Low-cost Airline’s Strategy Model Analysis: Southwest Airlines

Case Southwest Airlines

Must-Win Battles & Strategy Model

About 40 years ago, Rollin King and Herb Kelleher got together and decided to start a different kind of airline. Southwest Airlines founded in 1971 and it was a novel business model innovation that breaks all the rules.

They 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.

A  low-cost airline is also known as a no-frills, discount or budget carrier or airline. It is an airline that generally has lower fares and limited services. The term originated within the airline industry referring to airlines with a lower operating cost structure than traditional airlines. Low-cost carriers should not be confused with regional airlines that operate short flights without service, or with full-service airlines offering some reduced fares, because they have different business model.

Must-Win Battles

Low-cost airline’s the Must-Win Battles are:

  • Very low ticket prices (customer)
  • High utilization rate of fleet of aircraft (growth, routes)
  • Efficiency through simple structures (processes)
  • Lean and productive personnel (resources)

Low-cost airline allow business travelers, who could not fly in First Class, to enjoy a premium service. Accordingly, elements of the customer perspective focusing on frequent point-to-point flyers, limited service and refundable ticketless flight. Frequent flyers are people, mostly business, who frequently travel between destinations that are 600-900 miles apart.

The growth perspective follow only the strategy logic of the high utilization of aircrafts, which is based on elements such as the efficiency in ground services (25 min gate turnaround), short-haul, frequent and point-to-point routes between mid-sized cities and secondary airports. These the key issues keep planes in the air the most of the time. The utilization rate with high volume is very crucial for the low-cost airline’s strategy model and every business issues must follow this logic.

The process perspective based on simplicity of operations. Just one type of aircraft (Boeing 737) keeps costs down related to pilots’ training, spare parts, maintenance, etc. The hardest part of the implementation of low-cost airline business model is personnel.

Create lean organization, flexible and productive personnel:

  • Flexible contracts & multi-skilled personnel
  • Create right company spirit
  • Reward: High compensations of employees
  • Be selective: Only hire persons fit in profile

The strategy analysis (strategy model / strategy map) in Slideshare:

The whole Strategy Model of Southwest Airlines (see picture below).

Levels of analysis:

  1. Root: Mantra (“mission statement”)
  2. Orange elements: strategy logics per strategic perspective
  3. Dark blue/violet elements: business issues
  4. Blue elements: activity elements

Read more about Must-Win Battles [Click picture below]


See also Business Model Canvas:

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