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Rock Street, San Francisco

Taylor Luciani
Senior Thesis
4/29/18
This report is looking into Southwest Airlines and how they are a Fortune 500 company that is looking for ways to improve not only their profits but also how their contributions to making the world a better place. In the past couple of years, Southwest Airlines has won multiple awards with Customer Service and Domestic Carrier of the Year. When you see a company has been profitable for over 40 years in a row, something in their business plan is clicking and making the company reach its full potential. Southwest Airlines prides its self on offering affordable flights to everyday Americans. Do accomplish this, you need to have a well-trained work force and reward that work force for getting the job done. This is exactly what Southwest Airlines does for their employees. making it one of the best places to work in America (Kazin 2018). When traveling is so stressful and hectic Southwest is there to make to make your life easier while helping out your pockets.
Corporate Social Responsibility
As stated in their yearly “One Report”, Southwest is coming into the new fiscal year with goals of changing their emissions from their planes and other machinery. This goal started back in 2012 in hopes of reducing their emissions. Even though they acknowledge that as the company grows so will the emissions, so they’ve taken a stand and tracked their total emissions for five straight years. They’ve made it a company wide goal to improve their CO2 intensity ratios. As the diagram in the One Report shows, Southwest Airlines aircrafts consume nearly twenty million gallons of fuel each year as the latest report shows they consumed 19,622,681 gallons of fuel for their planes. Which in turn releases 19,664, 622 metric tons of Co2 into the atmosphere. As that number may look extremely high, they have taken steps to use natural resources to offset the amount of fuel used. They are taking the next step by using more GSE fuel, which is used in fuel storage, machinery used on runways and equipment used when constructing the aircraft. Southwest had a total of 33,160 gallons of GSE fuel consumption with 5,368 gallons of Natural Gas, and having an updated HVAC system which uses 3,395 gallons of fuel. As Southwest realizes they need to be a pioneer in the Airline industry by setting goals that are ahead of Airlines for America (A4A). Since 2009, Southwest has been below industry average in average CO2 consumptions and if recent trends stay on pace, they will continue to be the lowest in the A4A. Their most recent emissions report shows that they are ahead of the curve with 1.56 million tons of total emissions compared to an industry average of 1.8 million tons per company (Environmental Initiatives 2017). As Southwest continues to be a pioneer with fuel consumption and emissions they realize that their company goes well beyond earning profits. In the past two years Southwest has made community service one of their top priorities. Southwest has always had its hand in the community in some form for 40 years. Southwest mission is to be the, ” Heart of Community” while making sure their only business is not done on the runway. CEO Gary Kelly stated, “In meaningful interactions, we find the good in one another, which serves to open our minds and hearts to our fellow neighbor”. This is Southwest’s way of helping communities grow stronger and more resilient. They do this by investing in local communities that are less fortunate in hopes of building relationships that will lead to an overall improvement of life in that certain community. The One Report states that, since 2014, the company has given over 18 grants adding up to 2 million dollars to invest back in the community. This takes place not only in America but Mexico as well. Reports show that after their first five, “Heart of the Community” grant projects which took place in Detroit, San Antonio, San Diego, Providence and Baltimore. Over 735,000 dollars in total grants, 150 jobs created, 2.5 million visitors to project sites and over 1.4 million event attendees. In total, the five events saw 7.7 million dollars in visitor spending and over 1,200 hours of employee volunteerism. With many more events planned all over the country and in Mexico it is clear that Southwest mission is to give back to the community and make the world a better place one city at a time. Another key component to Southwest’s Social Responsibility initiatives is working towards more of an international expansion. With recent expansion into 8 countries in Latin America and the Caribbean after their newly expanded network. Reports show that international markets total about three percent of their total network capacity. In the year 2016 the Air Transport Agreement between the USA and Mexico passed and that following December, Southwest Airlines was the first airline to have a connecting flights from LAX to Cancun, Puerto Vallarta and San Jose del Cabo (One Report). This shows that Southwest is aggressively trying to expand into more and more international markets. The last piece to Southwest’s social responsibility goals are to be a industry leader in recycling products and in turn making them usable items for their company use. This initiative started back in 2013 when they decided to “repurpose” their seat covers. By working along side with various organizations around the country, Southwest has started to repurpose seat cushions, life jackets and engines. This effort has paid dividends for the company as they took nearly 5,000 pounds of waste out of landfills in Uganda and other countries in Africa to take landfill and turn it into useable objects and items for the company. Southwest has gone as far as recycling the carpet they use at their facilities so they can turn it into something worth value for the company. In all, Southwest recycled nearly 40% of their waste products in the past year and that number is only expected to rise in the coming years.
