Simplicity is profitable Jason 21 Apr 2006

39 comments Latest by steve

Southwest airlines continues its streak of 33 years of unbroken profitability. There’s a lot that’s different about Southwest, but at the core of Southwest is simplicity.

Simple fares (no secrets, one-way fares aren’t more expensive that round trip fares, fewer fees), simple planes (they only fly 737s — every SW pilot or flight attendant can work any flight), simple seating assignments (they don’t have any), simple meals (they don’t have any), simple friendliness (shiny happy people), less big airport hassles (serving the unserved at smaller, simpler airports), dead simple rewards program (based on # of flights, not miles), simpler fuel costs (they buy futures to lock in prices), etc.

There’s a lot to learn and LUV about Southwest’s dedication to simplicity. It’s clearly their advantage.

39 comments so far (Jump to latest)

Jake Walker 21 Apr 06

An interesting article from Montley Fool on the decline of Southwest and the rise of JetBlue.

“Southwest’s CEO Gary Kelly commented that the company’s core advantages were its performance in areas like on-time flights, baggage handling, and low frequency of complaints and cancelled flights. This was interesting because it ignored what had been Southwest’s chief competitive advantage for decades — price.”

Bernie Aho 21 Apr 06

I see the same type things in WestJet on the Canada side. It was my understanding that the guy that started southwest couldn’t do anything for a while in US because of an agreement and started westjet in canada. Then did jetblue. All doing well on the same principles.

Amazing unorthodox simple things like:

*Treating your employees like people
*Treating your customers like people
*Listeing to employees and doing something about it
*Listening to customers and doing something about it
*using IT as a competive advantage.

Imagine the time they save in employee training too with not having much to train.

Jake Walker 21 Apr 06

(continuing my thought)…

So, as their ability to compete on price has eroded (because, in the last few years, their fuel hedge became less of an advantage; and in the long-term, the airline industry has responded to the original pricing pressures brought on by Southwest), they have been able to shift their competitive advantage to things like being reliable and customer friendly.

That is, that simplicty isn’t just about Southwest and price (though surely it’s important), but running only one or two types of planes, keeping simple policies has allowed them to shift their competitive advantage as they have been less able to compete on price.

One place the company isn’t simple is that it still models for people to no-show for their flight; JetBlue, and some other startups, never oversell their flights. If watching Airline on A&E has taught me one thing, it’s that the number one complaint for SW must be the overbooking of flights, thus bumping some customers to another flight. I guess that’s a tough game to play between keeping prices low by modeling for no-shows or incresaing prices to eliminate the need to overbook. But if occam’s razor is followed (the simplest answer is the best), the calculus involved in bumping people from flights can’t possibly be a part of “getting real” and keeping it simple.

Anonymous Coward 21 Apr 06

Talk about JetBlue all you want, but SWA has been profitable for 33 years while the rest of the industry is falling apart. Until SWA has profitability issues they still lead the pack. Everyone else is following. Futher, JetBlue hasn’t been around long enough to see any trends or to evaluate their model.

tom dewitt 21 Apr 06

The last time I flew Southwest, as I was walking on the plane they told me my bag was too big. So they rip it from my kung-fu grip and the stewardess writes my final destination on a napkin, places it on top of the bag and then piles a few more bags on top. Forget baggage tags, apparently napkins are far more efficient. Right about now there are some Southwest employees somewhere, divvying up the goods.

tom dewitt 21 Apr 06

The last time I flew Southwest, as I was walking on the plane they told me my bag was too big. So they rip it from my kung-fu grip and the stewardess writes my final destination on a napkin, places it on top of the bag and then piles a few more bags on top. Forget baggage tags, apparently napkins are far more efficient. Right about now there are some Southwest employees somewhere, divvying up the goods. I just wanted to throw a wrench into the love fest.

I would also like to congratulate the idiot who thought “Airline” would be a good marketing vehicle. It’s one drunk after another stumbling and puking on themselves.

