Southwest Airlines-36 Years of Profitable growth

Southwest Airlines is one of the world's most profitable airlines and in 2008 posted a profit for the 35th consecutive year - an unsurpassed record in the airline industry. Southwest’s market capitalization is more than that of combined market capitalization of its six big competitors. It is the largest
airline in the United States by number of passengers carried domestically per year and also the largest airline in the world by number of passengers
carried. Southwest has won the Triple Crown (best on time performance,
fewest complaints, and fewest lost bags) for 5 years in a row. Southwest
Airlines has never lay off a single employee ever and never had a labor
disruption.
Southwest's marketplace success has been sufficiently dramatic and visible
to inspire attempts by other airlines to adopt the Southwest model. However
Southwest has always sustained its Competitive advantage. In this project
the real reason behind its Sustainable Competitive Advantage has been
analyzed.
Southwest is able to offer lower prices due in large part to the highly
productive use of its major assets-its Aircraft and its People.

The secret of high productivity is the High Performance Relationships which are based on Shared Goals, Shared Knowledge and Mutual Respect.

Here an attempt has been made to understand the policies strategies and
techniques that have led to Southwest’s success through High Performance
Relationships and how these practices can be used for improving Efficiency
and Quality in the Airline Industry.

Anonymous Flier-Southwest

The Secret Behind High Profits at Low-Fare Airlines

It's no secret that the travel industry has been struggling lately. But one segment continues to do well - the low-fare airlines such as Southwest Airlines in the United States, Ryanair and easyJet in Europe, WestJet in Canada, GOL Airlines in Brazil and Virgin Blue in Australia.
What's their secret?
One major contributor to their success is that they fly only one airplane model in their fleets. Thus, pilots and mechanics need to be trained on only one kind of airplane. Having a single airplane model in a fleet also lowers inventory, record keeping and maintenance costs, and it minimizes the number of technical manuals, tools and spare parts. Also, fleet management is greatly simplified.

The Boeing 737 makes up more than 90 percent of the combined fleets of the low-fare carriers around the world. Shown here are four of the many airlines whose profitability is closely tied to the cost savings derived by using only this airplane in their fleets: clockwise from top right, WestJet, Ryanair, GOL, and Virgin Blue, representing the major markets across the globe - North America, Europe, Latin America and Asia/Pacific.
"What happens if you have mechanical irregularities?" said Herb Kelleher, chairman of the board of Southwest Airlines. "With only one model airplane in your fleet, you can substitute one for the other."
The first airline to adopt this one-model-fleet tactic was Southwest Airlines, the fourth largest carrier in the United States, which just completed its 29th year of profitability.
"Southwest Airlines has built its reputation on low fares and quality service throughout the United States, and we continue to see a bright future by utilizing an all-737 fleet," said Southwest President and Chief Operating Officer Colleen Barrett.
Knowing a good thing when they see it, other airlines have modeled themselves in Southwest's image. Ryanair, founded in 1985, was the first European airline to convert to the low-fare model after its chief executive, Michael O'Leary, visited Southwest Airlines in 1991. Since then, the airline has grown to become Europe's most profitable airline and the largest low-fare airline in Europe. The airline is growing at a managed growth rate of 25 percent per annum and will carry over 12 million passengers this year.
"We're simply applying in Europe for the first time in a very disciplined fashion the model Southwest Chairman Herb Kelleher already has established in the United States," O'Leary recently told The Wall Street Journal.
Virgin Blue, founded in 2000 by Sir Richard Branson as a low-fare airline for flights within Australia, had predicted a loss for its first three years, but instead came in with a profit of $500,000 in its first seven months.
In 2000, WestJet, which began operations in 1996, became the second most profitable airline in North America behind Southwest, and just celebrated its 21st quarter of profitability with its 2002 First Quarter results. GOL Airlines of Brazil carried 2.2 million passengers in 2001, its first year of operation.
Even more remarkable than the fact that these airlines fly just one model is that they all fly the same model - the Boeing 737. In fact, the 737 makes up more than 90 percent of the combined fleets of the low-fare carriers around the world.
Why the 737?
Cost, for one. Low-fare carriers must tightly manage operating costs or they cannot offer the low fares for which they are famous. The new model 737s are designed to have the lowest operating costs in their class. In fact, on a typical route 737 cash operating costs are nearly 4 percent less than its closest competitor, the A320 series, in part due to its superior structural efficiency.
"The newly redesigned 737s weigh less than the A320 and therefore require lower engine thrust," said Carolyn Corvi, Boeing 737 and 757 programs vice president. "This means the 737s use less fuel, and have lower engine maintenance costs and lower navigation and landing fees."
The 737 maintenance costs are up to 35 percent lower than the A320 series as reported by the U.S. Department of Transportation Form 41, an FAA- required form on which airlines report their costs.
The 737 is not only less expensive to maintain, but easier too. Its simple design and low stance on the ramp make the airplane easy to maintain and load. Most equipment can be serviced at ground level, including the engines. Newer 737s have fewer parts than older models, which improves reliability and maintainability. Baggage can be loaded from the ground, allowing for last-minute bag additions. All of this contributes to the quick turnarounds that allow carriers to make maximum use of their airplanes - in other words, keeping them in the air earning revenue rather than sitting idle on the ground.
"Our airplanes spend about 25 minutes at the gate between flights, versus an industry norm of about 45 minutes to an hour," said Laura Wright, vice president and treasurer at Southwest Airlines.
Reliability is another major reason airlines prefer the 737.

