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Southwest Airlines and AirTran Airways Merger Analysis Report (Assessment)

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Updated: Jan 25th, 2022

Introduction

Southwest Airlines has a rich organizational culture. The company has been accredited for excellent customer service due to its fun-loving attitude, warrior spirit, and servant’s heart that emphasize living the Southwest way (Johnson et al. 22). In this light, the human resource factor of the company has played a significant role in the enhancement of efficiencies resulting in the need for expansion to widen the scope of operations and success. Southwest Airlines struck a $1.4 billion deal with AirTran Airways in a bid to expand operations (Merkert and Morrell 854) This move implied that the company’s cancelation of flights to smaller cities would be reduced, thus resulting in more operations in various destinations. Therefore, the human factor had to be catered for in a bid to facilitate an effective merger that would observe the company’s core values that focus on customer satisfaction. This paper will highlight the human resource aspects of the Southwest Airlines and AirTran Airways merger through the utilization of a SWOT analysis to identify the pertinent HR factors before recommending strategies for improved operations.

HR SWOT Analysis

A SWOT analysis focuses on the strengths, weaknesses, opportunities, and threats that a company faces in its operations.

Strengths

Southwest Airlines has recorded impressive financial gains in the recent past. In the 2013 fiscal year, the company recorded a $754 million profit, which was the highest since 2008. In the first half of the 2014 financial year, the company’s cash flows were above $1.6 billion (“CAPA Centre for Aviation” par. 3). In this perspective, the company has portrayed the potential for the growth of its workforce and becoming the preferred employer due to its financial stability.

The company upholds a healthy domestic network that has safeguarded its demand in the US market. The firm’s network of domestic flights resulted in an 8% revenue growth of its passenger unit in 2014 that made the company record the highest gains in the US in its category. The company’s merger with AirTran has facilitated the increase of its seating capacity, which has seen the company acquire a substantial market share of 8 out of 10 cities in the US in 2014 (“CAPA Centre for Aviation” par. 5). In this regard, the expansion of the workforce to uphold the company’s core values in the increasing destinations is essential for its growth.

Weaknesses

Southwest Airlines is faced with minimal revenue opportunities due to the rejection of the strategy to allow custom tailoring of the traveling experiences. Therefore, the company only recorded a 3% increase in its 2013 revenues (“CAPA Centre for Aviation” par. 13). From the HR perspective, the implications of this weakness indicate that the organizational culture is not flexible to accommodate new trends that would enhance its market share. This aspect threatens the security of the workforce due to low investment in hybrid and full-service provisions to its customers. In addition, the company’s product is outdated, and thus against the US industry trends.

Opportunities

The Wright Amendment repeal avails opportunities for the Southwest and AirTran merger to grow since the company can now offer direct flights to various cities in the US (“CAPA Centre for Aviation” par. 18). In this regard, the human resource factor would benefit from growth due to the heightened demand for the products and services offered by the merger, thus resulting in better rewards. Additionally, new internal operations and collaboration with foreign airlines would widen its scope of operations, thus resulting in the HR’s spread of the living the Southwest way culture in new markets.

Threats

An identity crisis has faced Southwest Airlines due to the rise of the ULCCs. This assertion holds due to the high fare prices and sticking to the traditional service provision mechanisms. In this regard, the future of the workers is threatened due to their inability to cope with the new industry trends characterized by hybrid and full-service airlines. The company’s unique culture is also undergoing erosion, thus tarnishing its employee relations and organizational culture. In this light, the living the Southwest way culture fostered by the employees’ fun-loving attitude, a warrior spirit, and a servant’s heart is threatened (Gittell 37). In the long-term, this aspect would render the merger less competitive, thus resulting in layoffs that would affect the workforce’s job security.

Recommendations

The merger of Southwest Airlines with AirTran Airways has posed various challenges to the growth of the human resource aspect towards the realization of its goals that are based on quality service provision. For the sustainability of the merger, the implementation of the following recommendations is essential.

The erosion of the unique living the Southwest way culture needs to be mitigated by improving and harmonizing the reward system in the new merger that facilitates the enhancement of the human resource factor. The merger needs to foster its financial strengths by embarking on new domestic and foreign destinations. This aspect would be in synchrony with the expansive strategies depicted in the merger with AirTran, thus boosting the growth of the human resource aspect.

The merger needs to provide hybrid and full-force operations that allow customers to tailor their experiences. This move would improve the relations with customers and create an organizational culture that embraces modernity in its operations, thus promoting efficiency.

The merger needs to take advantage of the new international operations and partnership opportunities that would improve the company’s market share, thus resulting in the growth of the human resource.

Tasks of the HR in the merger

The HR department of the expanded Southwest Airlines is subjected to various roles that aim at integrating the merger through recruitment and hiring of new staff members. The following is a list of the tasks of the expanded Southwest HR department (Blanchard and Barrett 66).

  • Recruitment and training integration of the new staff members
  • Communication and blending the organizational cultures
  • Changing the roles and structures
  • Facilitating smooth transitions of employees
  • Staffing alignment

Metrics for evaluating the Southwest’s expansion

The metrics for evaluating the merger of the Southwest and AirTran companies would be based on the recruitment, retention, compensation, cultural diversity, performance, and development aspects. The recruitment metrics would focus on the quality of hire, rate of employee referrals, and yield ratio. The retention metrics would be based on the critical employees’ retention rates and departmental resignation rates. The compensation aspect would focus on the recognition and appraisal of the salary ratio. The strength of company values and the employees’ happiness would constitute the cultural diversity metrics. The performance and development metrics would emphasize the HR to employee ratio, employee output, and satisfaction with the expansion (Mayr et al. 112).

Conclusion

The expansive strategies of Southwest Airlines through the acquisition of AirTran Airlines have brought new developments to the HR department. The SWOT analysis shows the strengths, weaknesses, opportunities, and threats that the HR department is facing. Therefore, upholding the living the Southwest way culture, widening the scope of operations, and embracing new industry trends are essential moves for the sustainability of the merger. The HR department needs to perform tasks that improve the workforce operations coupled with utilizing various metrics for the assessment of the Southwest and AirTran merger.

Works Cited

CAPA Centre for Aviation: Southwest Airlines SWOT: Financial strength is mainstay, but cost and culture challenges loom large 2014. Web.

Blanchard, Ken, and Colleen Barrett. Lead with LUV: A Different Way to Create Real Success. Upper Saddle River, New Jersey: Pearson Prentice Hall, 2010. Print.

Gittell, Judy. The Southwest Airlines Way, New York: McGraw-Hill Education, 2005. Print.

Johnson, Andrew, Lisa Pasciak, Victoria Guerra, and Artur Jazowski. Southwest Airlines Co. Case Study, Colorado: CreateSpace, 2013. Print.

Mayr, Valerie, Katie McCartney, Susan Sapp, Katie Sheehan, and Tamekia Watts. Flying LUV: Southwest Airlines Strategic Analysis, Colorado: CreateSpace, 2014. Print.

Merkert, Rico, and Peter Morrell. “Mergers and acquisitions in aviation–Management and economic perspectives on the size of airlines.” Transportation Research Part E: Logistics and Transportation Review 48.4 (2012): 853-862. Print.

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