A few recent SWA Stats 3 rd most admired company according to FORTUNE Magazine in 2006 ; 5 th in 2007 FORTUNE has ranked Southwest Airlines in the top five of the “Best Companies to Work For” in America. Southwest ranked first in 1997 and 1998, second in 1999, and fourth in Southwest has chosen not to participate since 2000.

Southwest Airlines carried more Customers than any other U.S. airline in August 2006, marking the first time that Southwest Airlines has topped the monthly list for combined domestic and international passengers, according to the U.S. Department of Transportation’s Bureau of Transportation Statistics.

BusinessWeek along with The Boston Consulting Group named Southwest Airlines in their 2006 Top 25 ranking of “The Worlds Most Innovative Companies.” Southwest was included in the list for being “a whiz at wielding operational improvements to outfly its competitors.”

Fortune’s Most Admired Southwest Airlines # 5 Starbucks #2 FedEx # 6 General Electric #1

Dimensions People Management Quality of Management Innovation Investment value Use of assets Quality of products/services

SWA Highest shareholder return of any stock ( ) –Return of over 21,000% –Consistently profitable, even when other airlines sought bankruptcy protection Market share gains –California 45%, up from 0% in 1989 Turnover: 4.5% versus 9.5% industry avg.

SWA Employees per aircraft (1998) –SWA: 94, United & American: 160 –Industry: 135 Passengers served per employee –SWA: 2,443 –Industry: 840 Customer service –Triple Crown winner On-time performance Fewest lost bags Fewest customer complaints

SWA Safest airline in the world (of the 85 major world airlines) Top company to work for in Fortune Magazine’s list of the “100 Best Companies to Work for in America” In 2006 hired 3,363 people and received 284, 827 applications –About 1% of applicants are hired

SWA Employees at the gate –One agent, ground crew of 6 (SWA) –Three agents, ground crew of 12 (Avg.) Aircraft turnaround time –15 minutes (SWA) –30 minutes (CA Lite)

SWA Questions Why is this company so successful? Why hasn’t the competition been able to imitate them, or to achieve their level of success? –“the business model is understandable by any 3-year-old.” (Tom Peters) –How has the company been able to grow to its current size (32,000 employees) and to deliver consistent performance over such a long time?

SWA Quotes “They can imitate the airplanes. They can imitate the ticket counters and all the other hardware…..But they can’t duplicate the people of Southwest and their attitudes.” Kelleher

SWA Quotes It used to be a business conundrum: “Who comes first? The employees, customers, or shareholders?” That’s never been an issue to me. The employees come first. If they’re happy, satisfied, dedicated, and energetic, they’ll take real good care of the customers. When the customers are happy, they come back. And that makes the shareholders happy.” Herb Kelleher (1996)

SWA Values SWA values –Work should be fun…it can be play…enjoy it –Work is important…don’t spoil it with seriousness –People are important…each one makes a difference

Competitive Advantage Through People Founder’s philosophy & leadership style Recruitment & Selection –What do they look for in selecting people? Who is involved in interview process? How do they respond to those who are not selected? Why ?

Competitive Advantage Through People Training & Socialization –Information sharing Monthly statistics on costs, operations, and financial data Keeps employees focused and builds trust –Importance of satisfied customers For every customer who complains, 25 remain silent Each unhappy person tells 12 others Top Management –People department –Behaviors, values, attitudes, etc..

SWA: additional info Who is the most unionized airline in the United States? Information sharing –Monthly statistics on costs, operations, and financial data Keeps employees focused and builds trust –Importance of satisfied customers For every customer who complains, 25 remain silent Each unhappy person tells 12 others

SWA: The Competition Start-up imitators –America West (had been bankrupt), Reno Air –Morris Air (bought by SWA), Kiwi Air –Jet Blue? Majors –Continental Lite (lasted two years) –United Shuttle (backed out of 40% of routes it shared with SWA) –Delta Song –TED of United