Friendly Skies

HRM 400 6981

24 July 2016

René Seier

UMUC

 

 

 

 

 

 

 

 

 

Introduction

Southwest is a low fare airline that wants to be known for connect people to what’s important in their lives through friendly, reliable, and low-cost air travel. (Southwest, n.d.) You will see this all over their website and commercials. Southwest bought AirTran back in 2011 for $1.4 billion with the intention of combining fleets and operating the newly merged airline under the Southwest brand, but it has been a long, slow process. Even the two frequent flyer programs are not yet fully merged, though you can earn and redeem on flights by both airlines and transfer points between the two, and they’ve been adding new international routes that they are hoping to begin this effect shortly after the merge. They had to bring together two worlds and make them into one family. Adding AirTran to their family didn’t change their vision of become the world’s most loved, most flown and most profitable airline. The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit. They are hoping this will push them more toward this.

Main Finding

AirTran had conversations with Southwest for years about a number of possible marketing alliances before the merger. It is the result of these discussions and in-depth analysis that both sides determined the offer to acquire and merge. They felt strongly that together they could accomplish more, grow more efficiently, create more jobs, and realize more value, with more certainty and security together than either AirTran or Southwest can do independently.

Southwest is committed to provide our Employees a stable work environment with equal opportunity for learning and personal growth. Creativity and innovation are encouraged for improving the effectiveness of their airlines. Above all, Employees will be provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Southwest Customer. Southwest Airlines is America’s largest low-fare carrier, serving more customers domestically than any other airline. (Southwest)

The company uses a number of mechanisms to allow employees participation. Very high standardization regarding operations, it is low with respect to customer service. Employees are encouraged to try things. Southwest has a very customer service oriented airline. They serve at their best by using their sense of humor. Southwest believes in promoting within. Job opportunities may depend on the conditions taken by Southwest in promoting their staffs to a higher position. They could find it difficult to promote because there are a lot of factors to consider in order to move someone into a higher level. Employees are able to construct their plans for their career under a company that may be influence by the structure of the organization. AirTran’s career plans should be in accordance to how Southwest works out career paths for their workforce.

 Some of the most important effects of organizational structure can be seen in employee morale, internal communications, efficiency, and effectiveness. Employee morale often relies heavily on a strong organizational structure. Employees tend to feel motivated and loyal when they are treated with respect, challenged by their work, and have access to advancement opportunities. This is the structure that Southwest wants to use to bring both groups together. The effect of Southwest structure on employee morale can also be negative. Southwest Airlines will have to assess its current business structure to be able to identify areas of improvement. (Bhattacharya, n.d.) With the expected arrival of both current and new staff from both companies, Southwest will have the opportunity to both replace old staff members with new ones as well as retain old staff to train new staff and get them up to speed with the current company trends.

The agreement with AirTran Airways for $1.4 billion to merge with Southwest. Also with the merge AirTran shareholders will receive around $7.50 in consideration per share of AirTran stock subject to certain conditions based on the Southwest share price at closing. (Q&A, 2010) The deal would expand Southwest’s network by 25 percent and give it its first international destinations in the Caribbean and Mexico. The combined networks of Southwest and AirTran have little overlap: each serves about 70 airports, but they compete directly on just 19 routes. This is a 69 percent premium, share price of AirTran stock and is valued at more than $1.37 billion in equity based on more than 178,000,000 outstanding shares. Including existing AirTran Holdings, Inc., indebtedness and capitalized aircraft operating leases, the aggregate transaction value is approximately $3.42 billion.

 

SWOT Analysis of Southwest Airlines

The SWOT analysis below had be created to emphasize major accomplishments of Southwest Airline’s merger with Air Train and the necessary improvements that can be made with the expansion and acquisition. (Southwest Airlines SWOT)

Strengths

•Southwest started in 1971 and grow very fast very quickly.

• Offers credit based on the number of trips with the airline instead of the total miles traveled.

• Was the first to offer senior discounts, ticketless traveling, and services for air freight delivery.

• Painstakingly considers each applicant so that they are sure to select the best employees which leads to excellent service for their customers.

• Offers low fare priced tickets/packages with low frills and excellent customer service.

• Low fare methodology to flights that has lured consumers to their services.

• Excellent employee relations leads to higher ticket sales as they all work as a team.

• Uses only Boeing airplanes to keep costs down in repairs and get a bulk discount on the purchase.

 

Weaknesses

•Does not offer segmented seating options.

• Space to carry freight and cargo is limited.

• Does not offer international flights.

• Dependent on a single airplane producer.

• Perks plan is the same no matter the length of your flight.

• Scrutiny of potential employees based on personality before skill could be dangerous.

• Having a reduced amount of Line Supervisors can lead to unruly employees.

Opportunities

•With the merge they can expand into international and other national markets.

• Research and development to advance procedures and services with the industry.

• Was the first to offer senior discounts, ticketless traveling, and services for air freight delivery.

• Using the newest technology to make the travel experience more enticing.

• Extend flights to further destinations.

• Expanding services to include services for leisure or business classes.

• Considering applicants with large skill bases but lower amounts of enthusiasm.

Threats

•The economy reducing the number of travelers for leisure.

• Online ticket reservation systems from competitors.

• Government regulations that add to operating costs.

• Terrorist threats causing less people to be willing to fly.

• Prices for oil and gas.

• Costs for airline security have increased annually. (Southwest Airlines SWOT)

 

Conclusion

The merger closed in 2011, but Southwest has been notoriously cautious on its public timeline for how long it would take to completely fold AirTran's operations into its own. With the strongest balance sheet in the industry, competitive strength, low costs, various revenue initiatives and network optimization, we believe the company sustained even in a difficult operating environment and will continue to do so in the near future. Over the past few years, Southwest was forced to expand its capacity at relatively low rates of around 1-2% per year as it was occupied with integrating AirTran. (Q&A, 2010) Converting AirTran’s 737s into Southwest livery as well as phasing out AirTran’s 717s required Southwest to keep many airplanes out of active service. So, as these AirTran airplanes return to active service, refurbished with Southwest livery, the carrier plans to expand its capacity by 6% per year in 2015. We figure this aggressive capacity expansion in 2015 will help retain Southwest’s growth, which over the past 2-3 years was driven in part by the AirTran acquisition and synergies.

 

 

 

 

 

 

 

 

References

Bhattacharya, A. (n.d.). Southwest Airlines. Retrieved from http://www.slideshare.net/prasant26/so-31809083

 

Q&A on the Southwest-AirTran merger. (2010, September 27). Retrieved from http://www.bizjournals.com/atlanta/stories/2010/09/27/daily2.html

 

Southwest Airlines Careers. (n.d.). Retrieved from https://www.southwest.com/html/about-southwest/careers/index.html?clk=GFOOTER-ABOUT-CAREERS

 

Southwest Airlines Swot Analysis. (n.d.). Retrieved from http://www.quality-assurance-solutions.com/southwest-airlines-swot-analysis.html

 

Strengths And Competitive Capabilities Of Southwest Airlines Management Essay. (2015, March 23). Retrieved from https://www.ukessays.com/essays/management/strengths-and-competitive-capabilities-of-southwest-airlines-management-essay.php