Southwest Airlines Business Model and Downsizing

Southwest Airlines Business Model and Downsizing.

Southwest Airlines: Downsizing decisions

Southwest Airlines brands itself as a people-focused company. Interacting with its quirky, humorous staff has become part of the Southwest experience that customers expect when traveling on the airline. Southwest places a premium upon selecting the right people for each position at the company, with the belief that while workers can learn skills, they cannot learn to have the right attitude. When faced with the prospect of downsizing, Southwest must confront the possibility of letting go cherry-picked workers who have made a tremendous investment in the company, and in whom Southwest has made a tremendous investment in recruiting and training. "There is little airlines can do about the cost of fuel, landing fees or insurance. The big fish is controlling labor expenses, and experts say that companies must reduce costs or get better efficiency (i.e. more working hours) out of pilots"(DiCarlo 2004). However, air travel is a service-based industry and Southwest cannot afford to ignore the need to retain quality staff.

From a rational choice perspective, customers are highly price-sensitive when it comes to choosing airlines, particularly airlines that have primarily marketed themselves as 'budget' airlines like Southwest. Southwest has been able to keep costs down in the past by flying to a relatively limited range of destinations, an aggressive fuel hedging program, and limiting full meals and in-flight amenities. However, this strategy does not appear to be working any longer. Thus, according to the rational choice perspective, Southwest must cut costs in all areas including workers.

But this is where rational choice theory can occasionally meet with folly, failing to take into consideration the input of other organizational actors. The harmonious relationship between Southwest management and employees, which has limited the strikes and labor discord that have plagued the other airlines, has been another cornerstone of its success. Massive layoffs would threaten this. "87% of its employees belong to a union. Southwest has never had a strike, and now that the network carriers have whacked away at salaries and benefits, Southwest staffers are generally the highest paid in the industry. But since Southwest has about 30% fewer employees per aircraft than its network competitors, it has the lowest non-fuel C.A.S.M. (cost per available seat mile) of any of the major carriers" (Brancatelli 2008). The fact that Southwest operates on a 'skeleton crew' compared with most airlines means that cutting staff could severely compromise customer service. It could also compromise safety. "Southwest's pilots are independently unionized, and while its overall labor costs are just slightly below average, they are more efficient because they fly far more hours than those at other airlines. National union rules limit the number of hours pilots can fly" (DiCarlo 2004). Cutting the number of pilots who are already flying more than the industry average could result in more overtired workers and more costly errors.