest works to direct its product towards everybody; however, their service does not
    necessarily appeal to all groups. Because Southwest Airlines does not offer first class or

    business class like the full service airlines, those costumers that are looking for a little

    something else take their business to other companies. Colleen Barrett, President of

    Southwest, stated her view towards the company as, ―Southwest is a cause, not a career‖

    (McConnell, 2001). This statement shows that Southwest Airlines believes they are

    capable of helping everybody.

   As stated earlier, the customer base that Southwest Airlines serves is anyone who wants

    to get from point A to point B fast and inexpensive. Southwest is a low- fare airline that

    focuses on quality customer service. The average customers that purchase Southwest‘s

    services are not looking for meals or a first class seat. Southwest airplanes are not

    equipped with first class or business class seating. ―We have fought to keep our costs

    low so that we could make flying affordable instead of a luxury for a few.‖ (SW Annual

    Report, 2004) Southwest is used heavily by college age students because they are not

    worried about full service, but rather, getting where they need to go.

        Many airlines team up with travel websites to try and attract costumers and that ends

    up being a large part of their online marketing. Southwest has chosen not to participate

    with the travel websites and to concentrate on their own website. Unlike other carriers,

    Southwest has lured plenty of customers without partnering with travel Web sites, such as

    Expedia, Travelocity, and Orbitz. ‗Their customers seek them out, which is tremendous,‘

    said Paul Berliner, an industry consultant. ‗I mean, my goodness, that‘s what you dream

    about‘‖ (SW Annual Report, 2004). The amount of transactions being processed on

    Southwest‘s website, proves that the Southwest‘s target market wants a no frill airline.

    Southwest has proven that they can market successfully without the help from outside

    companies. ―…54 percent of Southwest‘s passenger revenues came through its Internet

    site, which has become a vital part of the company‘s distribution strategy. As part of

    Southwest‘s cost reduction measures and due to the success of its website, the company

    has announced it will no longer pay commissions to travel agents for sales on or after

    December 15, 2003‖ (SW Annual Report, 2004). Southwest is able to advertise

    successfully to their target market, and because of their advertising campaign they are

    able to draw in a large variety of customers. Potential customers can also find out about

    Southwest through their reputation.

   Some of the major objections that potential costumers face when looking into buying the

    services of Southwest are the lack of full service flights, as well as, the ability to tra nsfer

    flights. As stated before, Southwest does not have full service, which deters those

    interested in a full service flight, which include seat assignment, meals, and

    entertainment. Also, due to the fact that Southwest has no other airlines that they ha ve

    agreements with, when transferring from a Southwest flight to a flight on another airline

    customers are required to transfer their baggage themselves from one flight to another. To

    some people this is objectionable and, if they do not have a long enough layover, they

    could have problems connecting with their next flight.

   Southwest Airlines establishes contact with potential c ustomers through television

    advertising, newspapers, magazines, and radio. Foremost in terms of accessibility is its

    web page at allows direct booking and assessment of

    transportation affordability. Potential customers/passengers are able to make reservations

    for specific time periods, vacation packages, vehicle arrangements, and hotel

    accommodations; thereby, eliminating travel agents or purchases at the airport counter.

    Also available on its web page are special fare incentives being offered for travel

    destinations on a monthly limited basis. Television advertisement for Southwest Airlines

    is primarily focused at turnaround points within its marketing area, rather, than a

    nationwide network advertising. This maintains advertising expenditures are at cost-

    effective rates. We are unaware of any current radio advertising. Business travelers are

    being offered low-cost air travel on a consistent basis, as a part of Southwest Airlines

    declared business practice. As a result, corporate travel planners seeking advantageous,

    affordable air travel arrangements, ground transportation and room reservations are

    receiving word-of- mouth recommendations favoring Southwest Airlines as a primary

    choice. Magazines dealing with corporate America markets are also a primary source of

    advertising. Possessing direct flights to major terminal points such as Chicago, Los

    Angeles, Dallas-Fort Worth, Denver, Atlanta etc. with regular periodical timetables,

    Southwest Airlines allows business travelers last-minute travel accommodations on a

    same-day basis. Cargo consignment transportation can also be arranged in a similar


   Southwest Airlines has established a firm commitment to attaining low-cost air travel for

    his customers, particularly business travelers. A reputation for reliable service and

    dependability makes any service related departure from current practice to be

    unnecessary and unwarranted. Expansion of its current air fleet is an indication that

    Southwest Airlines is confident that its current policies are effective, beneficial and

    profitable. (SWA Annual Report)

   Southwest Airlines has gained number one status among the continental United States

    airlines currently operating. The measured expansion into current air travel markets is a

    marked contrast to the contraction/consolidation policies of its economically crippled

    rivals. Potential customers are seeing reliability as a virtue and for Southwest Airlines

    this virtue is profitable.

