I witnessed a lot of these experiences first-hand. When I was finishing school in Georgia, I moved back to metro Atlanta to find suitable work. There were very few companies hiring my experience level and the ones that were would require a 2-hour commute each way and didn’t pay enough to cover the fuel expenses I would incur (and certainly didn’t pay enough to justify moving).
I was fortunate enough to have a place to stay in the metropolitan Los Angeles area, so I packed a small valise and made my way west. Despite the gloom and doom, business mass exodus that so many pundits were predicting, southern California has a rich and diverse economy that is still quite vibrant. In half a year of searching in metro Atlanta, I wasn’t able to accomplish what I did in one month in LA: find a job. Granted, it was not the best job, but it was a foothold, and led to bigger and better.
Georgia, despite her “pro-business” rhetoric, was unable to do the one thing that the everyman looks for in an economic haven: provide a living-wage paycheque.
But now, as the economy picks up steam, and consumer sentiment rises to its highest levels since 2007, a new state keeps appearing at the top of the unemployment list. Georgia, home to Fortune 500 heavyweights such as Home Depot, UPS, and Coca-Cola, had the highest unemployment rate in the nation in August, September, and October. With a November rate of 7.2 percent, the state was narrowly edged out by Mississippi’s 7.3 percent (December statistics won’t come out until mid-January).
I have long been a critic of the Transportation Security Administration and its parent Department of Homeland Security since their inception following the attacks on September 11, 2001. That is not to say that I don’t think that we should have security at our airports, but that we should have more commonsense policies that don’t rely on a strategy of general harassment and exploitation of the flying public. The TSA strategy is generally reactive (please remove your shoes because that one guy tried to make them a bomb) and encumbered by bureaucracy. This sort of thing has led to labour slowdowns, periodic line freezes, and other general annoyances that do nothing to hinder terrorism while doing everything to annoy and patronise the flying public. In a way, the TSA simply proves that the terrorists won.
TSA: A Portrait of Inefficiency, Ineptitude, and Waste.
Author’s Note: This was originally written and published as an academic paper early in 2010, before Southwest’s decision to purchase AirTran was announced. The material exists as it was originally written with only images added for the purposes of this blog.
Hailed as a scrappy, start-up, small-market airline, Southwest Airlines has taken an unconventional attitude toward the air travel industry and turned itself into the most profitable company in the business. Throughout its history, Southwest has had to fight tooth-and-nail, quite literally, for its very existence. It’s this warrior attitude that has developed into a tongue-in-cheek approach to marketing and a vehement sense of doing right by the customer; which has, in turn, developed into a business strategy that has kept the company growing for over thirty years.
Since its inception, Southwest’s mission has been a “dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.” The company focuses on this mission through an extremely selective hiring process that ensures all employees fit within the corporate culture believing that truly fun-loving and spirited employees bring superior customer service through their inherent attitudes that are allowed to shine without the confining regulations and propriety that so many other airlines practice. Southwest employees routinely go the extra mile to help a customer because—by and large—they genuinely care about making people happy. Just as most other wildly successful companies, Southwest’s philosophy agrees that happy employees translates into happy customers and happy stockholders.
In 2004, when Gene Kelly took over as CEO from Herb Kelleher, he formally instituted the four factors and five strategic objectives that had become and, as he said, would continue to be the guiding principles of Southwest Airlines’ continued success. Hiring great people and “treat ’em like family” is the first factor which is illustrated through the airline’s extremely selective interview process and extremely generous wage and benefits schedule. Southwest employees have, on average, made more than their rival counterparts without taking massive pay cuts during hard economic times through a conservative financial plan as well as stock options that have grown as considerably as the company has over the years. Second, Southwest cares for customers “warmly and personally, like they’re guests in our home” because it only hires employees who genuinely care for people. Third, Southwest pledges to keep fares lower than anyone else through safety, efficiency, and operational excellence. The company’s 25-minute turnaround goal can only be achieved through efficiency and teamwork where ground and flight crews all work together to have a plane ready to board within the specified time limit. When faced with glaring safety violations tarnishing the company’s near-perfect safety record, Southwest acts with integrity by alerting and working with federal inspectors to make sure aircraft are repaired and maintenance is brought current—despite the possibility of fines and other potential penalties (lost revenue, for example), which is far outweighed by the potential company-ending disaster that could occur otherwise. Finally, staying prepared for hard times has helped the company weather the economic recessions and skyrocketing fuel costs. Southwest maintains strong liquidity and aggressive fuel hedging which keeps them afloat while other, larger airlines are haemorrhaging money, raising fares, declaring bankruptcy, and merging out of existence. Southwest’s five strategic objectives build and restate the four factors while adding the goal of offering customers a convenient flight schedule to places that they actually want to go. This has allowed Southwest to realise its goal of bringing the American public the “Freedom to Fly” almost anywhere, at any time, and for a low price.
