Thursday, March 26, 2009

Southwest Airlines: Tweaking the Model

The Wall Street Journal reported yesterday that Southwest Airlines continues to tweak their strategy, which has been so successful them for several decades. For instance, Southwest has now decided to begin providing service from both New York's LaGuardia Airport and Boston's Logan Airport. Traditionally, Southwest avoided these types of crowded and busy major airports in northern cities susceptible to frequent weather delays. As a result, Southwest Airlines has always managed to turn around their planes in a remarkably short period of time, working from smaller regional airports such as Providence and Manchester. Southwest achieved a very good record of on-time arrivals and departures as a result. Moreover, the company kept its planes flying more hours per day because of those fast turnaround times, leading to higher productivity and increased profits.

As a strategy professor, Southwest offers a model to be admired, because they have created such a well-integrated system of activities. Everything they do works to deliver speed and low costs. They do not exhibit any inconsistencies in their strategy. Now, however, these tweaks to the model may weaken the operating model. Will they be able to keep costs as low, turn around planes as quickly, and maintain their record of on-time arrivals and departures, when operating out of such busy, crowded airports?

Southwest has a remarkable string of 36 straight years of profitable operations - a record unmatched in the airline industry. They have chosen to tweak the model to deal with the economic upheaval, and to find new sources of growth. However, they may risk weakening the strategic focus and clarity that have been at the root of their success.


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