   Southwest Airlines is enjoying a competitive edge over its rivals due to the astute

    economic planning by its current management. When Southwest Airlines first went into

    business, they had a ten minute operational turnaround, but now because of the‖ increase

    in size of airplanes, the growth in carry-on luggage, the amount of cargo flying on each

    plane, and the congestion at many of the airports, the average turnaround time for a

    Southwest airplane is now twenty minutes.‖ Southwest Airlines is garnering a more

    consistent market share of business travel customers, because of the multitude of

    destinations that Southwest is now offering. Leisure travelers are more likely to be

    employed business travelers seeking affordable vacation destinations for themselves and

    relatives. This familiarity and assurance of affordability tends to make Southwest

    Airlines a preferred option when coupled with a reputation of reliability. The contrast

    between Southwest Airlines and its rivals during the current economic disruptions is very

    telling. It is a testimonial favoring a competently managed corporation.

Marketing Mix

        Southwest uses the marketing mix to their advantage. They do not depend on an

intensive promotion program. The service that Southwest Airlines offers to its customers is the

ability to fly to many different destinations. (, 2004) The variety of destinations

allows their customers to fly throughout most of the United States. Southwest Airlines is lacking

destinations in the upper Midwest region of the United States that will allow the company to

grow their business. (SW Annual Report, 2004) If the company grows into the upper Midwest

region, their customers will have more destinations to fly to and as a result their distribution will

increase. One of the ways that Southwest has marketed their company is to become the airline of

the NBA and the WNBA, which allows the company to have special marketing features during

the playoffs.. (Airline Industry Information, 2003) Before 9/11, promotion pricing ranged from

$39 to $139 after 9/11 promotional pricing had a maximum price of $99. For the first time,

Southwest Airlines is offering a promotional price of $149, with no option for a decrease in

price. The increasing prices are a result of external marketing factors, such as, the rising fuel

prices (economics). ―Southwest recently raised its regular price fares by mostly $1 to $2 each

way in 200 of its 1,500-plus markets.‖ (Johnson & Trottman, 2004)


        Southwest Airlines core service is simple: air transportation. Customers pay Southwest

Airlines to take them from point A to point B as rapidly and inexpensively as possible. Another

service they also provide is cargo delivery. Southwest Airlines Cargo will let a customer send a

package from the airport to the door with the highest quality cargo service – guaranteed.

(, 2004) These two services definitely complement each other, by combining two

services in one flight.

       ―Southwest capitalized on the idea of offering permanently low fares‖ (Freiberg, 1996)

Because of this, the customer knows they are getting a great deal. The most inexpensive ticket

found on traveling from Seattle to Las Vegas in December was $236 round trip

with America West Airlines. Southwest Airlines offers the same flight no matter what day for

$160 a savings of $76. Southwest Airlines offers these lower prices , because their target- market

consist of value-conscious customers who want to get from one place to another at the lowest

possible price and do not care about unnecessary services. Southwest says, ―Your seat is

reserved; you just don‘t know which one it is.‖ (Freiberg, 1996). Southwest Airlines boasts that

they are the best on-time performance airline with their signature 10- minute turn around.

       The irony of this is that the features that are listed above are the subjects of the most

complaints recorded against the company. In relation to the no seat assignment, ―The process

infuriates some customers, who refer to it as a ‗cattle call‘‖...(Freiberg, 1996), where people have

to stand in line at the terminal for a long period of time to get a good seat. A customer

complaint, ―I think I will fly an airline where I have a seat ready for me when I get there and not

have to rush around trying to find one once I get to the plane!‖(, 2004) Southwest

replies, ―…getting people on and off the plane quickly is essential to southwest‘s fifteen-minute

turn, and the fast turn helps keep ticket cost low.‖ (Freiberg,1996) Another major complaint by

their customers is that Southwest Airline‘s policy penalizes a customer who occupies two seats

to purchase both. With the increase in gasoline prices and America‘s increase in weight, the extra

weight adds to the company‘s operation cost. ―The extra weight caused airlines to spend $275

million to burn 350 million more gallons of fuel in 2000 just to carry the additional weight of

Americans.‖(DJ Newswire). ―We at NAAFA are sadde ned and angered by Southwest Airlines‘

recent decision to enforce their ―Person of Size Policy."(NAAFA, 2004).