One of the reasons the Boeing 737 is so popular with low-fare airlines is its ease of maintenance. As shown here, the airplane sits low to the ground, allowing maintenance crews to easily perform routine maintenance on the engines.
"The 737 is well known as the workhorse of the aviation industry," said Brett Godfrey, chief executive officer of Virgin Blue. "It's reliable and cost-efficient, two vital characteristics for a true low-fare airline."
The 737 is the industry leader in reliability. Because the airplane can be turned around at the gate so quickly, airlines can get back on schedule if they fall behind for any myriad of reasons. This allows airlines to deliver passenger satisfaction as defined by the customers themselves: getting them where they want to go, when they want to go, at a good value.
"The 737's reliability also means operators can use an airline for more flights on any given day, giving passengers more departure time choices and airlines the opportunities for more revenue," said Toby Bright, executive vice president of Sales, Boeing Commercial Airplanes.
Flexibility is another attractive feature of the 737 for these types of carriers.
"We wouldn't be saddled with an airplane that we could use only on long-haul, or that we could use only on short-haul," said Sandy Campbell, chief financial officer and senior vice president of WestJet.
Besides this range flexibility, the 737 comes in four different sizes in the 100- to 200-seat market. The interiors are flexible, too. Operators can choose optional flex seating, in which they can change a row of seats from five-abreast business-class seating to six-abreast tourist-class seating in less than one minute. A moveable cabin divider also allows configuration changes between flights.
The 737's dominance as the airplane of choice for successful low-fare airlines was recently reinforced when Ryanair placed the largest single order in the Next-Generation 737's history. The Dublin, Ireland-headquartered airline ordered 100 737-800s, with an option for 50 more, which will begin delivery in 2002 and continue until 2010.
"This is a validation of the 737 as the airplane of choice for low-fare airlines," Bright observed on the day the order was signed.
But Bright also is quick to point out that an all-737 fleet is not every airline's route to success.
"The world is a big place, with a large number of airlines flying millions of passengers on countless routes around the globe. There always will be room for airplanes of every size, from large twin-aisles to small regional jets," he said.
No one would claim that the Boeing 737 is the only reason these airlines are a success, either. These low-fare airlines all offer many unique services that keep their customers coming back. But as the evidence shows, an all-737 fleet is a major contributing factor and a key element in their business plans.
"It's difficult for me to visualize Southwest Airlines without the 737, "Kelleher said. "It's beautifully designed and manufactured, and I think one of the best decisions we ever made was to buy the Boeing 737."

India's Airline Industry

A few years ago, India's airline industry was flying high. A booming economy made India one of the fastest growing and most competitive aviation markets in the world. Six new carriers launched while established airlines laid on new routes and bought new jets. In the last four years, Indian carriers ordered 400 Boeing and Airbus jetliners worth about $37 billion.
Brace for impact. The global recession has hit air carriers everywhere, but a sharp decline in passenger numbers is especially bad news for India. With oil prices rising to $73 a barrel, Indian airlines — which carry just 2% of the world's passengers — could sustain more than $2.5 billion in losses this year, accounting for one-fourth of the projected $9 billion in losses for the entire industry, according to the International Air Transport Association. Weighed down by overcapacity, debt and the government's refusal to provide bailouts, Indian carriers are being forced to slash their operations and reduce ticket prices.

That change includes deferring aircraft deliveries, cancelling orders, rationalizing routes and trimming staff to stave off financial collapse. "It's going to be tough, but we mean business," says Praful Patel, India's civil aviation minister. At the same time, three of the country's largest carriers — state-owned Air India, and private players Jet Airways and Kingfisher — are trying to attract more passengers by turning their full-service domestic fleets into budget businesses. In January, India's budget airlines fleet totaled 75 jets, compared with 120 full-service planes.

