Southwest Airlines

Harvard Business School

9-694-023
Rev. April 2, 1997

Southwest Airlines: 1993 (A)

In the summer of 1993, Southwest Airlines anticipated the immediate delivery of two
uncommitted airplanes. As with any scheduling decision at Southwest, Pete McGlade, director of
schedule planning, and his team faced the challenges of meeting growth objectives while maintaining
focus. “Controlled growthis essential,” emphasized McGlade. McGlade reviewed the final
candidates before him: adding a new route between Detroit and Phoenix, or initiating service to
Dayton or Baltimore. The chairman, CEO, and president, Herb Kelleher would make the decision in
conjunction with the scheduling department. As McGlade glanced at his watch, he realized that it
was already 2:00 p.m., time for thescheduling department’s daily “hackeysack”1 break. As he
walked down the hall to gather his staff for the break, he knew that the final decision would have to
preserve the Southwest culture and spirit that had enabled it to be the only major airline in the United
States to post a profit in 1992.

History—The Airline “Luv” Built
Although organized in 1967, Southwest’s operations were delayed for fouryears due to court
battles brought by competitors over the new carrier’s entrance into the Texas intrastate market. The
competitors argued that there was inadequate demand to support three carriers. A year and a half
after Southwest began operations, those same competitors, now defunct Braniff and Texas
International Airlines, initiated a price war that led to a 50% decrease in Southwestticket prices

1Hackeysack" is a game played by a group of people involving a small bean bag. The object of the game is to

keep the hackeysack in the air, and players use their feet and other body parts to kick the sack into the air. The
game is usually played outside and is a popular beach activity. McGlade and his crew play in the hallway.
Research Associate Roger H. Hallowell prepared thiscase under the supervision of Professor James L. Heskett as the basis
for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.
Copyright © 1993 by the President and Fellows of Harvard College. To order copies or request permission to
reproduce materials, call 1-800-545-7685 or write Harvard Business School Publishing, Boston, MA02163. No
part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in
any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the
permission of Harvard Business School.

1
This document is authorized for use only in Direccion Estrategica 2 by Jose Luis Salinas Wood from March 2012 to
June 2012.694-023

Southwest Airlines: 1993 (A)

between Dallas and Houston to $13. Surviving these early battles, the new airline developed an
image as “the underdog” in the eyes of both employees and the Texas public.
Southwest’s corporate offices were located at Dallas’s Love Field, the city’s only airport until
the opening of the Dallas Fort Worth International Airport (DFW) soon after Southwestbegan
operations. Love Field was located six miles from downtown Dallas, whereas DFW was located 21
miles from city center. All Southwest flights out of Dallas originated from Love Field.
“Luv” also played a role in the Airline’s early marketing. Analyzing the competitive postures
of airlines operating in Texas in 1971, Southwest’s advertising agency and marketing department
developed a themedescribed as “obviously fun” to differentiate the airline.2 The theme revolved
around a “Love Theme” that featured “Love Machines” (virtually instant ticket writing machines)
and “Love Potions” (on-board drinks). Southwest dubbed itself, “The somebody else up there who
loves you.”
Luv service also involved frequent (often eight or more one-way flights a day on a specific
route) and on-time...