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《Southwest Airlines (A)》.pdf
CASE : HR-1A
DATE : 1995 (REV ’D. 04/05/06)
SOUTHWEST AIRLINES (A)
“The workforce is dedicated to the company. They’re Moonies basically. That’s the way they
1
operate.”
—Edward J. Starkman, Airline Analyst, PaineWebber
Ann Rhoades, vice president of people for Southwest Airlines, was packing her briefcase at the
end of a 17-hour day. Tomorrow was an off-site meeting with the top nine executives of
Southwest Airlines. The agenda for the meeting was to review Southwest’s competitive position
in light of recent actions by United and Continental, both of whom had entered Southwest’s low
fare market. That day’s New York Times (September 16, 1994) had an article that characterized
the situation as a major showdown in airline industry:
This is a battle royal that has implications for the industry, said Kevin C. Murphy,
an airline stock analyst at Morgan Stanley. The battle will, after all, be as much a
test of strategy as a contest between two airlines. United and other big carriers
like USAir and Continental have decided that they can lower their costs by
creating a so-called airline-within-an-airline that offers low fares, few flights, and
frequent service. The new operations are unabashedly modeled after Southwest,
the pioneer of this strategy and keeper of the healthiest balance sheet in the
industry.2
The reasons for this competition were easy to understand. Over 45 percent of United’s revenues
came from passengers who
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