By utilising aggressive cost-cutting measures, such as their trademark no-frills flight service, point-to-point route structure, single-model fleet, and fuel hedging, Southwest Airlines currently enjoys one of the lowest operating costs per passenger seat mile—13.85 cents in first quarter of 2008, a feat that can not be duplicated by other airlines (the closest, America West, reports 15.58 cents per passenger seat mile). In addition, Southwest maintains large cash reserves ($16.77 billion in 2007) as compared to the industry average. The airline’s volume strategy of selling full planeloads for lower fares than selling fewer seats for higher prices has led to historically high revenues for the company as well, as less money is wasted flying full rather than empty seats. Not only boarding more passengers per flight, but also quicker turnarounds leads to more available seat miles, which, after filling those seats, leads, again, to larger revenues. These elements have put Southwest in a position of being, financially, the strongest airline in the United States as of the fourth quarter 2008.
Due to the nature of how it conducts business, Southwest Airlines enjoys many competitive strengths. The airline has enjoyed unprecedented growth since 1971 driven by a simple fare structure, low costs, and impeccable customer service. The company also maintains a fleet of one aircraft type, which saves on parts inventories and maintenance training costs as well as provides them with incentives such as volume discounts and flexible financing options. Strong, simple loyalty programs help to build lasting relationships with repeat customers. Southwest’s desirable corporate culture also makes it able to be highly selective during its interview process for new hires, making sure the company hires only the best of the best applicants.
One major weakness in Southwest’s product is its lack of seating options. Passengers must arrive early to be more selective about their seating arrangements, which may aggravate some passengers and turn them off to the experience. Because it only flies smaller Boeing 737 aircraft, cargo space is limited, and increased revenues from less price-elastic cargo transport must be foregone in favour of highly price-elastic passenger miles. Also, being reliant on one producer for aircraft creates some level of dependency on Boeing that may prove a strategic weakness if aircraft prices change. Southwest also does not offer any international flights, even to popular tourist destinations in Canada, Mexico, and the Caribbean—missing out on the very lucrative vacationing market segment.
Southwest has always been a leader in incorporating advanced technologies into their business model. The airline was among the first to utilise electronic ticketing as well as adding winglets to improve efficiency in their aircraft fleet. By continuing to seek advanced technologies, Southwest has the opportunity to gain significant competitive edges against its competitors during the adoptive phase of the new technologies (which can last upwards of ten years, in some cases). Southwest can also consider expanding into markets not already served by the airline, especially smaller markets in the southeast and central United States with little or no competition.
Several threats face Southwest Airlines, as well as their competitors. Chief among these is the price of jet fuel and other petroleum derivatives that are essential in aircraft maintenance. Currently, a slowing domestic economy has reduced the amount of leisure travelers while commute alternatives such as teleconferencing have reduced the need for business travel. Increasing federal regulatory action also threatens Southwest, especially in light of recent safety violations that caused a significant portion of the fleet to be grounded for inspections and repairs. Not only FAA regulatory action, but also ever-increasing demands for security protocols from the TSA threaten air travel by making it inconvenient for many people, either through outrageous screening processes or increased costs of passenger screening, which is then passed back onto the customer.
The bargaining power of the buyer in this market is quite high, as there are several options in each market on which a potential customer can choose to fly, and the services offered are relatively standard at this point. Typically, he who offers the lowest price is going to attract the most customers, which is where Southwest typically displays some advantage. In addition, the threat of substitutes is high as well for the same reasons—undifferentiated services and proliferation of competitors. Southwest has also set themselves in a situation where their suppliers have a high level of power as well. While maintaining a fleet of only one aircraft type significantly reduces the cost of warehousing parts and training mechanics as well as simplifying maintenance logistics, it puts all bargaining power in the hands of the manufacturer, Boeing. Any decision to increase prices of aircraft or parts can force Southwest to succumb to those extra costs under threat of grounding the entire fleet. Fuel suppliers also keep a choke-hold on the industry as a whole as they control the means of production (in this case, the distribution of fuel—without which, there can be no flights). However, Southwest has been able to mitigate the effect of fuel costs by their aggressive hedging strategy. Competitive rivalry is also quite high in the airline industry. There are many competitors and, such is the case in periods of slow economic activity, each one plays a price game to entice customers away from the others in order to keep their operations at sustainable levels.