Southwest puts a focus on making sure the relationship between staff and customers is second to none. From the moment you want to book a flight with southwest it is easy to see that business is handled the right way, whether you are talking to customer service, a stewardess or the CEO. Business is done in a professional, legal and ethical manner. They make sure they handle every situation with care whether it’s a delayed flight on the tarmac, trouble scheduling a flight. The amount of care that goes into each and every employee has a direct impact on their service.

Employee Development
When applying for a job at Southwest Airlines, they are looking for workers who are motivated, passionate and willing to do anything to make sure that the customers have a second to none experience when flying or doing business with them. When it comes to applying Southwest generally looks for people with bachelor degree (“Glassdoor” 2018) but recently have been hiring more employees out of the, Heart of Community, programs. Southwest just doesn’t hire anyone, in the interview process management looks for employees that show intangibles like intuitive skills and seeing how interviewee would react to certain scenarios. This team based business environment makes sure that employees are always giving 100% effort and making sure they do their part to keep the customers pleased as well as upper management. Once they complete the interview process and feel that the candidate is a good match for the company, they then introduce them to the Southwest. In 2013, CEO Kelly said that they value employees just as much as they do customers. This is important to know because once the newly hired employee steps foot in a Southwest facility they are taught the different values and core pillars of the company. As soon as you walk in the door as a new employee you learn that the atmosphere is fun and inclusive (“Business Insider” 2015). This is extremely important because right away newly hired employees will notice the culture and have an easier time of “buying-in” to the ideology of the company. This goes to show how committed Southwest is when hiring new employees, they have to fit the mold of the company, they need to be a team player. The goal of Southwest is to make sure that every employee feels that they have some type of role in the company whether it is loading the plane with luggage or someone in an upper management role, as long as you work for Southwest, you are part of a bigger family (Forbes 2017). In the airline industry, rules and regulations are always changing and Southwest must make sure that their training programs are up to date with the new rules, regulations and different laws in aviation. When new laws and regulations are updated, not only are the new employees brought up to date but the returning employees in all areas of the company are taught the new formalities and how they can go about business (“One Report” 2016). By having all of their training programs readily available for any employee is reassuring to Southwest because they know that they are educating their workers to the point where they can learn fast and learn on the job. It’s a give and take system at Southwest, if the employees feel that the upper management genuinely cares about them as people and as workers they will continue to give their best effort on the job each and every day.
After the employees make it through their respective training courses and have shown they can translate what they learn to the actual job they start to earn different benefits as they move up in the company. Southwest takes great pride in their detailed employee programs and benefit packages that they offer their employees as they deliver award-winning service on a yearly basis. They reward their employees by offering top line benefits and an employee favorite, financial rewards. Southwest has made it a goal in recent years to motivate their employees monetarily. Even though Southwest has been in business for over 40 years they are always changing how they reward their employees. Southwest realizes how much the employees mean to the company and the overall product. The first step to this is having a culture that is built around serving the customer while giving your employees. A mixture of great benefits and monetary awards has lead to them winning ” Best place to work” on Rueters. Southwest understands that having a company where employees feel wanted and are motivated to work will deliver the best possible finished product. Southwest CEO Gary Kelly stated in 2013, “Our vision is to become the world’s most loved, most flown, and most profitable airline” (Gallo 2018). This can only be done by making sure they meet the customers needs and wants are reached day in and day out and Kelly has set up a company culture that feeds right into that strategic plan. On top of the great benefits like vision and other health benefit packages, Southwest offers different perks. One of the employee favorites is how they get discounted ticket prices when they fly for them and their families. Employees also have the perk of flying anywhere around the world with southwest, with these different perks employees only feel more wanted. One of the best benefits that southwest offers its employees is a great 401k plan, Southwest has a plan in place where they match dollar for dollar up to a range of their eligible salary between 8-9%. Its not very often where a company invests that much into their employees future as Southwest does. The last and maybe the best benefit options that southwest offers their employees is there profit sharing. The way it works is when the employees help the company reach financial goals they reward their employees for their contributions towards Southwest’s profitability. Southwest distributes a percentage of their eligible salary which in the past years have ranged from .5% all the way to 16%. Southwest was the first airline in the industry to offer their employees a profit sharing plan and has set a trend in the industry (Blasi 2017). Giving employees a plethora of different benefits shows how committed Southwest Airlines is to seeing growth and maturity with their employees as they move through the ranks of the company. Southwest makes it a point to make sure their employees want to retire with them because the end goal is to have their workforce be like a family.
