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    Service Operation Management at

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    Suvarna Kamble
    Southwest Airlines was founded in 1967 in Dallas, Texas. It operates point-to-point flights with Boeing 737 aircraft and focuses on customer satisfaction. Key aspects of its strategy include low fares, no meals or assigned seating, and quick 15-minute turnarounds. Southwest has high aircraft utilization, reliable on-time performance, and aims to fill each flight profitably using price discrimination based on passenger type. It has been profitable every year for over 30 years and maintains a low-cost, differentiation-focused approach to its business model.

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    Service Operation Management at

    Uploaded by

    Suvarna Kamble
    40 views26 pages
    Southwest Airlines was founded in 1967 in Dallas, Texas. It operates point-to-point flights with Boeing 737 aircraft and focuses on customer satisfaction. Key aspects of its strategy include low fares, no meals or assigned seating, and quick 15-minute turnarounds. Southwest has high aircraft utilization, reliable on-time performance, and aims to fill each flight profitably using price discrimination based on passenger type. It has been profitable every year for over 30 years and maintains a low-cost, differentiation-focused approach to its business model.

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    Southwest Airlines was founded in 1967 in Dallas, Texas. It operates point-to-point flights with Boeing 737 aircraft and focuses on customer satisfaction. Key aspects of its strategy include low fares, no meals or assigned seating, and quick 15-minute turnarounds. Southwest has high aircraft utilization, reliable on-time performance, and aims to fill each flight profitably using price discrimination based on passenger type. It has been profitable every year for over 30 years and maintains a low-cost, differentiation-focused approach to its business model.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    40 views26 pages

    Service Operation Management at

    Uploaded by

    Suvarna Kamble
    Southwest Airlines was founded in 1967 in Dallas, Texas. It operates point-to-point flights with Boeing 737 aircraft and focuses on customer satisfaction. Key aspects of its strategy include low fares, no meals or assigned seating, and quick 15-minute turnarounds. Southwest has high aircraft utilization, reliable on-time performance, and aims to fill each flight profitably using price discrimination based on passenger type. It has been profitable every year for over 30 years and maintains a low-cost, differentiation-focused approach to its business model.

    Copyright:

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    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 26

    Service Operation Management at

    Background :

    - Founded in 1967 - Love Field in Dallas, TX

    - 35,000 Employees (started Flying in 1972) - Nations 4th largest airline (59+ cities and 65M Customers) - Only two fares: regular coach and off-peak Only airline to win the FAAs triple crown 26 different months, three full years in a row best on-time record fewest lost bags fewest customer complaints (consistently the airline with lowest complains)

    Results and Outcomes:

    - Excellent customer service (rated the best for on-time performance, fewest lost bags; fewest customer complaints 13 years in a row) - Safest airline in the world (never had a fatal accident) - Profitable every year (33 years in a row); only airline in the world

    Fun facts (www.southwest.com)


    Southwest reviewed 284,827 resumes and hired 3,363 new employees in 2006

    (11.8%).

    Southwest carried 96.3 million passengers in 2006. Southwest served 93.8 million bags of peanuts in 2006. Southwest moved 265 million pounds of cargo in 2006. Southwest used about 1.6 billion gallons of jet fuel in 2006. The shortest daily Southwest flight is between Ft. Myers and Orlando (133

    miles). The longest daily Southwest flight is between Philadelphia and Oakland (2,508 miles). approximately 2,266 Southwest Employees have spouses who also work for the Company.

    Southwest has approximately 1,133 married couples. In other words,

    Southwests Business Model


    Providing safe

    Reliable
    Short duration air service Lowest possible fair

    Quality service
    Point to Point

    Integrated Low Cost/Differentiation Strategy


    Low Cost Use a single aircraft model (Boeing 737) Differentiation Focus on customer satisfaction High level of employee dedication

    Use secondary airports


    Fly short routes

    No meals 15 minute turnaround time No reserved seats


    No travel agent reservations

    New flight services for business travelers (phones and faxes)


    S.W.A.s Culture, Values, Philosophies & Principles

    The Right People or the Right Organization?


