Research Paper on "Airline Corporate Culture"

Research Paper 5 pages (1740 words) Sources: 4

[EXCERPT] . . . .

Corporate Culture of Southwest Airlines

Every complex organization, from hospitals to the military, operates under the guidance of a shared set of ideals and objectives, and the concept of a vision statement has emerged during the half-century as a way to concisely express this philosophy to an organization's target audience. For corporations and companies engaged in commercial activities, the vision statement has become the preferred tool through which to transmit managerial strategies and commitments to consumers. The most effective vision statements used by successful companies typically consist of a clear, direct single-sentence statement of operational goals and corporate culture, a template encapsulated by Southwest Airline's vision statement: "Our vision is to become the world's most loved, most flown, and most profitable airline." The process of designing and integrating a new vision statement within a corporate hierarchy can often become convoluted, as competitive division managers with opposing worldviews struggle to shape the vision statement according to their own professional image. As observed by Southwest CEO Gary Kelly, "Southwest is a great place to work and brings the greatest joy because we have such meaningful purpose & #8230; (so) a purpose should answer the question, 'Why do we exist?'" (Gallo 1), which is why he decided to further clarify the company's corporate culture with a purpose statement as well. According to Kelly's purpose statement, "We exist to connect people to what's important in their lives through friendly, reliable, and low-cost air travel" (Gallo 1), and this sentiment accurately describes the ongoing efforts of Southwest Airlines as the company strives to emerge from a tempestuous industry to become the public's preferred carrier.

The most powerful vision statements are those which resonate with the widest possible segment of the consumer demographic, while developing a personal connection with individual customers. When the internet search titan Google states, for example, that "Google's mission is to organize the world's information and make it universally accessible and useful," this vision statement becomes quite powerful when one considers the breadth and scope of the company's efforts. The fact that finding the vision statement quoted above was made possible via Google's powerful search engine only serves to emphasize the possibilities to be derived when a successful company develops a strong vision statement and embraces that vision fully. The concept of "universally accessible" knowledge is quite novel within the confines of human civilization, and yet Google's concise and direct vision statement leaves one with the sense that this once-impossible goal is now eminently attainable. Southwest Airlines has capitalized on this concept by building its own corporate culture around the concept of affordability and convenience, offering low-cost fares for budget-conscious travelers around the nation, without sacrificing customer service or quality. Traditional companies outside of the online realm can also harness the power of a clearly defined vision statement to guide their overall corporate image. The vision statement of McDonald's "is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile," and this outline of the restaurant chain's commitment to quality and value appeals directly to budget-minded diners looking for a quick and affordable meal. By positioning the McDonald's brand as one which can appeal to college students, soccer moms and even nostalgic grandparents, the vision statement crafted by the company's current executive management structure is precisely tailored to capture the widest possible segment of the American fast-food market. Kelly has followed the example set by McDonald's as well, branding Southwest Airlines as the alternative to high-priced competitors while accentuating the concepts of value in the company's advertising campaigns.

The recent mid-December merger between the bankrupt American Airlines and one of its main rivals in U.S. Airways signaled a sea change in the way long-distance travel is operated on a domestic basis. With the pool of financially viable competitors operating domestically losing yet another airline -- as American Airlines and U.S. Airways are now operating jointly as American Airlines Group, Inc. -- the market for air travel has become increasingly stratified along a monopolistic basis. In addition to the newly created American Airlines Group Inc., there are currently only four competing airlines specializing in affordable passenger fares on a nationwide basis (Delta, JetBlue, Southwest and United), which continues the decades-long trend of internal consolidation within the historically underperforming airline industry. Kelly has fostered a corporate culture of independence during these hectic times within the airline industry, refusing to merge with competitors while continuing to establish the company's niche within a previously crowded marketplace. This ability to survive and thrive while competitors devour one another was noted by a prominent scholarly journal focused on managerial strategy, which observed that "Southwest Airlines has carved for itself a vital niche, maintaining an enviable record of profitability and service quality. In fact, the past three years have been for Southwest a period of continual national recognition" (Quick 46).

When news of the merger became official on December 9th of last year, the stock market responded in a number of ways which signal the overall market's reception to monopolization within an industry which is integral to the operation of nearly all other business pursuits. Casual investors holding stock in the now defunct U.S. Airways Group, Inc. (LCC) saw their holdings convert on a share-by-share basis to the newly created American Airlines Group, Inc. (AAL). Owners of American Airlines parent company -- AMR Corporation, which filed for Chapter 11 bankruptcy protection in 2011 -- faced a more complicated procedure, as their shares were transferred to the new parent company, but according to a formula contingent on new stock price and not on a share-by-share basis. According to a report published by Daily Finance on the day after the merger was finalized "the new American Airlines rose nearly 3% in its debut on the Nasdaq & #8230; (and) United Continental (UAL) and Delta (DAL) both gained 2%, despite the weather-related flight delays and cancellations over the past few days" (2), all of which are encouraging developments for casual investors and corporate titans alike. A report published by CNNMoney shortly after the merger became official observed that the unique structure of the stock share distribution scheme may have spurred unanticipated gains, because while "most of the shares were distributed to AMR's former creditors and U.S. Airways shareholders & #8230; in an unusual step for a company emerging from bankruptcy, American's former shareholders got 0.0665 share of AAL stock for each of their former shares of AMR, giving them just over 3% of the company" (Isidore and Wallace 1). Meanwhile, Kelly has shepherded Southwest Airlines through the financial fray, as "in 2009 Southwest had its 37th consecutive year of pro-tability -- unmatched in its industry & #8230; (because) low fares in a time of recession combined with adroit ?eet management resulted in Southwest achieving a record full-year load factor of 76% in 2009 -- for all Southwest ?ights, 76% of seats were ?lled" (Klein 35).

While most mergers between national or multinational corporations are complex by their very nature, the union between American Airlines and U.S. Airways was subjected to a higher level of regulatory scrutiny due to the antitrust implications inherent to the airline industry. Both the United States Justice Department and independent consumer groups voiced objections to the merger, with the Justice Department going so far as to file an antitrust lawsuit in federal court. And although the merger managed to clear these legal and governmental hurdles, as CNNMoney reports "the combination leaves four U.S. airline companies -- the new American, United Continental, Delta Air Lines (DAL, Fortune 500) and Southwest -- controlling more than 80% of the nation's air traffic & #8230; (continuing) a series of five major mergers and seven separate bankruptcy filings in the U.S. airline industry since 2001 that have reshaped in industry" (Isidore and Wallace 3). With executives from the newly formed American Airlines Group, Inc. making repeated public assurances that fares would not be increased as a result of the merger, the initial concerns of many investors appeared to have been quelled in the immediate aftermath of the announcement, as evidenced by the slight increase in stock prices both for AAL and its primary rivals within the airline industry.

In attempting to prognosticate on the future of AAL's stock, it is important to bear in mind that airlines are a historically underperforming industry in terms of modern financial analytics, as well as the fact that U.S. Airways was forced to file for Chapter 11 bankruptcy protection to facilitate the merger's eventual development. Simply put, major national airlines struggle to produce consistent profits, and despite the early improvements in share price for AAL, the stock is likely to experience correction and regression to the mean at some point in the near future. The same financial obstacles and constraints which sunk U.S. Airways and forced it to accept a takeover by a former rival -- rising fuel prices, the advent of low-cost airfare clearinghouses and a… READ MORE

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