Margins have fluctuated and are down, indicating short run cost control failure. However, company performance in the long run is strongly attributable to the corporate culture. Southwest has had consistent performance since its inception, despite many swings in the fortunes of the industry overall. This indicates that management fostered a culture that over the long run will drive customer loyalty and will drive steady, incremental cost reductions. Success for Southwest is not measure in short-term results so much as long-term and on that measure the culture has contributed to a long run of success for Southwest. One of the strategic decisions in the case is how to deal with the declining revenue environment. The airline industry has struggled in recent years leading to industry-wide cost reductions. To address this issue it is recommended that Southwest simply ride it out. The corporate culture has been a source of value for the company, and layoffs could compromise that culture. Therefore layoffs will cost more than doing nothing even as revenues drop. The second recommendation is to use the opportunity to find new routes. As other carriers reduce capacity, space may become available at airports that would allow Southwest to drop less profitable routes for ones that are more sustainable...

While layoffs are bad, the fear of layoffs is almost as bad for morale within the organization, so a public stand could assuage that fear. The second leadership action would be to ask for the employee's assistance in cutting costs further. While the culture exists, this act would reinforce the culture, by imploring the employees to buckle down and go to battle for the company. Another leadership action would be to go on the offensive -- make an internal declaration such as a mission statement for the coming year that will rally the troops against a specific target. This could be overtaking a rival airline in market share or perhaps turning a profit. In either case, these tactics will work because the instill confidence in the employees and then follow through on that by challenging them, appealing to their sense of being an underdog.
Southwest has built its success by fostering a corporate culture that supports its end goals. Although Southwest has had some downward trends in its financial performance, the firm remains on solid footing overall. However, the leadership today should take steps to reverse…