       Southwest Airlines has the lowest percentage of the consumer complaints compared with

all major U.S. Airlines in 2003 with .14 percent. As Table 1 demonstrates though this

information is misleading because even though they have the most complaints, they also boarded

a many more passengers. (See table 1) ―Southwest has been ranked number one in fewest

customer complaints for the last 13 consecutive years as published in the Department of

Transportation's Air Travel Consumer Report‖ (, 2004)

Table 1

Cons umer Complaints 1 Against Major U.S. Airlines by Airline, 2 2003

                                                   System-wide    Complaints per 100,000
 Rank Airline                        Complaints passenger boarding passenger boarding
 1.     Southwest Airlines           106           74,788,501             0.14
 2.     ExpressJet Airlines          24            11,376,605             0.21
 3.     SkyWest Airlines             34            11,421,158             0.30
 4.     JetBlue Airways              28            8,973,449              0.31
 5.     American Eagle Airlines      61            11,925,053             0.51
 6.     Alaska Airlines              78            15,047,033             0.52
 7.     Atlantic Southeast Airlines 55             9,293,833              0.59
 8.     ATA Airlines                 65            9,847,846              0.66
 9.     Atlantic Coast Airlines      65            8,598,599              0.76
 10.    Delta Air Lines              656           84,250,319             0.78
 11.    United Airlines              548           66,153,078             0.83
 12.    AirTran Airways              97            11,654,706             0.83
 13.    America West Airlines        168           20,050,292             0.84
 14.    American Airlines            781           88,798,446             0.88
 15.    US Airways                   373           41,264,286             0.90
 16.    Northwest Airlines           492           51,975,656             0.95
 17. Continental Airlines             371           38,936,200           0.95
   1. Consumer complaints filed with the U.S. Department of Transportation. Complaints range
              from flight problems and over sales to baggage and customer service.
2. Includes U.S. airlines with at least 1% of total domestic scheduled-service passenger revenues.
   Source: Office of Aviation Enforcement and Proceedings, U.S. Dept. of Transportation, Air
                                      Travel Consumer Report.

       The name Southwest Airlines is a signature phrase for most Americans. The word

Southwest is a regional description with a new frontier appeal. However, since 1989 when

Southwest has defied its regional definition by becoming a major airline exceeding the billion-

dollars in revenue.(SW Annual Report, 2004) Consumers equate Southwest Airlines with

―nations only major short haul, low-fare, high- frequency, point-to-point carrier;‖ it is easy for

them to recall (, 2004). The name Southwest is descriptive in a sense that their

company is based out in Texas, but in terms of describing the benefits offered by the company

the name does not really cover this area. The Southwest name itself does not particularly

distinguish the company from all other airlines; it is what is behind the Southwest name that

distinguishes it.

        Southwest does not offer and warranties other than ticket reimbursement under specific

conditions. If a person is unable to get on the flight that they have booked, Southwest will

exchange their ticket. However, if the flight is missed by fault of the passenger, they may have to

pay the difference for the new ticket. On the other hand, if the airline is at fault no extra charges

will take place. This seems like an appropriate way to insure customer satisfaction.

        Southwest‘s product, or service, offers value because people travel for a reason. If a

customer missed an intended flight, they would not just say ―oh well‖ and go home. People have

very scheduled lives and sticking to their schedule is important. The value of traveling is

important to all those who use Southwest.

        It is interesting the difference in views towards the customer service shown by Southwest

Airlines to its customers. Southwest claims to put a great deal of importance on customer service

and this can be seen on their website. You can call and talk to a customer service representative

and they will do everything they can to assist you with your problem. However, there are many

people that are not happy with the way they were treated by Southwest. One customer stated that,

―If all goes smooth, Southwest employees are friendly, happy and well. As soon as problems

arise, the employees completely and miserably fail…‖ (, 2004). If a problem

arises, the passenger should be reassured and immediate attention given to the situation at hand.

