Southwest Airlines' leadership style and competitive advantages

Business Studies

Southwest Airlines

Southwest Airlines has been a highly successful airline, it has been one of the most successful airlines in U.S. history with the low cost carrier model created by Southwest emulated successfully by many other airlines across the world. Today it is the largest domestic carrier in the U.S. And has a history of consistent profits, with on a few quarters in the recent recession showing losses (Southwest Airlines, 2013). There are numerous reasons behind the success, the main reason are the leadership and the way that the firms ability to gain and maintain effective competitive advantages. These will provide a good basis from which to consider the future of the firm.

Effectiveness of Leadership

Southwest Airlines was founded by Rollin King and Herb Kelleher, having seen successful interstate airline operating out of California it was believed that Texas could also support an interstate airline (Barratt, 2008). The idea was to create an airline that would operate in the interstate market, but would provide low cost flights, which were also enjoyable. At the most basic level, history shows that the leadership must have been effective, not only did the firm survive the initial threat to its existence with winning a three-year legal battle brought about by three other Texas airlines trying to stop the firm from taking tot he skies, the firm has grown at an exponential rate.

It may be argued that the key aspect of the leadership has been the leadership style and values which are able to gain the loyalty and trust of employees and support high levels of productivity. The leadership style has been referred to as servant-leadership; a style where the needs of the employees are put before the needs of the leader. Although, when Herb Kelleher started the firm and took the helm as a position this term was not used, there was a basic belief that if employs were treated well, as if they were internal customers, they would treat the employer well and be motivated to provide high levels of customer service.

The leadership strategy appears to have worked well, the organization has been able to create a corporate culture where employees are not seen to take themselves too seriously, and are able to help customers have an enjoyable flight. Furthermore, employees have been treated on the basis of merit, for example it was Southwest Airlines which hired Louis Freeman, the first black pilot in 1980, and he was subsequently named the first black chief pilot had any major U.S. airline in 1992 (Southwest Airlines, 2005).

When Herb stepped down as CEO, he stayed on as chairman until 2008, when Gary Kelly, the existing CEO also took on the role of chairman. While the leadership may have changed, the leadership style remain the same, with those in leadership positions throughout the organization supporting the people centric culture, with an strategy to develop and promote people internally, identifying potential in four key areas, the ability to share the people, the ability to build great teams, strategic thinking, and the ability to achieve excellent results, the areas that the company referred to as their leadership expectations (Bryant, 2007). Developing and promoting employees internally supports a people centric approach, and demonstrates commitment by the employers to the employees because the health and support motivation, one aspect which are supported by the human relations school of thought. It has not only been leadership managing people that has been successful, the financial management and leadership strategies such as the use of hedging for fuel have also been key elements of the firms success.

However, by the leadership appears to be highly successful, there have also been some failings which may also be credited to leadership failures. This is seen with the safety failures at Southwest Airlines, it was found that the Southwest aircraft had been flying without the legally required safety checks, some f the aircraft had been flying in this condition for none months, This was a significant failing and indication some internal systemic failings which have to be attributed to leadership. The most worrying aspect is even after this problem was identified, the firm allowed the aircraft to continue flying for another nine day. The result was a fine of $10.2 million. Therefore, while leadership may be strong, it has been far from perfect.

Potential Growth Strategies

The firm has established itself as one of the most successful airline in U.S. history, after the first few years of losses the firm has made an almost consistent profit, with passenger numbers growing each year. The market in the U.S. may be seen as now growing more slowly, with firm acquiring AirTran in 2010; it was this acquisition which took the firm to the position of the largest U.S. domestic carrier. This also aids with the potential economies of scope and scale supporting the cost advantage.

The firm is in a market where there is some growth potential, but it is limited and there is a high level of competition with other low cost carriers, such as JetBlue, competing aggressively, as well as full service carriers reducing ticket process to compete. The firm is successful so whatever strategies are pursued need to be aligned with the low cost model and compliment rather than contradict the existing firm values, otherwise the existing market may be endangered (Mintzberg et al., 2011).

The potential to increase the spread of the airline and fly to international and well as domestic location has a great deal of potential, especially as this is not a sector developed in the low cost market in the U.S. Internationally, the low cost carrier market has been well established, firms such as RyanAir and Air Asia have demonstrated this in the short haul and middle distance markets. The acquisition of Air Tran has included some international flight to close foreign destination, such as Mexico and the Caribbean, with nearly three years experience gained flying internationally it may be argued it would be a natural progression to increase the flight routes further, which may appeal to existing customers as well as new customers. The firm already has the resources and the knowledge, and the existing competitive advantages would support this expansion. The initial growth may be to nearby locations, such as Canada, but this may also be expanded to transatlantic or transpacific routes. The differentiation and cost advantages may be maintained and the services would compliment the existing operations.