A Look Into SouthWest Airlines

A Grad Student's Blog About SW's Business Strategy

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Why Investors Grounded Southwest Airlines Stock in April

Investors fear that airlines could be early victims of a recession, should we enter one. This made investors already skittish about the sto

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When attempting to differentiate Southwest's strategic issues, I noticed they have been operational, business-level, and corporate. Their business and corporate-level issues are results of external factors. The pandemic affected many airlines, but SW failed to make their decisions traditionally and timely. The brand has been losing some of their customers by changing their format and layout. While these factors were external, SW also received a new board of directors. The executive staff chose to change many existing policies and strategies. The company's issues were internal and external, but initially external. Southwest's investors are speculating we will soon enter a recession. With the release of their last earnings report, Southwest Airlines expressed disappointment and the stock decreased significantly. With SW being in the airlines industry, it is susceptible to market volatility. The strategist for SW will need to integrate the CFO for financials, project analysts for new strategy, CEO for operational issues and overall business plan adjustments, board of directors and potentially an external consultant. This is a very pivotal time for Southwest, so if they do not make the best decisions, it could literally cost them everything.

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10 posts!

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The Struggle

Over the past few years, SouthWest Airlines has been undergoing a process innovation. The new board of directors has been making operational changes and adjusting the utilization. There seems to be an incremental versus preemptive launch type of dilemma. While SW needed to make some adjustments after the pandemic, I believe the changes were made too soon and were too unconventional compared to their previous culture. SW has been known for utilizing Boeing planes but has recently experienced many issues with aircraft. Over the past few years, they have been slowly phasing out Boeing 700-800s to Boeing 737 MAX models. The MAX models will all have more legroom and chosen seats. The major concern for this is that they are receiving limited upgraded aircrafts timely, delays in certification, and delays in production. Once SW noticed the loss of revenue, they decided to rush the overall upgrade. Their strategy is to phase out the older aircrafts, but will they receive them in time? They already have a MAX model scheduled for this summer.

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Southwest Used to Be Safe From Some Gate-Check Complaints. That May Change.

Air travelers hate being told they have to gate check their carry-on bag because overhead bins are full, then it turns out there's plenty of

Uh oh. Customer satisfaction.

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Mass layoffs hit Southwest Airlines this month

The cuts, concentrated in Dallas, represent about 15 percent of the airline's corporate and leadership workforce.

Mass layoffs?! What next??

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Southwest was previously known for its free, two checked bags policy with a carry on and personal bag. Now, SW is expecting a decrease in checked bags starting this summer since the company will begin charging for checked bags. Many feel this will bring much longer check-in and security times at the gates. The effects will include customer dissatisfaction, bad press, and a potential decline in ticket sales. This particular issue has been common among SW's competitors. The new leaders and board members of SW have been adjusting the strategy and are not keeping their traditional culture. I feel as if they are creating new barriers. They have changed the systemic barriers such as the structure, behavioral barriers like the norms, status quo, and personal time constraints. SW's leaders and investors are slowly diminishing the trust and loyalty from frequent customers by making all these recent changes. It seems as though they no longer care for service differentiation, value proposition, or creativity. New leadership and board members are not acting in the best interest of the company or customers. They have completely changed the direction of the company, the vision, and the culture through their titles and power.

The airlines also completed a mass layoff (concentrated in Dallas, TX), affecting 15% of the corporate leadership. That tells me that the board is intending to adjust the culture and ethics of the company. The CEO, Bob Jordan, admitted to deferring from the original vision from the 1970s and focusing more on operations. People are eagerly waiting for SW's next quarterly financial reports to see how the airlines is being affected financially. I am not the only person who feels that the new board is ruining the company by attempting to be more modern.