This should be addressed in crew training.

           There are many ways to assess service quality. The first way is to eliminate potential

customer complaints. The second way is to emphasize service delivery. Another way to ensure

the highest customer satisfaction is the goal of all services rendered. Being that Southwest

provides a service rather than a product, it is very important for them to have quality customer



           Southwest Airlines utilizes a variety of channels by which passengers may employ it


1. Direct ordering via the Internet web site for passenger reservations, hotel reservations, cargo

delivery, and rental car reservations. On- line ticket sales account for 53 percent of revenues in


2. Travel agency arranged travel accommodations. Travel agencies are not cost effective. On-

line ticket sales cost $1 as opposed to $10 involving personal sales.

3. Telephone contact with local airport hosting Southwest Airlines or travel accommodations.

4. Southwest Airlines local airport sales counter to negotiate travel requirements and


           Facilities for handling passenger-ticketing requirements must be in direct communication

with central purchasing at Southwest Airlines because of control and coordination essential to

operations.. Airports accommodating walk- in traffic must have trained personnel and a

communication network to handle travel arrangements and processing. Southwest Airlines is

negotiating to acquire ATA gates at Chicago's Midway Airport and to increase its daily flight

schedule from 145 flights to 185 flights. (Airline Industry Information, 2004) The importance of

these acquisitions lies in the weakness of a company in accessing the central United States as a

profit center.

        Airport destinations extend across the United States and contain service arrangements

and accommodations at each airport location that facilitate advertising and sales promotion. This

achieves target marketing of customers based upon immediate access to airport facilities. Target

marketing carried out at service locations allows solicitation of customers through media

advertisements and direct mailing. Travel customers have immediate access to the airports in

their immediate localities.

        The service that Southwest provides is available 365 days of the year. The only thing that

changes with season or day of the week maybe is the price of the airfare, in accordance with

encouraging route usage. Having this service constantly available to users is very appropriate.

There are people that need to travel any day of the year. Having the ability to provide

accommodations for air travel is essential to the success of Southwest Airlines.


        In the early years of Southwest airlines, their planes were called Love birds, drinks were

Love Potions, peanuts were Love Bites, and even the ticket machine was called the Love

Machine. With its ticker symbol on the stock exchange being ―LUV,‖ the company took

advantage of this and exploited this word in its advertising. It even created a ―love‖ campaign

which ―set out to define the airlines as a woman – a witty, pert, with-it, starling woman.‖ As a

criticism, however, promotion campaigns of this quality are now out of date and ridiculed. As A

result, Southwest Airlines has matured in its advertising strategy. (Freiberg,1996)

        The airlines believed that, the more outrageous they were, the more people talked about

them, and the more likely the customer was to remember them. Word of mouth was a great

resource for Southwest Airlines, the company knew how to have fun and Southwest Airlines was

the airline to break through the traditional airline uniforms for hostesses. Now hostesses were

allowed to wear short shorts called hot pants and high heeled go- go boots, they definitely were

the talk of the town. This free publicity was just what they needed during those times. They

even used these ladies on some of their commercials. One of the commercial shows three ladies

hastily walking to the airplane and one says, ―Remember what it was like before Southwest

Airlines? You didn‘t have hostesses in hot pants.‖


       Through the years, Southwest Airlines‘ advertisements became more humorous than

outrageous. One of their ten core principles that guided their marketing and advertisement reads,

―Make advertising an invited guest.‖ Southwest Airlines assumed and assumed right that most

people do not want advertisements in their homes and cars, and is the reason why they are

considered uninvited guests. Southwest Airlines does not have many television or radio

commercials because they want to be an invited guest. They prefer to be sponsors where their

logo will be spotted, but not intrude into a customer‘s home. Because of this ―Southwest insists

that its agencies create advertising that gets people to actually look forward to it.‖ (Freiberg,

1996) They want to become an ―invited guest‖ and they do this with three simple rules. With

their advertisements, they first want to intrigue the audience. Second, they aim to entertain, and

finally they must persuade. With customers looking, watching, and listening to their ads they do

follow their principle of being an ―invited guest‖ and they really do this by following the rules

they put forth. With print ads saying, ―We‘d like to match their new fares, but we‘d have to raise

ours.‖ and ―Earning a free ticket at is easier than earning a free cup of coffee‖

they reassure the consumer of their low prices which allow customers to make an obvious

choice. It surely brings a chuckle and at the same time persuades the customer that they really

are a low fare company and with their rapid rewards system it is easy to earn a free ticket.