Kathleen Fasanella 21 Apr 06

I continue to be amazed by the number of people who don’t know of the best business-life hack of all time. It’s called “Lean” and is exemplified by Southwest Airlines but most often associated with its most celebrated practioner: Toyota. With Lean, everybody wins -businesses, employees, profits, but most of all, consumers. Do yourself a favor, read Lean Thinking. I wish more “lifehack” sites would explore the topic; it’s a glaring omission on sites like this. Small enterprises -rather than large ones- have the most to gain. Any domestic manufacturer will eventually go lean if they expect to compete for the hearts and minds -to say nothing of profits- of consumers and employees.

Vishi 21 Apr 06

Define “simple”, please.

Bob Aman 21 Apr 06

To counterbalance Tom’s comment above a wee bit, I flew on Southwest twice this week (out of a total of like 10 planes so far, with 3 more flights to go — yikes). I was very favorably impressed with the first SWA flight, but the second flight on Southwest was amazing. The steward seriously missed his calling. The man was a stand-up comedian, and a dang fine one at that. I haven’t laughed so hard in ages. That whole safety thing you have to suffer through every time? He turned it into a comedy routine: “Please pretend to pay attention while we explain the safety features of this Boeing 737. I know, I can’t believe it either, but there’s a safety card in the seat pocket in front of you. No one ever reads it, so I’m not going to even bother asking you to. At this time, you should have your seatbelts on, your tray tables up, and your seats in their upright and most uncomfortable position. This is a no complaining, no whining, no smoking flight. If you absolutely must smoke, I suggest you avail yourself of our smoking area out on the wing… that is, if you can manage to get it lit. While you’re out there, feel free to enjoy our inflight movie, Gone With The Wind. We don’t expect a loss of cabin pressure today. If we did, the three of us would have called in sick. But if we do lose pressure, masks will automatically fall from the ceiling. After you’re done screaming, simply put the mask on and breath normally, like this: [Darth Vader Imitation]. Please put your own mask on before helping your children… or those who are acting like children, such as your husband. Now, since we’ve been cleared for take-off, I’d like to ask you to lean over and please press your face against the window so that all those other bankrupt airlines can see that we have a full flight. Neener, neener! And thank you for flying Southwest today. Remember, no one loves you, or your money more than Southwest!”

That man so deserves to be the employee of the year. Yeah. He sang several Southwest Airlines songs too.

JF 21 Apr 06

I love that Bob. I’ve been on a flight where they’ve done something like that too and it’s so damn refreshing. Breaks the ice, puts everyone at ease. Southwest rules for things like this.

Phil 21 Apr 06

The main problem with Southwest? Because of one of the “usability: reasons mentioned there, I don’t want to fly it.

I’ll pay $50 extra to fly US Air or another carrier? Why? The no pre-set seating. This means you line up for good seats. But some jackass always starts lining up an hour before the boarding call…so of course everyone else does too. You end up standing in line for a stressful hour just hoping you’ll get that window seat…and forget about the bulkhead, that requires a 2 hour wait. Meanwhile every other plane i just pick my seat in advance, know my fate, and chill out with my laptop until i’m called, knowing my seat is waiting for me. Southwest flights always end up being more stressful for me.

p-daddy 21 Apr 06

I’m not sure that purchasing fuel futures constitutes simplicity in any way.

It might be cost-effective if they know what they’re doing, but simple it ain’t.

Don 21 Apr 06

“Talk about JetBlue all you want, but SWA has been profitable for 33 years while the rest of the industry is falling apart”

Repeat after me, because it’s not a phrase that only applies to mutual funds: Past performance may not be indicative of future results. While I admire SWA’s efforts and they may indeed contribute to their success, most industry analysts can point you to hard figures about their fuel hedges, their lack of encumbrance with old pension plans and high legacy salaries, and other advantages that have more to do with their comparative youth as an airline than some seating methodology. Yes, good choices have extended that run but many of their advantages are slipping as legacy carriers shrug off pension plans in bankruptcy.