    A Values-Based Organization View of Strategy
    Fundamental Values or Beliefs What are our basic Principles, Philosophies and Core Values? What do we believe in? What policies and practices are consistent with these Values and Philosophies?

    Design Management Practices That Reflect and Embody These Values

    Use These to Build Core Capabilities

    What can we do for the customer better than our competitors?

    Invent a Strategy That is Consistent with the Values and Uses the Talents & Capabilities of People/ Organization to Compete in New and Unusual Ways

    Given our capabilities, how can we deliver value (EVA) to customers in a way our competitors cannot easily imitate?

    Senior management manages the values and culture of the firm.

    Senior Managements Role

    SW:Anatomy of a 15-minute Turnaround


    7:55 Ground crew chat around gate position 8:03:30 Ground crew move to their vehicles 8:04 crew moves towards gate 8:06:30 Baggage unloaded, refueling

    8:15 Jet way retracts

    8:10 Boarding complete. ground crew leaves

    8:08 Boarding call ,baggage loading, refueling complete

    8:07 Passenger off plane

    8:15:30 Pushback from backs

    8:18 Pushback
    disengages plane leaves for runway

    How SW strategy is Implemented


    No meals
    Limited Passenger service No site assignme nts

    No baggage transfers

    No connection with other airlines

    Short hual,point to point travel

    Passenger related departure

    High aircraft utilization

    Very low ticket prices

    Key operation parameters of sw


    Passenger Load factor-

    is the percentage of a plane filled with paying passengers. Revenue passenger milesOne paying passenger flown one line

    Passenger Load Factor


    72 70 68 66 64 62 1998 1999 2000 2001 2002

    Revenue passenger miles


    60000 40000 20000 0 1998 1999 2000 2001 2002 million

    Source:www.southwest.co m

    Cont

    Aircraft Utilization-in hours and minutes in a day a plane is used

    Average Daily Passengers


    3,000 2,000 1,000 0

    passengers

    Aircraft Utilizatin
    11:24 11:16 11:09 11:02
    1998 1999 2000 2001 2002 hr:min

    SWs Top Ten Airport-Daily Departure


    Southwest avoided

    congested airport. High employee productivity. Reliable on time performance.

    Daily Departure
    200 180 160 140 120 100 80 60 40 20 0
    No. of Daily Flights

    141 150 130 117 122

    171 180

    80

    86

    No od Daily flights

    Airports

    Third-Degree Price Discrimination


    The firm identifies different consumer groups, in

    the market, each with a different demand curve.

    Southwest Airlines recognizes that any given flights has different types of travelers

    business travelers vs. vacation travelers

    To maximize profit, the firm sets a price for each

    group by equating marginal revenue and marginal cost.

    Equivalently, by using the inverse elasticity pricing rule (IEPR)

    Conditions for price discrimination

    A firm must have some market power to price discriminate The demand curve the firm faces must be downward sloping

    Southwest knows that it can attract more customers at lower fare price

    The firm must have some information about the different amounts people will pay for its product. Southwest must know how reservation prices or elasticities of demand differ across consumers A firm must be able to prevent resale, or arbitrage. Customers need to present an identity card before boarding

    Corporate Culture
    Tickets must be bought from the airline itself, the

    phone or online Extra Rapid Rewards

    - frequent flier program - credits for online booking users only


    Customers are assigned to a boarding group

    depending on check-in time

    - find their own seats on the plane Colorful boarding announcements and crews that burst out in song instead of no video entertainment Meal service is less than on historically full service airlines

    Looking Ahead
    Increase more non stop flights

    Enrich operation system


    Include daily non stop flights in busy air traffic

    route.

    Conclusion
    Southwest Airlines uses third-degree price

    discrimination to fill the plane with travelers in the most profitable way Depending on the price of elasticity of demand for tickets

    Charge a higher price for business travelers who have relatively inelastic demands Charge a lower price for vacation travelers who have relatively elastic demands

    ThaTs IT

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