       One television commercial that was very humorous was one that showed an old man

feeding pigeons on a side walk, a convertible pulls up and honks which of course scares the

pigeons away and text that reads ―that‘s low‖ shows up in the middle of the screen. In the next

scene, an old man is seen throwing the bird seeds inside the convertible with text now reading

―that‘s lower,‖ and with the final scene saying ―but not as low as Southwest a irlines click and

save fares.‖ Even its radio ads follow the same steps in order to be classified as an ―invited

guest.‖ With these types of advertisements they really do gain the attention of its audience and at

the same time informs, persuades, and reminds them about the service Southwest Airlines has to

offer in a quick, simple and memorable way. Also, as you watch their advertisements and

commercials, it is clear to see their attempt to incorporate the culture of the company within their

advertisements. ―With its advertising, I want customers to know that when they fly Southwest,

they will have an experience like no other‖(Freiberg, 1996) almost like the experience they have

while watching a Southwest Airlines commercial. The other side of this is that even though they

do a good job attracting the fun customers, they may be repelling the more serious business

customers. Southwest fixes this problem by having some direct advertisements that read, ―The

All- Time On-Time Airline‖ and ―Just Plane Smart.‖ These types of campaigns are directed to

the business flyers and ―markets the fact that Southwest has one of the best on-time records and

the lowest fares in the country.‖(Freiberg 1996)

       Like most major companies, Southwest Airlines hires an outside adve rtisement agency.

Most of their paper, television, and radio advertisements, including the ones talked about above

are created by an advertising agency called GSD&M, a company which is owned by Omnicrom

Group (NYSE-OMC). The advertisement agency‘s job is to create a variety of ideas which

Southwest Airlines will use to promote their company over the coming year. Southwest Airlines

will tell GSD&M what they want along with its criteria‘s and rules, and they will create it for

them. In 2003, the company shows $155 million for advertising expense. (, 2004)

Public Relations

       Southwest Airlines has a well designed public relations program. When Southwest

Airlines started out at Sea-Tac to help create a positive image in the Northwest, they flew a

group of school children from Seattle to Spokane for the day at no cost. (Griffin, 1994) The

company does have the ability to respond to bad publicity, because they have nine people

devoted to the position of spokesperson. The internal Public Relations department has a team of

16 to respond to any negative publicity that the company receives. Southwest Airlines receives

publicity all year long, whether; this is positive publicity or negative publicity. During the bad

times there is no shortage of publicity and most of it is negative then damage control ensues.

This department handles all the public relation issues that might arise. To help create positive

public relations for Southwest Airlines, they work with Porter Novelli to design their public

relations strategy. (Anonymous, 2003)

       The members of this public relations department have nurtured relationships with

journalists because this department knows that they have to be crea tive when dealing with the

journalists. ―We sometimes have to be even more creative with the travel press because they

want to cover destinations as opposed to how you get there.‖ (Anonymous, 2003)

       Southwest Airlines is able to communicate effectively with their target market.

Southwest Airlines knows that they are reaching their target market because of the customers

who are returning to fly with them. Rapid Rewards is a loyalty program which gives away free

flights after a prerequisite number of paid flights.

       The publicity plan that the public relations department assembles will focus on their

target market. The recognition that Southwest Airlines receives from the media proves that they

are successful in the public relation strategy. Because of Southwest Airlines success they have

received many accolades from the following magazines:

          Fortune Magazine—Nations Most Admired Company

          Business Ethics Magazine—100 Best Corporate Citizens

          Hispanic Magazine—2003 Hispanic Corporate 100 (Hispanic, 2003)

          Airline Transport World Magazine—Airline of the Year

          Inside Flyer—Best Customer Service, Promotion, Award Redemption

          Global Finance—―Experts‖ List- Worlds most Socially Responsible Companies

Southwest Airlines also was presented with an Award from the Official Airline Guide Airline

Awards as the Best Low Cost Airline Award in 2003. (, 2004) For the company

to be recognized by so many different magazines shows the ability of the company to provide the

best customer service possible to their customers. With these awards from the many different

magazines, Southwest has been able to capitalize on the articles that the previous magazines

have written. Their public relations department is also able to communicate with their

employees to create a successful company, because some of the kudos given to the company

could not be achieved without their employee‘s cooperation.