Hardest hit by the economic downturn has been national carrier Air India: It reported annual losses of $1 billion in the fiscal year ending March 31, along with an accumulated debt of $3.5 billion; that debt load is expected to rise to $7 billion by 2012 if it takes delivery of 111 new aircraft already on order. Air India alone accounts for 10% of the total projected losses for the global airline industry this year — even though it carries just 0.35% of global traffic. Air India is suffering from an aging fleet and a bloated staff roster of 31,000 permanent employees and 20,000 contract staff; its labor costs amount to 18% of its total operating expense, the highest ratio in the world, according to Patel.

With no bailout help from New Delhi in sight, Air India is bidding to bring its profitable international budget brand — Air India Express — to Indian turf. Air India Express, which has been flying routes to the Middle East and Southeast Asia for the past five years, will configure 10 of its 57 planes for budget flights by September, says Air India managing director Arvind Jadhav. The company plans to increase the number of budget flights a day from 25 initially to 43 by October. Ticket fares will be down 25% making it attractive for fliers. The logic, says aviation minister Patel, "is to fill up seats and operate at lower costs." Unlike its parent, the profitable Air India Express operates as an independent company with lower overheads. Besides, with no business seats they will be able to pack in more people at a time when the passenger count for all airlines is down 30% since last year.

Following similar logic, private players Jet Airways and Kingfisher, owned by the liquor baron Vijay Mallya, are expanding existing budget operations to try to increase business during the economic downturn. They aren't starting from scratch. Both airlines already had rechristened budget carriers — Jet Lite and Kingfisher Red — acquired in 2007. Now they are transferring capacity to the economy fleets. Kingfisher Red jets are flying more routes; as a result, about 75% of all domestic passengers that now fly with Kingfisher are traveling budget class, up from 50% a year ago. Meanwhile, Jet Airways, India's oldest private player, has converted some of its jets by removing all business-class seats and rebranding them as JetKonnect — giving the company two budget brands. "It gives us the flexibility and speed to deploy capacity and reverse it to meet changing trends," said Sudheer Raghavan, chief commercial officer of Jet. Launched in May, JetKonnect offers 40% lower fares and plans to take the current 130 flights a week to 160 by October.

Officials for both carriers say they hope to resume normal operations once the economy rebounds. But analysts say that may be difficult because the industry has yet to solve a basic problem: too many airlines flying too many flights in a country that, despite its economic growth, is relatively poor. India's airlines are now crowding into the budget market, just as they crowded into regular and premium air travel services a few years ago. "With everybody fighting for the same piece of business, this could once again create overcapacity and fuel fare wars," says Ankur Bhatia, executive director of Bird Group, a New Delhi company that provides technology to the travel industry. Lowering fares may attract more travelers but it may not improve the overall financial health of the industry. "To make profits while shifting business models, the airlines have to think, act, breathe and be low cost," Amitabh Malhotra, managing director of investment bank NM Rothschild & Sons in Mumbai. "That doesn't happen overnight." Adds Patel, India's aviation minister: "This time every airline will learn a lesson the hard way."

''Ayurveda can counter swine flu''-Sri Sri Ravi Shankar

"India has a wealth of knowledge from Ayurveda to counter swine flu". In addition, our mind also plays an important role in our immunity. Whenever we panic and have fear, our immunity level goes down. Practices like pranayama and meditation play a vital role in reducing panic / fear and keeping ourselves calm.
Urging people not to panic, His Holiness Sri Sri Ravi Shankar, founder of the Art of Living said in a press release, “India has a wealth of knowledge from Ayurveda to counter swine flu”.

Elaborating on this, Dr. Manikantan and Dr. Nisha Manikantan, senior ayurvedic doctors at Sri Sri Ayurveda centre said, “Swine flu invades the body because of a breakdown in immunity. And Ayurveda offers simple & effective remedies to boost immunity & build resistance. Tea made from Laxmi Taru (botanical name: Simarouba)leaves, Tulsi, Amla and Amrut (Giloy) acts as an immunity enhancer. Alternatively & additionally, Ginger and Turmeric (haldi) powder mixed with either lime juice or honey can also be taken twice a day.”
“To counter air-borne swine flu viruses, Sambarani dhoop (loban stems) should be burnt in the house twice a day. Sambarani is a very potent atmospheric sterilser”, the doctors added.
Sri Sri also said, “In addition, our mind also plays an important role in our immunity. Whenever we panic and have fear, our immunity level goes down. Practices likepranayama and meditation play a vital role in reducing panic / fear and keeping ourselves calm. Independent studies conducted at the All India Institute of Medical Sciences, New Delhi (AIIMS) and National Institute of Mental Health and Neuro Sciences, Bengaluru (NIMHANS) have empirically proved that practices such as pranayama and meditation boosts immunity at least three-fold. If we can integrate these practices in our daily lives along with the simple Ayurvedic remedies, we can effectively counter swine flu”.
Dr. Manikantan & Dr. Nisha Manikantan from Sri Sri Ayurveda can be contacted on :

info@ssapd.org