SustainabilitySouthwest has figured out its own strength and weaknesses to maintain its successful business strategy. The goal of the company is to put rules and guidelines that all employees in the company follow, to keep Southwest in a position to sustain its success for years to come.
Growth and Development Perspective
This is the stage where Southwest is able to maintain their success that they’ve enjoyed for over thirty years. Southwest has seen its company grow from an aviation line that only offered local domestic flights to now being the first to fly from US cities to other local Mexico cities and numerous other foreign countries. This commitment to never being complacent and always wanting to stay atop the industry is what separates Southwest from the rest of its competitors. When making the Sustainability Scorecard for Southwest Airlines it was clear to see that the performance drivers were different types of training for the employees and the variety of benefits that are offered from free tickets to 401k matching. During this phase Southwest employees turn into a family, as I stated before the goal of the company stated by CEO Gary Kelly is for every employee to love to go to work and feel apart of a family (Forbes 2017). The workers learn from the first days of training that they contribute their best effort to the company they will be rewarded with a higher pay, better benefits and a more flexible work schedule as result Southwest knows what they are getting from each branch of the company. If all employees know the ultimate goal which is provide the best, safe and friendly customer service that they possibly can the company will continue to win awards and stay a top the airline industry. One of the main ingredients for keeping a company in the green and on the fortune 500 list is customer service. The airline industry is one that deals with people face to face every day of the year. It seems like every day in the news there is a story about how airline companies are mistreating their customers. For example, when the news broke about how a women was dragged off her flight because she was in the wrong seat. Southwest makes sure that they are never in the news for mistreating their customers because without loyal customers and frequent fliers, their company would not be successful as it is. Southwest is one of the few airlines that offers flights at low prices and very short flights to reach demands of their customers. They are an airline for the average American just like how they hire the average American to work for them. When a company has a high turnover rate there has to be more money spent on training new employees and going through the hiring process. When a company is investing in training programs, matching 401k plans and excellent health benefits is what you need to provide your workers to have a sustainable business plan

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Internal Process Perspective
The next step in the sustainability scorecard is the internal process, which is somewhat similar to the development stage. When a company can combine both performance drivers and other business strategies it makes it that much easier to keep the company going on the upward trend. Looking deeper into the culture of Southwest, one thing stood out, their 2-Pillar system, compassion and action. Even though it is only a two pillar system it gets right to the core of what Southwest is all about. As stated before, Southwest makes their service available to the average American with shorter flights and cheaper rates. This is what has kept them atop the airline industry for many years but with this comes constant issues that need to be taken care of by the company. Since the planes go through more wear and tear then the average airline the engineers and mechanics need to be up to date on the latest rules and regulations. As southwest is always concerned with the commitment to decreases their carbon footprint they are starting to have another issue when it comes to company sustainability. Earlier this month, a southwest flight leaving LaGuardia experienced engine failure. This unfortunate event lead to the death of one passenger as the engine exploded and forced an emergency landing. This really hit home at Southwest because they are always in the news for positive stories about customer services and passenger friendly flights. They have really never dealt with anything of this magnitude. (Business insider). This is public relations nightmare and upper management realizes that now they need to take a deeper look into their planes as they take substantially more wear and tear then other airlines planes. Immediately following this horrific accident Southwest took the proactive approach and canceled dozens of flights to inspect their planes. Southwest says they are committed to having a full fleet inspection by the end of 30 days. The death of the passenger was the first death of a American passenger on an US commercial airline. Southwest is committed to changing their engines that they use and will look into changing the engines if needed to make sure that this accident does not occur ever again. Other strategic core issues are following their Code of Ethics to a tee. “The Employees of Southwest Airlines deliver Legendary Customer Service, with Spirit and LUV, leavened with Common Sense and Good Judgment while keeping Safety paramount. We work hard, and we treat our Customers and each other the way we would like to be treated” (Southwest Code of Ethics). Once again, Southwest proves again how committed they are to having their customers experience the best possible service they can.