       Southwest Airline uses a majority of the public relation avenues. Event sponsorship is

used through many of the professional sports teams, for example, the National Hockey League

and the National Football League. Southwest Airlines was also the airline for the NBA and the

WNBA for 2003. (Airline Industry Information, 2003) With this opportunity to sponsor these

athletic events, Southwest Airlines is able to receive press coverage. Also, Southwest Airlines

uses the avenue of issue sponsorship by sponsoring the Ronald McDonald house. There is an

―…Annual LUV Classic Golf Tournament in Dallas and Phoenix to raise funds for the

Houses…‖ This golf tournament is very well supported by many of Southwest airline‘s

competitors and vendors. (, 2004) Product placement is another avenue used by

Southwest Airlines, they will often be the airline for a show, which will result in their plane

being shown in the credits. Internet is also used by Southwest Airlines, tickets, promotion, and

investor information can be found on- line. The public relation department does a very good job

of using the tools to create the best possible image for Southwest Airlines.

       From all the notices in Business magazine and some magazines for mass consumption,

Southwest Airlines is reaching their market with their public relations strategy. Their strategy is

geared towards people who want to get from destination A to destination B for a low price. They

are also making an extra effort to reach the Hispanic community which is succeeding according

to the award received in the Hispanic magazine. (Hispanic, 2003) In the airline business, the

cost of the public relations can always be justified because this is the type of business where bad

publicity hits hard. When an airline receives bad publicity, it is usually because there was a

plane crash or problems with the mechanics of the airplane. When a plane crashes or there is

mechanical failure with one of their airplanes; the company will come to rely on the public

relations department. Southwest Airlines also need this department to show their company in a

positive light when all is smooth sailing.

Personal Selling and Sales Promotion

          The mission statement of Southwest Airlines is dedication to the highest the quality of

customer Service delivered with a sense of warmth, friendliness, individual pride, and company


          Direct selling to the customers is not a feature employed by Southwest Airlines in dealing

with its customers. Ticket agents are not dedicated to serving the needs of Southwest Airlines on

an exclusive basis. Ticket agents at airports who are employees of Southwest Airlines do not

solicit business, but instead expedite customer requests for reservations and purchase of tickets.

          The emphasis by company personnel achieves the purpose of creating positive sales

promotion as regards customer service performance. The customer becomes the focal point upon

which company seeks to achieve financial success. The training of the personnel as stipulated by

the mission statement establishes each individual as a representative of the company upon which

the public acts as the chief critic of Southwest Airlines performance. The airline depends upon

repeat business and customer loyalty that can only be achieved by maintaining quality service

and accommodation. From the purchase of the ticket, handling of baggage, airport waiting area,

facilitation addressing customers with special- needs and requirements, boarding and debarkation

from the aircraft, in- flight attention and consideration, safety assurance, and the arrangement of

ground service accommodations with associated travel firms; the chain of value is created by

professional, confident people employed by Southwest Airlines.

          The creation of an enjoyable airline travel experience was emphasized by the adoption of

customized leather seating and reconfiguration of aircraft environmental features. This

enhancement of customer comfort acts creates a sales promotion by providing more space

availability as regards customer seating. This program labeled, Spirit, was introduced January

16, 2001 with completion anticipated at the end of 2005. The logical explanation is that "your

posterior will be pleased with our interior". (, 2004)

       Sales promotion is chiefly consolidated by Southwest Airlines Rapid Rewards program.

This program bribes airline travelers to utilize Southwest Airlines as its principal carrier. Under

the program, Rapid Rewards, a passenger is enrolled, gratis, and one credit accumulated for each

one-way trip, irregardless of actual travel mileage, until 16 credits are achieved within a

continuous 12- month period. An award is granted to the qualifying customer allowing a one-

way trip, purchase free, to any destination in Southwest Airlines routing allows. Ground

transportation arrangements with Dollar, Hertz, Budget, Alamo car rental agencies for more the

one-day usage results in a one half Rapid Rewards Credit. Visa Credit Card Company is allied

with Southwest Airlines to make one credit awardable each time their credit card is utilized for a

