case study on organizational strategy and information systems

Southwest Airlines’ merger with AirTran Airlines, valued at over US$3 billion, made Southwest the largest domestic carrier based on number of passengers flown. 25 The merger increases Southwest’s presence in a number of major cities, most notably New York (LaGuardia) and Washington D.C. (Ronald Reagan National Airport). Thanks to AirTran, Southwest now

flies into the coveted Atlanta’s Hartsfield-Jackson Atlanta International, the world’s busiest airport, along with a number of international vacation destinations such as Aruba, Puerto Rico, and the Bahamas. In all, 21 new cities were added, 7 of which were in the international market, positioning Southwest to expand in Central and South America. The result was a

significant increase in profitability for Southwest, growing from $178 million in 2011 to $1.1 billion in 2014. 26 Southwest has grown organically, acquiring only two other smaller carriers-Morris Air and Muse Air-in the 1980s.

This has made it easier to maintain its quirky identity. On the other hand, AirTran was created from several airlines, including the former ValuJet, about 15 years ago. It is known mostly as a low-cost, on-time carrier. The Company Culture page on AirTran’s Web site prior to the merger claimed that “loyal crew members keep AirTran airways customers soaring” and

who have a “timely and accommodating demeanor.” AirTran’s values included a total commitment to safety, technical excellence, continuous learning, fun, and profit.27

Southwest, headquartered at Love Field in Dallas, uses the ticker symbol LUY and uses all kinds of ways to show that “Luv” to their customers. Southwest has cultivated a corporate culture that focuses on employees and customers having a good time while flying. The company carefully selects its employees using interviews that involve creative activities and

even asking the recruits to wear tutus. Southwest’s training program with karaoke and amusing challenges is designed to socialize the new recruits into the airline’s fun-loving culture. According to its Web site, its cultural values include “A Warrior Spirit, A Servant’s Heart, A Fun-Luving Attitude.”28 Wharton management professor Peter Cappelli commented just after the merger was announced in 2010 that “Southwest’s whole business model is built on a particular approach to managing employees. It’s a big bet they are making that they can swallow AirTran …. This is a very different approach, taking thousands of AirTran employees, dumping them

into the system and hoping it works. It’s a pretty risky move.” Cappelli adds that airline mergers are always difficult because integration has to take place while a carrier continues to carry out complex operations. Thousands of employees can’t easily be put through an orientation program in the merger’s short time frame, and the information systems supporting the complex

operations of two airlines can’t be easily changed.29 In November 2011, Southwest Airlines’ more than 6,000 pilots and AirTran Airways’ 1,700 pilots overwhelmingly approved a plan to combine the seniority lists of the two carriers with five of six pilots voting in favor. 30 The personnel systems had to be modified to reflect the new seniority and pay systems.

The disparate cultures of Southwest and AirTran also posed problems for the merger of their online reservation systems and their frequent-flyer programs. Southwest switched from Sabre to Amadeus system to better accommodate merchandising and international flights. AirTran’s reservations system vendor was Navitaire.31 AirTran and Southwest had diametrically

opposed views on distribution through online travel agencies. Southwest usually sold its tickets via telephone or through its Web site whereas AirTran preferred online reservation systems such as Orbitz and Expedia.32 It took several years after to figure out how to blend the two different reservations systems. The Southwest frequent-flyer program was the last system

to be updated to include the top customers of AirTran. In December 2014, the new merged airline was just finishing up the integration. Will the cultures of Southwest and AirTran come together? People are optimistic, but the real answer lies in the future.

Discussion Questions

1. Discuss the layers of culture that are evident in this case. Why do you think Southwest has preferred to grow organically over its history?

2. What are the similarities and dissimilarities between the cultures, values, and beliefs of Southwest and AirTran airlines?

Where would you expect the differences to be most difficult to manage? Why?

3. What problems could arise due to the different perspectives of both airlines toward online reservation systems? What do you recommend the managers do to solve these problems?

4. What would you recommend managers to do ensure a smooth integration of the information systems given the culture

differences?

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