Nuts! The story of SouthWest Airlines

Nuts! is a very nice book about the success of SouthWest airlines. The book reads like a good novel and worked really well as a bed time story book for me.
 
SWA is the pioneer of the low-cost airline.Their business model has been replicated many times all over the world, but no one has been able to replicate its success. Before I begin, some facts about SouthWest Airlines(SWA) –
  • Only airline company to make profits every year since 1973.
  • Has never mass fired employees
  • Has never lost a passenger to accidents
  • Has the highest customer satisfaction rating
  • Serves double the number of passengers per employee than the nearest rival. i.e its employees are 100% more efficient than other airlines.

Although many airlines copied SWA business model(sell cheap tickets but keep the planes full and in the air), they were not as successful because no one copied the root cause of the success.

SWA are able to achieve this incredible set of figures above because of the following –

Difficult Birth – When SWA began operations, Airline industry was tightly controlled sector. Competing airlines filed a suit claiming that 2 airlines are sufficient to cater to the needs of 3 cities SWA wanted to fly. These two airlines also threatened to not hire any employee who has worked for SWA. This resulted in the existing employees of SWA bond together and form a “rebel” group in airline industry. Eventually, the lawsuit was squashed and SWA was allowed to fly.

Culture –  Because of the difficult birth, the company employees have a family spirit. The employees really care of each other. ex: when an employee lost both his arms in an accident, the company founder Herb Kelleher kept him in the company roles so that he could get regular salary and medical insurance. The employee’s wife was so moved that she offered to help the company in whatever role she could help. She began by helping SWA provide the “personal touch” to all employee related stuff. She was so good at it that she finally retired as  HR head.

Culture –  They hired for attitude and not for qualifications. Since rival companies did not hire SWA employees, SWA didn’t have a large pool of talent ot hire from. So, they started hiring people from other industries. These new people did not have the baggage of airline industry with them and brought their own fresh thinking. This gave SWA a unique advantage unmatched by other airlines.

Culture –  SWA is a fun place to work. People’s creativity is encouraged. SWA is the only airline whose planes are coloured differently. i.e they do not have their own unique color. When they wanted to support a “water world” like aquarium in a city, they painted their plane to look like a giant killer whale. Some times they had christmas parties in september because september was only time when Herb and other senior members of the company were free!

Waterworld airplane

SeaWorld airplane

Culture – SWA employees have “Can do attitude”.During a particularly difficult year, people figured out that only way to be profitable is to turn around a plane in 15 minutes. SWA employees understood the seriousness of the issue and they achieved a 10 minute turnaround!!

Culture – One of the few companies that believe in “Employees first, Customer second“. This does not mean they do not care about customers. Remember that they have the highest customer satisfaction amongst all airlines. It is just that the company does not put unnecessary restriction on their employees.  One customer complained that the hostess sang the initial “Here are the exit doors, the oxygen mask will drop in case of emergency etc….” announcement bit. The company rewarded the employee for making a boring task more interesting and entertaining as singing made more passengers actually listen to the instructions.

Culture- One of the few companies which treat all employees the same. In fact every employee irrespective of his experience has to spend one week as baggage handler or airplane cleaner. This creates the “respect” for other jobs in the company. The result – only company where the pilots and mechanics help clean the plane for the next flight. Only company where other employees chip in to remove and load baggage.

Culture – When the company was going through a bad patch, the Herb reduced his salary to 0 and asked his employees to reduce their salaries by whatever % they deemed fit. He gave details of the balance sheet and said that they need to cut expenses by 20% to remain afloat. Result, every employee took voluntary cut instead of seeing his fellow SWA employee being fired. The company compensated them with SWA stock. Currently about 10% of SWA is owned by employees.

The company culture enabled them to do things that other companies will fail to do.You might be sceptical about the above. How can culture make a company profitable? Well culture does not directly affect profitability…true,but it enables you to take measures that would fail if the culture is not present. Here are some examples –

Ruthless efficiency –  Most efficient operations. Every plane stays on the ground only for 10 minutes before it takes off for a new destination. Can you imagine? 10 minutes to get all passengers off, all luggage off, clean the plane, load new passengers, load new baggage and refuel the plane and takeoff. I don’t think we could manage to do that in a large car let alone a plane. 

Ruthless Efficiency – They have only one kind of plane Boeing 737. This helps them save money on training, spare parts and down time. If one plane breaks down another one takes over without a hitch.

Ruthless Efficiency – They never operate out of regular airports. They always chose low-cost alternative airports which are willing to offer the airline many hangers. Since some of these airports are down on business because of the “big” airports nearby, they are more than willing to get at least one airline. Result- Some of these airports are exclusively used by SWA.

I recently found a video that shows the culture of SWA airline –

As the above points show, it is a mix of great culture and eagle eye on efficient operations that keep SWA profitable. Indian airline industry has a lot to learn from SWA…for sure.

There are certainly a lot of things software industry can learn. Especially companies like CDC which are moving to agile and experimenting with empowering employees. What do you think? Do comment

2 Comments

Filed under Business book summary, Management Book Summary

2 Responses to Nuts! The story of SouthWest Airlines

  1. África Rosaleny Cerveró

    Really interesting post!

  2. Haley Owens

    Thanks for writing this I enjoyed the information.

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