Geof Harries 21 Apr 06

I barely contained my laughter when reading Bob’s post. Great stuff. Let’s just hope this employee doesn’t get a firm talking-to or even the boot for not being serious enough. I’m sure it’s happened before.

The Unnamed One 21 Apr 06

Why would the employee get the boot for not being serious enough?

This is Southwest’s style, which is why they’re awesome.

Eamon 21 Apr 06

I will never ever fly Southwest because of the seating policy. That’s not simple: it’s stressful, and it’s stupid. I don’t know how people handle that madness with kids in tow.

Ryan 21 Apr 06

Not only can the pilots fly every plane, but they only need parts and mechanics for one type of aircraft. The added savings (money and time) from this approach by them goes a lot deeper, too, I’d bet.

Simon 21 Apr 06

I have a personal fondness for SWA: My wife was a flight attendant for SWA for fourteen years; she joined back in the “hot pants and go-go boots” days.

Bear in mind the no assigned seats policy was a cost-cutting event back in the day, and at least these days you can check-in online and be pretty darn sure to be part of the “A” group, so even if you don’t want to join the queue, you can still be in the first 1/3rd aboard the plane, should give you plenty options even with kids, and if your kids are young enough you get to pre-board anyway.

Rahul 21 Apr 06

Have you guys read Blue Ocean Strategy? Besides being a great book about using simple business strategies to open up new markets, it’s a great resource for examples of smart businesses with smart ideas. Southwest was highlighted as one of those, along with others like yellowtail and the NYPD. Definite recommendation while you’re on this topic.

Geof Harries 21 Apr 06

As another poster had commented, Canada’s equivalent is WestJet. Their flight staff used to be funny and joke around, but in recent years, they’ve become overly serious and awfully boring.

I wonder if their enthusiasm was choked out when the corporate red tape started wrapping its way down from the top.

scott brooks 21 Apr 06

My favorite part of thier preflight was a SW flight attendant discussing the emergency exits …..”There may be 50 ways to leave your lover but there are only 3 ways off this plane”

Thanks for making me feel better …humour is welcome for alot of people prior to taking off.

cheers

Scott

Matt 21 Apr 06

I _prefer_ to fly SWA because of the no-assigned-seatiing policy. EVERY TIME I fly another airline, they always bungle my assigned seats up and I end up having to sit in the back, near the toilet. You’d think that at least once, they could screw up and put me in an emergency exit row? Nope. Even JetBlue has done this to me.

Yes, I’ve flown in groups before and have had the group broken up because we were in the ‘C’ group, and we didn’t mind at all because we bring our own entertainment (gameboys, laptops, etc) and even if we forgot something, SWA’s in-flight magazine is actually GOOD.

Jake Walker 21 Apr 06

I gotta say, I find the so-called funny announcements and all the stuff associated with it to be totally patronizing. I’ve only flown Southwest a few times, but I’ve seen things on that Airline show that are just stupid. People singing, third rate comedians doing their act into the microphone, performances by the local choir group traveling to a convention, etc. I’m sure some of it is hammed up for the camera, but nonetheless… I’m on a flight. Leave me alone, I want to sleep and/or go about my business.

Phil 21 Apr 06

“EVERY TIME I fly another airline, they always bungle my assigned seats up”

Thats simply amazing, since of the 12 flights i’ve been on in the past year alone, not once has my seating been “messed up”. Usually you just pick a seat online, say 12A with a map of the airplane and everything, and bam thats your seat. Taking Southwest is like taking the freakin’ bus.

Emily 21 Apr 06

Yep —- “Party Airlines”

Provide the passengers with enough alchohol and they’ll leave happy. Heck, bring around the cart another time. We encourage drinking on our flights. Not a bad strategy.

I wouldn’t want to fly it with kids though — no sirree…not fun at all. Stressing about getting a seat together. Not for me.

Parand Tony Darugar 21 Apr 06

Bob Aman: that steward is funny, unless you fly SW twice a week, in which case you hear the same set of jokes from the different flight attendants over and over. In short, it becomes routine, just like the announcements from the other airlines.