One piece of good news for Southwest, considering Porter’s Five Forces model, is that the threat of new entrants is low. There is a lot of cost and capital investment associated with starting an airline, and, especially in periods of slow economic growth, the risk often far outweighs the reward. Established brand names—often legacy airlines—tend to survive the troughs better than small start-ups, especially when customers are not patronising as they do during peak economic times. Loyalty programs become paramount, discouraging changeover and promoting the strong brand names that already exist in the marketplace.
Southwest Airlines seems to be doing almost everything right, but, even still, there are two notable strategies that the company can implement for continued growth across all market segments. Currently, Southwest offers no partnerships with other air carriers for international or tertiary domestic markets. Southwest can “extend the LUV” to these smaller domestic markets by partnering with regional airlines that provide shuttle service to the larger markets. In addition, Southwest can partner with larger international carriers to enhance their global reach from entry ports such as LaGuardia (for European travel) and LAX (for destinations to and from Asia and Oceania). Such partnerships may seem counter-intuitive to Southwest’s self-reliant culture, but as the global community becomes smaller, airline partnerships will become inherently more important.
The other major consideration, and presently the most important, for Southwest’s continued expansion is the acquisition of rival airlines. This may be the most important step in enhancing Southwest’s domestic presence because it opens up previously-untapped markets to Southwest’s lower-cost, simplified structure. Utilising the company’s large war chest, motions to purchase AirTran or JetBlue can easily be made during the economic slowdown. Both of these airlines are of particular strategic interest because—by and large—they operate in markets that are not currently serviced by Southwest, including major presences in tourist destinations in the Caribbean and business travel destinations in Canada. Also of singular interest is the fact that both competitors operate a fleet of Boeing 737’s, which will—unlike Delta’s acquisition of Northwest’s “hodgepodge” fleet—ease transition costs by not forcing Southwest to retrain mechanics or attempt to unload unused aircraft inventory on an already saturated market as well as by keeping maintenance costs relative to the size of the fleet, thereby not negatively affecting overall costs per available seat mile.
The one thing the Occupy Idiots fail to realise is that corporations do not pay taxes: corporations take taxes into account when they charge you for products or services. The consumer is the only one who bears the burden of corporate taxes. At the same time, government does not create jobs–the private sector does, and taking money away from the private sector takes away potential growth and potential jobs.
I’ve worked in sales off and on for quite a while now–probably most of my working career, actually. One thing I have noticed in common with each job is that the sales training focuses almost entirely on the technique of selling. It’s really this technique, typical of “greasy salesmen,” that tends to drive customers to put up the very barriers that the sales training emphasizes on breaking down. It’s been my experience that just “making a friend”–that is, to say, building trust by legitimately caring about the customer–is the easiest way to sell anything. Some people are naturally amiable, and they tend to make customers feel at home and not pressured which builds confidence, trust, and–most importantly–repeat business.
There has only been one company (who shall remain nameless) I worked for that emphasized product knowledge as much as the technique of selling, and it was also the company I had the most success selling for. Simply put, if a company does everything it can to build a confident salesperson by focusing sales training on product knowledge and industry awareness, then a salesperson will be honest and open with that customer–improving everyone’s bottom line.
Well, things are going all right for the time being, I s’pose. My back hurts for no apparent reason, but I’m surviving. I’ve got a lot happening right now, so time comes a little bit at a premium right now. I hope that everything I’m working on can manifest itself successfully. Sorry for being so incredibly vague, but I’m not quite sure which way certain things are going and I don’t want to get myself too hyped-up over anything just in case plans fall through. In any case, just wish me luck, and I will kep you all apprised of what develops as things begin to clarify. Just a few of the things going on: A new educational and career endeavour. Promotions and raises. Financial endeavours. Organisational endeavours. Personal enrichment endeavours. Home improvement endeavours. As many of you know, I was promoted to assistant manager at Vitamin World, bringing with it a mediocre but impactful raise. It’s a nice bonus, as it helps to bring financial enrichment a little more quickly. It’s my goal to get Bank of America out of my life as soon as possible (more on this to be saved for a later number–in the meantime, check out Clark Howard.com for one motive). I also have a modest amount of credit card debt amassed since buying the house (they nickel-and-dime you to pieces when you purchase one) which I need to pay off. I don’t need CCCS or anything, just patience and prudence. One of my more daunting projects in recent years was to digitize my entire CD collection (some 270+ discs) so I would have random access to almost all my music in one, convienent location (and so I could load my iPod more easily). Now that I am moved into the house and have more available physical space–more “elbow room,” if you will–I have addressed the question of the remainder of my music collection: Digitizing my LP records, 45’s, and cassettes. I don’t have quite the number of them as I have compact discs, but there is much more work involved: recording the album to the computer, cutting each track, encoding to mp3 format, importing into my iTunes library, and finally writing ID3 tags. Needless to say, it’s quite time-consuming, but I’ve managed to complete 14 LP’s in only a few days. The worst part about this project is that it kinda makes my computer bleed with all the processing power it requires. Not so much the power, but the load–and what a load! That’s about all for now. More to come as things progress.
