Indian Airline Industry Need To Learn From SouthWest Airlines
Southwest Airlines earning profits for the past 44 years, here's what Indian carriers can learn
The sole reason quoted for the airline's success is the happiness of its employees, who are known to be one of the most productive and motivated workforces in the world.
With domestic airlines reeling under pressure due to mounting losses, the success story of Southwest Airlines holds significance as it gives hope that low-cost carriers can generate profits over the long term.
Indian carriers are projected to post the steepest losses in a decade in the current fiscal year due to higher aviation fuel costs and a falling rupee, according to a CRISIL report. The report forecasts debt liability of three listed airlines -- Jet Airways, SpiceJet and IndiGo -- to increase by 10 percent in FY19.
In contrast, US-based low-cost carrier Southwest Airlines has been raking in profits over the past 44 years and counting. In 2017, Southwest Airlines' yearly revenue was $21.171 billion and total equity of $10.430 billion.
The airline's success was attributed to the happiness of its employees, who are known as one of the most productive and motivated work forces in the world.
"The real secret to Southwest's success is having one of the most highly motivated and productive work forces in the world. They are motivated by a sense of fairness that says, 'We want your well-being to be tied to the company's well-being because, after all, you are the company'," wrote Kevin and Jackie Freiberg in their book titled Nuts, which is based on the carrier's prosperity.
Herbert Kelleher and Rollin King, who founded the company on March 15, 1967, focused on maintaining a happy workforce since inception. The company has also shared profits with employees, who own about 10 percent of the company's shares.
"Our people-first approach, which has guided our company since it was founded, means when our company does well, our people do really, really well. Our people work incredibly hard and deserve to share in Southwest's success," Gary Kelly, Southwest's CEO said in an interview with Forbes.
In 2017, the airline shared $543 million through its profit-sharing policy with its 54,000 employees. This was approximately 11.3 percent of each eligible employee's compensation -- the equivalent of more than five weeks' pay.
"Profit-sharing is an expense we want to be as big as possible so our people get a greater reward," Herb Kelleher was quoted as saying in Nuts.
The employee-centric approach has helped the airline inculcate a feeling of ownership and employees go the extra mile to ensure the carrier turns profitable. Stories of Southwest flight attendants picking up trash, gate agents tracking borrowed staplers and pilots cutting back on fuel usage keep making the rounds.
Around 87 percent of Southwest Airlines employees are part of a union, which is the highest for any airline in the US.
Moreover, Southwest Airlines has never laid off a single employee nor has cut salaries of staff, according CEO Gary Kelly.
Other airlines tried implementing Southwest Airlines' profit-sharing model, but their attempts failed. In 1995, United Airlines attempted to make their employees owners, and pilots and machinists exchanged about $5 billion in wage and benefit cuts for 55 percent shares in the company. The share value of United Airlines climbed nearly $4 billion. Its success, however, was short-lived.
United's attempt failed for various reasons including a change in the attitude of employees and lack of support from flight attendants' union for employee stock ownership plan (ESOP). This indicated that by simply handing over equity to employees it is not necessary that employees would become happy.
For the company to turn profitable, it is important that employees are thought how to run a business instead.
(source:online)
The sole reason quoted for the airline's success is the happiness of its employees, who are known to be one of the most productive and motivated workforces in the world.
With domestic airlines reeling under pressure due to mounting losses, the success story of Southwest Airlines holds significance as it gives hope that low-cost carriers can generate profits over the long term.
Indian carriers are projected to post the steepest losses in a decade in the current fiscal year due to higher aviation fuel costs and a falling rupee, according to a CRISIL report. The report forecasts debt liability of three listed airlines -- Jet Airways, SpiceJet and IndiGo -- to increase by 10 percent in FY19.
In contrast, US-based low-cost carrier Southwest Airlines has been raking in profits over the past 44 years and counting. In 2017, Southwest Airlines' yearly revenue was $21.171 billion and total equity of $10.430 billion.
The airline's success was attributed to the happiness of its employees, who are known as one of the most productive and motivated work forces in the world.
"The real secret to Southwest's success is having one of the most highly motivated and productive work forces in the world. They are motivated by a sense of fairness that says, 'We want your well-being to be tied to the company's well-being because, after all, you are the company'," wrote Kevin and Jackie Freiberg in their book titled Nuts, which is based on the carrier's prosperity.
Herbert Kelleher and Rollin King, who founded the company on March 15, 1967, focused on maintaining a happy workforce since inception. The company has also shared profits with employees, who own about 10 percent of the company's shares.
"Our people-first approach, which has guided our company since it was founded, means when our company does well, our people do really, really well. Our people work incredibly hard and deserve to share in Southwest's success," Gary Kelly, Southwest's CEO said in an interview with Forbes.
In 2017, the airline shared $543 million through its profit-sharing policy with its 54,000 employees. This was approximately 11.3 percent of each eligible employee's compensation -- the equivalent of more than five weeks' pay.
"Profit-sharing is an expense we want to be as big as possible so our people get a greater reward," Herb Kelleher was quoted as saying in Nuts.
The employee-centric approach has helped the airline inculcate a feeling of ownership and employees go the extra mile to ensure the carrier turns profitable. Stories of Southwest flight attendants picking up trash, gate agents tracking borrowed staplers and pilots cutting back on fuel usage keep making the rounds.
Around 87 percent of Southwest Airlines employees are part of a union, which is the highest for any airline in the US.
Moreover, Southwest Airlines has never laid off a single employee nor has cut salaries of staff, according CEO Gary Kelly.
Other airlines tried implementing Southwest Airlines' profit-sharing model, but their attempts failed. In 1995, United Airlines attempted to make their employees owners, and pilots and machinists exchanged about $5 billion in wage and benefit cuts for 55 percent shares in the company. The share value of United Airlines climbed nearly $4 billion. Its success, however, was short-lived.
United's attempt failed for various reasons including a change in the attitude of employees and lack of support from flight attendants' union for employee stock ownership plan (ESOP). This indicated that by simply handing over equity to employees it is not necessary that employees would become happy.
For the company to turn profitable, it is important that employees are thought how to run a business instead.
(source:online)
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