Southwest Airlines Puts Customers First and Generates Increased Profits as a Result
Southwest Airlines’ turnaround story serves as a great case study in how to get your employees to help you reduce costs without reducing service.
June 26 2014 by Colin D. Baird
In fact, Southwest (SW) managed to increase service without adding any labor.
Operating in crisis mode in 1973, then Southwest CEO Herb Kelleher asked employees at Love Field Airport in Texas to do the impossible: in an industry where it took 45-60 minutes to get a plane ready for its next flight, he asked them to accomplish it in 10. Kelleher realized this would get passengers to their destinations faster. Banks had been demanding that he sell one of four planes to meet payroll, yet Kelleher wanted to maintain the same number of routes. Given this new dynamic, a reduction in capacity would only lead to worsening conditions without a radical rethink in what value meant to airline passengers. Employees closest to the customer were key to improvements Kelleher wanted to make to succeed.
While SW’s competitors believed that value was best achieved flying full planes, it meant passengers had to wait for planes going out of their way to get to their final destination. SW employees learned customers didn’t want to wait; but rather, they wanted to arrive at their destinations faster. The airline saw a competitive advantage in changing their approach, and believed employees could be brought together to help them do so.
Kelleher asked everyone to save the struggling airline by eliminating anything that prevented them from having planes ready to fly again in 10 minutes. He calculated that doing so would enable SW to maintain the same number of flights using one less aircraft. This would also decrease leasing costs and space requirements at the ramp and reduce operating expenses on maintenance and financing costs.
Employees worked together to create a scheduling tool that enabled others within the system to know an aircraft’s ETA at any given point. Down the line, this sent a signal to a receiving team to prepare for arrival while aircraft were in the air. To move things along as quickly and efficiently as possible, pilots helped clean the interior before they deplaned, mechanics moved jet bridges and fuel trucks faster, and luggage racks were taken to planes as soon as they arrived. As the changes were taken from proof of concept to actual process improvements, they were formerly rolled out at other airports, and standardized as they became sustainable as the success of less waiting drove more and more passengers to fly SW.
Utilizing “organizational learning”—defined by Dr. Chris Argyris of Harvard University as the “detection and correction of errors”—SW’s executives learned that, while others believed the most value was in flying full planes, by reducing lead times, customers got what they paid for faster. This allowed SW to decrease operating expenses, increase inventory turns and expand into new markets. Without the collaborative contributions of executives and employees, none of this would have been possible.