Customer Perspective
Anyone who travels a lot and is a frequent flier knows that Southwest is a pioneer in the industry when it comes to in flight service and overall experience. Southwest was ranked number one in the lowest number of customer complaints as they carried over 125 million passengers on their flights over the past year, averaging 4,000 flights a day worldwide. When scheduling a flight customers are dealing with a company that was awarded the domestic carrier of the year for the seventh year in a row and a company that has won the “best low cost carrier in North America” for the third year in a row. One thing that separates Southwest from the rest of the pack is their rapid rewards program. This is a reward system that repays their frequent fliers with every dollar they spend with the company whether its on flight or with the airlines hotel or car service. It is a way to give back to the loyal customers. With this rapid rewards system you can also use your points on gift cards, hotel stays with southwest partners and different cruise liners. This only helps their public image as they are committed to providing the best possible experience to their customers. This area of the scorecard is tied closely with customer service and their initiative to become less of a polluter of CO2. With recent negative news about Southwest in the news a way to offset this is by staying in line with their company goals, which is treating the planet with more care. As the One report states, they are trying to cut down on their carbon emissions as they are below the industry average in emissions. They have already accomplished a goal of theirs by saving over 300,000 gallons of fuel a year by their idle reduction program. (“One Report”). They have also improved their jet fuel efficiency by 30% on a “revenue ton mile RTM) since 2005. It says a lot about a company when they had the foresight for over 10 years on working on reducing carbon emissions and not being complacent and just staying average. This has been a goal of the company since 2002 and they will continue to be a pioneer in the industry when dealing with carbon emissions.
Financial Perspective
When trying to achieve financial success as company you need to have three factors from the scorecard to align, which are Customer perspective, internal process perspective and growth perspective. Southwest has been at the forefront of this portion of the scorecard as they have been a profitable company for 40 straight years. With conscience efforts to have great returns for their shareholders and earn record profits, its safe to say that have reached their goal. As they earned a record 2.2 billion dollars in profit and they only expect that number to rise in the coming years. They have found a business plan that uniquely fits their company and will continue to raise the bar when it comes to profits. Mixing financial goals with extraordinary customer the only thing left for Southwest to jump to be the largest airline company in the world.
Work Cited
2016 One Report. (n.d.). Retrieved from http://southwestonereport.com/2016/
2017 Annual Report (n.d) Retrieved from http://investors.southwest.com/~/media/Files/S/SouthwestIR/Bookmarked%20Annual%20no%20blanks.pdfApril 19, 2018 by Diana Bradley. (n.d.). ‘Communicating in a fog of war’: How Southwest Airlines is responding to a passenger death. Retrieved from https://www.prweek.com/article/1462622/communicating-fog-war-southwest-airlines-responding-passenger-deathEnvironmental Initiatives (2017) Retrieved from https://www.southwest.com/html/southwest-difference/southwest-citizenship/environmental-initiatives/Programs, B. A. (n.d.). Retrieved from https://travel.usnews.com/rankings/travel-rewards/airline-rewards/southwest-rapid-rewards/Service Agent (n.d.) Retrieved from https://www.glassdoor.com/Job/jobs.htm?suggestCount=0;suggestChosen=false;clickSource=searchBtn;typedKeyword=Customer+Service+Agent+southwest+airlines;sc.keyword=Customer+Service+Agent+southwest+airlines;locT=;locId=;jobTypeKazin, M. (2018, April 10). Southwest makes world’s best airlines list. Retrieved from https://www.foxbusiness.com/features/southwest-makes-worlds-best-airlines-listGallo, C. (2014, February 06). Southwest Airlines Motivates Its Employees With A Purpose Bigger Than A Paycheck. Retrieved from https://www.forbes.com/sites/carminegallo/2014/01/21/southwest-airlines-motivates-its-employees-with-a-purpose-bigger-than-a-paycheck/#5f8cafe25376Martin, E. (2015, July 29). A major airline says there’s something it values more than its customers, and there’s a good reason why. Retrieved from http://www.businessinsider.com/southwest-airlines-puts-employees-first-2015-7Shepardson, D. (2018, April 22). Southwest cancels about 40 flights for engine inspections. Retrieved from https://www.reuters.com/article/us-airlines-southwest-cancellations/southwest-cancels-about-40-flights-for-engine-inspections-idUSKBN1HT0ZGWeisbaum, H. (n.d.). America’s most satisfying airlines. Retrieved from http://komonews.com/news/consumer/americas-most-satisfying-airlinesBlasi, Joseph. How Southwest Airlines And Others Are Creating A New Breed Of Capitalism. (n.d.). Retrieved from http://fortune.com/2017/03/20/southwest-airlines-profit-sharing/

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