Southwest Airlines reservation. Initial sign up results for a credit card results in four Rapid

Reward Credits. Accumulated purchasing amounting to $1200 on the credit card is convertible

for one Rapid Reward Credit. Diners Club International redeems one Rapid Reward Credit for

every $1000 of their credit card purchasing account volume. American Express awards one

Rapid Reward Credit for $2000 of their credit card usage. Variations of this program are

dedicated to promoting seasonal travel periods. Round-trip accommodations aboard Southwest

Airlines before December 15, 2004, result in three credits for airline travel and one credit for car

rental. Certain destinations involving selected airports invoke double credit awards. This makes

the program flexible and induces repeated travel. Corporate customers are encouraged to utilize

this particular program and allow their employees to be recipient of vacation travel awards.

        Hotel accommodations at Hilton Group Hotels, Choice Hotel International, Marriott

Group Hotels, La Quinta Hotels, Hyatt Hotels International are utilized for vacationers and

commercial travelers encouraged by receiving one Rapid Rewards credit upon checking in.

Discounts are also made available at various recreational locations upon presentation of the

Rapid Rewards Membership Card. The overall enhancement of utilizing Southwest Airlines as a

primary passenger carrier airline is achieved with mutual benefits enjoyed by associated

enterprises.(, 2004)


        Southwest airlines take pride in being a low-cost, no frills airline. Because of this it is

crucial that their prices are low enough to differentiate them from the full ser vice airlines. If

Southwest‘s prices rise, consumers will begin to pay the extra small amount to ride a full service

airline. They need to keep the gap between their prices and the other airlines at a reasonable

amount, allowing them to still be profitable and yet still entice customers. (Southwest, 2004)

        The mechanisms that Southwest uses to charge their customers the low prices are few in

number. They charge a lower price than the legacy airlines (Delta & United) and are able to

maintain their level of service. The customer gets where they need to go only with out the perks

such as a meal along the way. The customers that fly Southwest accept the pricing because it is

cost effective for them to do so. The price range for the tickets is well within the range the

customers are willing to pay for tickets.

        In the airline industry, customers are looking for a variety of different qualities when

picking an airline carrier. A large factor that deters or attracts people is pricing. There is a large

group of consumers that are looking for a cheap flight from point A to point B. Then there are

those who want to have the extra entities that airlines like Southwest may not offer and are

willing to pay the money for them. In terms of Southwest airlines, c ustomers are sensitive to the

price because generally price is the reason that they choose Southwest. The service that

Southwest offers is an elastic one because the demand for their service is price sensitive. Since

there are substitutes at a higher price the level of their price needs to stay low. If that price raises,

customers will choose to ride the full service airlines and Southwest will lose customers. This

will result in a decrease in revenue for them.

        There are a lot of factors that go into setting the fares for Southwest. The main thing that

Southwest bases their pricing off of is demand oriented pricing. Being in the airline industry

there is a high demand for low cost flights. A majority of people want to fly for low- fares and

―Southwest charges up to 80 percent less than competitors for similar-length flights‖ (Anderson

2). There are a number of full service airlines that charge an arm and a leg for flights. Since

people are cheap, they are willing to give up their meal to pay as much as $ 150 less than full

service airlines.

        Southwest does not offer large discounts on flights and the reason being that they are

already a great deal cheaper than many of the airlines. As much as people do enjoy cheap things,

offering discounts on something that is already cheap is not as attractive to customers.

Southwest does offer weekly internet only fares called Click n‘ Save on their websites that are

available Tuesday through Thursday (

        It is simple; receiving cheap things makes people happy. In turn that motivates them to

purchase things. It looks like Southwest has a good idea of the psychological dimensions

involved with pricing.

       Southwest is not a part of any cheap airfare website. One of the main types of promotions

that they use is commercials. They also print a large amount of ads in magazines.

( Those are really only the two main types of advertising that Southwest does.

They get a lot of their service from word of mouth advertising and repeat customers.

       Southwest Airlines does not have introductory airfares for new customers. They have

low airfares everyday, as well as, great promotional airfares. When a customer buys a ticket

with Southwest Airlines a customer may purchase tickets with cash, check, or credit card. Cash

and checks and credit cards can be used to purchase tickets at the ticket counter, while buying

tickets over the phone or online will be limited to using credit cards for the form of payment.

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