I’ve been working 2 jobs (one at Lowes, which I was encouraged to leave by the powers-that-be) for the past couple of weeks, so leaving things there would more than adequately elaborate on the subject line.
But that just wouldn’t be good enough.
To start with, Pops is pissed off at me for some stupid crap that is really more his own insecurities than anything I’ve done. On top of that, my glasses broke over Memorial Day weekend, so I’ve been wearing my old BCG’s from middle school/high school. Frankly, it’s rather annoying–the prescription is just off enough to drive me mad (not to mention make my eyes hurt). I got an eye exam and ordered some new frames, but they had to redo the order because they couldn’t make the lenses I wanted in my prescription. With any luck, this will be the last pair of glasses I buy. Give me 2 more years or so and I’ll have the lasik procedure completed.
It’s hard to keep up with things when you stay so busy–the house is a veritible pig sty and I have neither the time nor the will to clean it up since we’re going to be moving soon anyway.
On a lighter note, we picked up Donkey Konga (with bongo controller) on clearance for $15! W007! I digress, though, as with things getting hectic, for some reason, I have been getting progressively sickly the past couple weeks. I chalk it up to stress, so maybe I just need to chill for a few days.
I don’t mean to complain or anything, it’s just that I have to vent sometimes, you know? In the big picture, things aren’t quite so bad, really. Money is coming in, I’m cutting the last few tethers of parental dependence, living quarters are going to be improving soon. Things are actually, in general, looking up. There’s just a couple of issues that keep me bogged down, and that’s where I have to concentrate my efforts to resolve.
I need to watch a good “We Are The Champions” movie where the underdog comes out on top after fighting a good fight. I saw X-Men III, and it was really good (thanks, Adam), but rather depressing. Though, I will admit, the ending was well-worth the anticlimax. Maybe I’ll go watch the season finale of 24 that I taped and still haven’t watched. Not tonight, though, as it’s too late to start something that long.
So now that I have employment, things look like they’re starting to fall back into place. Lowes keeps jerking me around, so I’m about to say forget them and apply for some jobs at various coffee shoppes to get some supplementary income. Speaking of supplementary income, if anyone is interested, I need to sell some pint glasses. Anyway, I’m feeling a lot better, too! I guess when you are actually doing something productive besides sitting around on your ass waiting for the phone to ring, you tend to become a little more positive! I’ve actually been waking up in the mornings, and I feel really good! I just need to add a little exercise to my routine, and things will start to round out to where I can continue my projects [see previous blog entry “The Current State of Things to Come (and Other Rhetoric)”] and my reading–haven’t picked up my book in months!
Oh, well, I suppose that’s all for now. Until next time, paesanos, do the Mario!
Today has been a rather long day, I must say. Most of it has been spent driving from home to other parts of the county and back and walking circuits around Town Center Mall. Job hunting. I must say, though, that I am rather accomplished for the time being–I had another interview and have one scheduled for Wednesday. This time, we’re talking Vitamin World. Hey, it’s a living, I suppose. I also stopped by Adam’s place to check up on his new cat, Cinco, and repay an outstanding debt. At least I have all that off my shoulders now. Heck, once I can get employed, I can get back on Nadia’s good side ! Yeah, she’s been after me to get a job for a while now–and with good reason–even going so far as to not allow me to go out with the guys until I am employed. Can’t say that I really blame her, money has been running thin for a while and I’ve been saying that I’ll get a job for a month as it stands. I also managed to list some of my old textbooks on Amazon to see if I can get a better price for them than the campus bookstores. From the looks of it, I will. In other news, 24 is insane! I’ve gotta go see if Jack makes it out alive and with the evidence in tact! God bless VCRs!