 Employees per aircraft much lower than industry ◦ 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

 Fewer employees at the gate ◦ One agent, ground crew of 6 (SWA) ◦ Three agents, ground crew of 12 (Avg.)  Quicker aircraft turnaround time ◦ 25 minutes (SWA)

What is the secret of Southwest Airlines unbelievable level of performance? Southwest Video

 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

 “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.”  Herb Kelleher

 One of FORTUNE ‘s Most Admired Companies  FORTUNE has ranked Southwest Airlines in the “Best Companies to Work For”  2005, American Customer Satisfaction Index (ACSI) recognized Southwest Airlines as leading the industry in customer satisfaction  Business Week “Top 25 Most Innovative Companies”

Traditionally staffing has focused on the match between an applicants skills and experience and the job requirements. Match Person KSA’s Motivation Job Requirements Rewards

Most Companies Match Impact Person KSA’s Motivation Job Requirements Rewards HR Outcomes Performance Extra Effort Retention Satisfaction Commitment Hire for the Job

SWA Match Impact Person KSA’s Motivation ATTITUDE Job Requirements Rewards Organization Task Flexibility Values/Culture Career Progression HR Outcomes Performance Extra Effort Retention Satisfaction Commitment Hire for the Organization

 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)

CharismaticLeaders Strong vision and articulation Self-sacrificing, risk-taking Unconventional, novel behavior High expectations Build self-esteem in followers Self-confident, dynamic

 Founder of SWA  Zany, crazy approach to management – e.g. arm wrestling to settle business matters  Work should be fun – sing, dance, play but get the job done….

 Began as a secretary at Southwest Airlines and eventually became SWA President  Known for ◦ Humanistic ◦ Idealistic ◦ Sense of Humor ◦ Commitment to Customer ◦ Servant Leadership “We look for folks who are eager, who are “quick on their feet” with “outside the box” thinking and who have caring, friendly natures.”

 About Herb and Colleen About Herb and Colleen

 Current president, CEO and chairman of the board  Long history in SWA culture working with Herb and Colleen Leadership is... "Effectively supporting your team of Employees."

 Fuel hedging a key strategic advantage but becoming more difficult each year ◦ SWA fuel hedging for future:  % hedged at $50/barrel  % hedged at $49/barrel  % hedged at $51/barrel  % hedged at $63/barrel  % hedged at $64/barrel  % hedged at $63/barrel  “Even with $511 million in favorable cash settlements from derivative contracts in the second quarter 2008, our economic fuel costs increased 35.2 percent to $2.19 per gallon.” - Gary Kelly

 Failed acquisition Why??  Could it have worked?

Internal Maintenance External Positioning Flexible Processes Control-oriented Processes CLAN Build interpersonal Relationships; cohesion; morale ADHOCRACY Entrepreneurial; innovative; Adaptable; risk-taking HIERARCHY Stability; efficiency; Rules & regulations; Policy development MARKET Competitive; achievement-oriented; Goal-focused

 SWA vs. S&P 500 over 10 years

 Past 3 months

 What has been SWA’s competitive advantage?  Can they keep this competitive advantage in the future?  What does their future hold?