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Southwest is going through some changes to say the least. As I have been closely analyzing their moves, it is apparent that the company wants to expand and compete with the “big wigs”. In my opinion, they should have kept their simple, discounted structure. It was effective for years, resulting in a strong loyalty base from their customers. In my opinion, Sw should have kept their functional structure. When they decided to make divisional structure & expand internationally, I believe they bit off more than they could chew. Keeping their functional structure still could have allowed relation diversification into the international market, but I fear they made the efforts too soon. Many SW customers are just moving to other, related airlines such as Frontier, Delta or Alligiant. The new board of directors seem to have a new agenda that has caused the company to be disadvantaged compared to their competitors. SW could have benefitted greatly with a matrix structure slowly developed over years. Once the new strategy has shown to work domestically, then they eventually move to a worldwide matrix structure to expand internationally. You must have the proper strategy, finances, staff, and goals in place to be a successful international airline. I fear the board used their power to make big plans, but did not consider the risks and costs. Sw has a chance to compete in the foreign market, but did they diversify correctly?

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Southwest Airlines had a strong culture. Many of their customers were very loyal and appreciated the discounted, but decent serviced airline. The organizational culture is also suffering from the recent changes and layoffs. Can you say customer service?! SW will also put into effect their new assigned seat policy. In the past, I have had great experiences with flying SW. I would precheck my bags, know the expectations of carry-on bags, and appreciate using TSA Precheck to quickly check in to my flights. The corporate governance of the airlines is addressing the boundaries and constraints portion heavily with the new luggage policies. I would not be surprised if SW is struggling with their governance mechanisms resulting in this complete redo of their strategy and customer base. The new board of directors has already expressed a new goal and strategy for the airlines brand. The new changes will greatly impact the airline's efficiency and effectiveness. The expectation of Southwest charging for checked bags will be longer gate times, service times, and flight delays. This will change the customer experience, and we will see an effect. All I can say is get to the airport five hours before your flight, and hope for the best.

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The text mentions opportunity recognition— something Southwest has been struggling with. Their competitors, Frontier Airlines, sent SW a subliminal message. The article mentions that while SW is changing towards a more normal rather than discount airline, Frontier fully intends to gain all their customers. While SW is announcing the new checked bag fees and policy, Frontier has offered a summer travel package discounting flights and luggage until mid-August. SW will need to analyze the competitors and threats within the market.The perks SouthWest has offered in the past will now push customers towards other discounted airlines. Frontier stated their perks are staying—recruiting towards long term loyalty. Southwest airlines seems to be struggling with their strategy. Is it still discounted or normal to luxury? The differentiation and focus aspects of their strategy will need addressing. Maybe SW is gearing towards a combination strategy. It is a bit unclear. Southwest's human capital has also suffered from the layoffs in different areas such as Texas. With the recent cut of aircraft personnel, how will their routes be affected? Will the service suffer? Social Capital will truly suffer. Just as I have been analyzing SW's strategy, I am sure many others have mentioned their alliances. After the collaboration with Expedia, maybe SW is attempting to address the social capital aspect of their business. I guess we will see throughout the course of the year under their new leadership (executive board).

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Southwest Airlines announces major change to long-standing passenger perk

Southwest Airlines, which long stood out amongst competitors for its low-cost, no-frills model, is starting to re-evaluate its approach as i

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So Long SouthWest

During this semester, I have been analyzing SW strategy, but I had so much hope for recovery. Even through the higher ticket prices and lower reward points, I still planned on sticking through the course. But, charging baggage fees will be a sales killer. While Southwest is making this change due to their extensive research, they want to compete on a larger scale. It seems as though the company wants to move from Discount to normal pricing. This will be a huge disappointment to their customers. The airline also announced they'll be moving from unassigned seats to assigned seats, baggage fees, and no more standby/refundable flights. With all of these let downs, how will SW stay afloat? While SW is attempting to horizontally diversify, this will probably hurt revenue even though the goal is to raise it. Their strategists are thinking that people will travel and pay those fees regardless—but what SW is missing is, we will just fly with someone else! Especially considering economies of scope. While paying a higher fare, you could possibly receive more with other airlines. I will be doing some research before my summer travel plans. SW has always had a core competency to provide a discounted service. Now it seems they do not hold the same values... from the change in board of directors? Hmmmmm. All of these changes and none of them are exciting. Bummer!