Regarding the seating policy, Eamon, they let you get on first if you have kids with you, so it’s generally not a problem. Most of the flights (at least the ones I take) are majority work commuters, so they pretty much have the routine down: print out your boarding pass early enough and you’ll get group A and you’ll be fine.

In some ways the seating arrangement makes a lot of sense - the “goodness” of your seats is directly proportional to the amount of effort (eg. being early) you’re willing to put in, as opposed to random assignment or how well your travel agent can work the system.

Andy 21 Apr 06

A similair airline in Europe is easyJet. They also lack seating assignments, and have a great sense of humor in their communications.

For example, here is an article from their inflight magazine: http://easyjetinflight.com/features/2005/oct/hairofthedog.html

Chris Griego 21 Apr 06

Something else that Southwest Airlines is now doing, starting today, is blogging! :)

sean 21 Apr 06

A la In-N-Out Burger. Equally successful for the same reason. Simplicity - done well.

Erik Holmberg 22 Apr 06

No one really likes Southwest’s product, however. They just purchase it because it’s so damn cheap, and the supply is so minimal.

Richard 22 Apr 06

I have over a million miles on United and a heck of a lot of mileage on many others, including SWA. I actually love to fly, but the entire process of business travel can be stressful and I try to take stress out of every part of the process if I can.

A few above have referred to not liking the open seating policy of SWA because of what it means in the terminal (standing in line to get a good seat). I agree and this is the single reason I don’t use SWA more. Also, I fly out of the US quite a bit and so need an airline that will feed through a big hub easily. SWA’s model is point to point so they don’t feed hubs easily. Nor does Jet Blue for that matter, flying into cheaper airports that don’t connect easily.

Everyone has horror and love stories about every airline: they all screw up at times and every airline has flight attendants who tell jokes and have fun, including UAL, AA, and the other big, more conservative ones.

The most consistently great airlines in my experience are non-US carriers: Singapore, Air India and SAS (code shares with UAL). And, I flew a SWA equivalent in Europe that was cheaper and better than SWA. However, SWA was obviously their model, they just did it better, at least on the flights I was on.

If you fly a lot don’t forget to factor in peace of mind. In my book it outweighs price most of the time.

Andy 23 Apr 06

Great observations until the end, when you say something completely nonsensical. Fuel cost hedging is not “simple” in any reasonable sense of the word.

Beware of runaway metaphors! They make you sound dumber than (I think) you are. You should have said “less.” :)

J 23 Apr 06

Fuel cost hedging isn’t simple, but the results are. I think that was the point.

Cheshire 23 Apr 06

My favorite Southwest piece of patter, which I heard only once (I have heard most of Bob’s reported routine before), was that “in case of a change in cabin pressure, margarine cups will fall from the ceiling.”

sham 24 Apr 06

SWA is successful because their flight attendants wear sneakers, it’s how you make happy people. Those poor ladies at Air Canada, have you ever seen the spike heels they wear?

Eric Nord 04 May 06

Sometimes success is relative. The airline industry is famous for its failures.

steve 14 May 06

Jake… Relax brother… What could be more enjoyable than a flight that is broken up by a little off the wall humor? People are way too serious about flying these days and the anxiety that accompanies most passengers since 9/11 is rediculous. Yes, there needs to be some sort of order to it all, but if someone can be funny and break the monotony of those boring safety skits, I’m all for it… Way to go SWA… By the way, you don’t have to stand in line… If you brought a bag sit on it. If you didn’t bring a bag to sit on, SWA provides plenty of floor space at the gate. What more can you ask for? I for one am the guy who flies other airline who assign seats, and then get stuck between two outside linebackers for the Green Bay Packers.. Not cool… I think I’ll stand in line to get the oppotunity to pick my seat next to the tiniest hottie I can find.. Maybe if we as a society didn’t need barka loungers everywhere we went, the health and obesity issues facing our nation wouldn’t be such an issue. That aside from all, I dig SWA…

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