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Bite-size Case Study

How Southwest Airlines challenged a global crisis

Published on January 30, 2017   3 min
0:04
This study is of the U.S. airline industry after the Trade Towers came down on September 11th. Well, ridership went to zero for the first two or three days after that event. But then when it returned, it never returned to above 80 percent of previous ridership levels, which would have been fine, except the U.S. airline industry was counting on at least 86 percent seat fill rate to make money. That's why seven firms declared bankruptcy almost immediately. The two firms hurt the worst were the short haul carriers, those who relied on short haul routes, because not only did people stop flying, but they especially stopped flying on short haul routes. We said, "I don't think I'll take the shuttle from Washington D.C. to New York. I think I'll take the train," or "I think I'll drive to Chicago from Detroit rather than taking a flight." So, by and large, those firms were hurt worse than normal. US Airways is one of those short haul carriers. So they not only downsized more than 20 percent, but declared financial exigency, and laid off people without benefits. That is, they violated the union contract, essentially said, "We have no money to pay you severance." Southwest Airlines is the other short haul carrier. They adopted a very different strategy. They said, "We will lay off no one."
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How Southwest Airlines challenged a global crisis

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