I am going to start searching for a new favorite airline. I am not interested in long lines at the airport or extremely expensive flights. 

Good Luck SW!

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Southwest Just Cut Your Frequent Flyer Points By Two-Thirds—Without Warning - View from the Wing

All non-refundable tickets will earn fewer points going forward. And elite bonuses of 25% for A-List members and 100% for A-List Preferred b

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SouthWest Airlines — We have an issue! 

Uh oh, now we will all earn less points. According to recent news, the airlines has decided to give only a third of the points we used to receive on reservations. Like many different loyalty programs, you can trade points later for discounts. This will now cause us to earn points much slower. I think the airlines are trying to influence the buyers to purchase points, or purchase tickets full price. With the airlines being a discount-style airlines, this may come from a strategy leaning towards more profit. Even though they are cutting the points, it will be for the lower two tiers of tickets (Wanna Get Away & Wanna Get Away Plus). Anytime tickets will stay the same, and points for Business Select flights will increase. I am assuming this will be incentive to purchase from the higher two ticket tiers. 

Many customers are concerned about the change. It seems like it does not make sense to lower a Loyalty point system. The change is not the only major one. SW just cut staff in major Dallas hubs, received new boards members, and now this. While diversification is super important and how some companies survive—it might hurt SW. With Southwest offering booking by Expedia, the airlines will need to cover some of those new expenses. The SW's strategists may have a plan. Summer is coming up, and SW will remain, but with some changes. I think collaborating with Expedia makes sense, but what will the changes to the loyalty system affect? I personally won't be buying more expensive or higher tiered tickets. I am fine with economy. After all, I choose to fly with Southwest for service, discounts, and free baggage—not to feel fancy. 🙂

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Business and Competition

SouthWest has focused on being an affordable airlines with many southern, midwest, national and now recently--international flights. From recent news and strategic events, the airlines seem to be moving from the cost focus strategy to the Overall Cost Leadership strategy. Southwest has always been and continues to thrive from their discounted, but accessible flight schedule. The airlines do not come with many amenities, bells or whistles. It provides many people with the basic flights with good customer service. Their strategy shows some growth and expansion. Southwest seems to secure a certain customer base allowing them to have some cost advantage over their competitors. 

Initially, Southwest showed a focus strategy gearing towards southern and midwest flights. Over time, the airlines has added more routes expanding to the east coast and over more areas. Now, Southwest offers international flights and has been expanding those routes. It seems as though their strategists and analysts wanted to have a piece of the international revenue pie. Personally, I am excited to give their international flights a chance. I am a lover of the rewards program. In recent news, Southwest now offers booking through the third-party portal: Expedia and Expedia owned sites. Again, another opportunity for revenue and growth. Many people like the Expedia rewards program affording them the opportunity to earn with Southwest through Expedia. The airlines also plan to use assigned seating. Let us all see how this goes!

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You can now book Southwest Airlines flights on Expedia platforms

Southwest Airlines adds its first ever third party booking platform, listing flights on Expedia.

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Intellectual Assets?

This week the text focused on intellectual assets. These assets are from technological expertise and knowledge resources. With SW mentioning an upcoming hiring freeze, this might be a concern. Hopefully the strategic change with new board, Executive VP, and CFO, Southwest will begin to see more gains. The new VP and CFO have extensive experience and backgrounds in the Aviation industry. Speaking of knowledge and intellectual assets, these newbies should be huge visionaries to the company. Their view should bring a fresh and competitive outlook to the new plan. Both new employees could be considered social and human capital. In the social aspect, I can almost assure you that these executives have previous professional relationships. This could give SW a different perspective and one that can become as profitable as other major airlines. They will bring a diversity to the board and that competitive advantage. Time will tell, but they have a pretty good resume. Their strategy will need to include an analysis of the customer base and demand, the economic opportunities, and updating the current process.