The big idea: Southwest Airlines pioneered a new model for the low-cost airline carrier space. But now, as an established player and one of the four largest airlines, the same model might not continue to yield results. Southwest’s competitive pressures hail from two very different groups: a new generation of low-cost carriers like JetBlue, Frontier, Spirit and Alaska Airlines, as well as legacy carriers United, Delta and American. What should Southwest do next? Learn to say no.
The scenario: Southwest is known for a unique operating model supporting its market position: Low-cost, no-frills, on-time travel. All the process-level operational choices work together in harmony: frequent, short-haul flights, quick turnarounds, an affinity for secondary airports and business commuter routes, and a spider-web-inspired growth model. Even its fleet — only a single model — reinforces the plan.
Then there are the people. Cheerful flight attendants and pilots legendary for their jokes and the genuine appearance of, well, liking their jobs. And processes and people together? That’s synergy of purpose, one of the holy grails of operations design.
Airline profitability is driven by decreasing costs and increasing passenger revenue, both per available seat-mile. Southwest outshines the big three with the lowest costs, due to ultra-high airplane utilization and other efficiencies. But it falls short when it comes to passenger revenue, due in part to policies like no bag fees and offering simple, free snacks such as peanuts or crackers, but nothing fancier that costs extra. Seat classes and upcharges for premium seating were intentionally not a part of Southwest’s initial strategy. Instead, seat assignments were driven by a more egalitarian first-come-first-served principle. Not only are these choices central to Southwest’s value proposition and family-friendly atmosphere, but they also reduce costly delays and complexity. Can more of the same guarantee future success, especially when next-gen low-cost airlines and legacy carriers present such different types of competition? Should Southwest stay the course, or change with the times?
The resolution: Southwest has a winning formula that aligns process, people and purpose. But the real coup in responding to a changing competitive landscape lies in learning to say “no.” Operations are all about customer service, which means delivering on a promise that a customer wants kept. Deciding what promises to keep always means saying no.
The lesson: In 1985, Southwest’s tag line was “Just Say When” to highlight the frequency of their short-haul trips. In 2017, its tag line should be “Just Say No” — no to initiatives that dilute its core strategy.
Goldberg (MBA ’03) is a guest executive lecturer and Weiss is the Oliver Wight Professor of Business Administration at the University of Virginia Darden School of Business.