How Merger Could Hurt Southwest Airlines’ Competitive Advantage

January 20, 2011 at 10:20 am | Blog

Southwest and Airtran Merger-resized-600Southwest Airlines has been one of the few big success stories of the American airline business. While other airlines constantly lose money, go bankrupt, and disappear, Southwest Airlines is consistently profitable, with a great reputation for low fares, on-time flights, friendly service and a fun-loving culture.

The regional airline that started out offering flights between Dallas, San Antonio and Houston turns 40 in 2011, and they now fly more passengers than any other U.S. airline (86 million during 2009) and recently announced the purchase of AirTran Airways for $1.4 billion.

Although Southwest is in many ways a model for the rest of the U.S. airline industry, as this New York Times article points out, many airline industry observers are wondering if Southwest Airlines will be able to preserve its competitive advantages that have taken it to such great heights.

Competitive Advantages that the Merger might Affect

All companies (I am assuming) want to make sure that they can preserve their competitive advantages over time, so that they don’t lose touch with the key reasons for their success.

In the case of Southwest Airlines, the key competitive advantages that would be under pressure are:

  • On-Time Flights: For years, Southwest flew to the smaller, less-traveled airports instead of the busy hubs. In Chicago, Southwest flew out of Midway Airport instead of O’Hare; in Dallas they flew out of Love Field instead of Dallas-Fort Worth International. This gave them a competitive advantage of more on-time flights for their passengers – Southwest could deliver passengers to destinations without the hassles and delays of dealing with big airports. Southwest could get their planes unloaded, reloaded and refueled and back in the sky with fewer delays. Now with their purchase of AirTran, they will be flying out of busier, more crowded airports – which cuts down on their fast turnarounds and quick takeoff times (as anyone who has ever sat on a crowded runway waiting for takeoff can tell you).
  • 100% Consistency with their Planes: Another key competitive advantage for Southwest Airlines over the years has been their insistence on flying only one kind of plane – the Boeing 737. By only using one variety of aircraft, Southwest has been able to save a lot of money on maintenance costs – fewer parts to source, fewer varieties of training required, etc. Now with the merger, Southwest will have to absorb a fleet of Boeing 717s. This is one of the classic challenges with mergers – in addition to the strategic upsides and growth potential, there are also costs and complications that leaders need to bear in mind. Not to mention passengers expectations of the aircraft.
  • Company Culture & Passenger Experience: Southwest Airlines has one of the most unique and cohesive corporate cultures in the airline business. (How many airlines even have a unique or memorable culture?) Southwest flight attendants sing songs and play games with passengers. Southwest pilots sometimes help clean the cabins to get the planes ready for takeoff more quickly, and the whole company tries to create a spirit of fun at work – the CEO even dressed up like Woody from “Toy Story” at the annual Halloween party. As Southwest keeps getting bigger, they need to find ways to keep their unique culture alive – and this is also a challenge that many CEOs of growing companies can relate to. As companies grow and evolve from “startups and underdogs” to “establishment figures,” it’s important not to lose sight of the personality and character of the company.Not only for internal operations, but for your customers as well. Have you ever heard of the expression “If you confuse them, you lose them”?

Southwest’s Challenges are Good Ones in the End

The challenges that Southwest Airlines is encountering are ultimately “good problems to have.” It’s better to grow and have people wonder whether you can sustain your success, than never to grow at all.

Whether your company is small or a big, established player, we all can learn something from thinking about the challenges facing Southwest Airlines. Sometimes the competitive advantages that help your company during the early growth years are not the same competitive advantages that will endure for the long-term. You have to constantly stay on your toes and keep thinking about the future, while preserving the most important aspects of what makes your company competitive.

Watch Jaynie L. Smith’s take on the Major Airline Mergers in her interview with First Business