Accordingly formal, written policies and procedures have been adopted in the simplest possible way consistent with legal requirements, including a code of Ethics applicable to company’s principal executive officer, financial officers and principal accounting officer and controller. The company’s corporate governance policies code of Ethics covering all employees is available on company’s website. A SW airline is one of the best airlines, which anticipates its risks properly. Against the fuel cost increase, SW enters into fuel derivative contracts to protect against rising fuel costs.
Changes in the company’s overall fuel hedging strategies, the ability of the commodities used in fuel hedging to qualify for special hedge accounting and the effectiveness of the company’s fuel hedges pursuant to highly complex accounting rules, are all significant factors impacting the company’s results of operations. One of the major crises the whole airline industry had faced was way back in 2001, when WTC attacked has happened. During 9/11, almost all the airlines have been grounded for week time but SW managed the crisis successful and also made profits in that year.
The philosophy of John Kelleher and management style saved the airline from every crisis he says that “I have always approached things is to be prepared for all possible scenarios of what might happen. I usually come up with four or five Different scenarios. I do this all the time” (Katrina and Alynda, 2001). Now this type of thinking by the top manager of the airlines put it ahead of all its competitors in mitigating the crises. It is the SW airline which after 9/11, the cash grant offered by Federal government distributed it to employee’s even though there was no legal compulsion.
In the days after 9/11 as competitors announced massive job cuts SW executives assembled at an emergency command center at their Dallas headquarters and drew up plans to cut costs. New plane deliveries were delayed. Plans for renovation at headquarter were scrapped. But with $ I billion in cash and no debt, lay offs were not considered. The airline industry in general continues to face on going security concerns and cost burdens; further threatened or actual terrorist attacks or other hostilities could significantly harm airline business.
But South West’s low cost structure is one of the primary competitive advantages for SW. At Southwest Airlines, there is a constant search to better service the needs and desires of its customers. To minimize delays caused by heightened airport security after 9/11, the airline sought to improve its customer service by integrating its Rapid Rewards Frequent Flyer, loyalty-based program, with its reservation system to avoid delays in reservation transactions. Basically SW airlines have their shareholders and employees who may or may not have company’s stocks are the main stakeholders.
For the last 35 years SW airlines continuously declaring profits and the value of shares has been increasing continuously. Southwest Airlines was named the best performing stock with the best 30 year return since 1972 by Money Magazine in fall 2002. The Economist Intelligence Unit honored Southwest Airlines at its “2002 Global Corporate Achievement Awards. ” The airline was recognized for its excellent financial strategy and its ability to adapt to change successfully in the face of strategic and operational challenges.
The ranking is based on revenue growth, net earnings, market capitalization, earnings per share, and return on shareholders’ equity. Business Ethics lists Southwest Airlines in its “100 Best Corporate Citizens”, a list that ranks public companies based on their corporate service to various stakeholder groups. The “100 Best Corporate Citizens” list is found in the March/April 2002 issue of Business Ethics. As on Dec. 31st 2006 there were 11,055 holders of record of the company’s stock.
Company’s common stock is listed in New York stock Exchange and is traded under the symbol LUV. SW airline is one of the highest payers of dividend per share. The company has share based compensation plans covering with one Executive officer of the company. Prior to Jan 1st, 2006 the company accounted for stock based compensation utilizing the intrinsic value method in accordance with the provisions of accounting practices. After 1st Jan 2006 the company adopted the fair value recognition provisions for share based payments using the modified retrospective transition methods.
The company estimates the fair value of stock option award on the date of grand utilizing a modified Black Scholes option pricing model. SW is taking care of its employees care fully. As on 31st December 2006, SW had 32,664 active employees consisting of 12,954 flight 2056 maintenance, 13446 ground, customer and fleet service and 4, 208 managements covered almost 82% SW employees (Southwest Airlines Annual Report, 2006). Its relationship with unions and employees is overall very cordial.
At south west, parties, celebrations almost anything are common. Employee photos were the wall at Dallas headquarters leaving no doubt who’s most important for the company. Due to higher morale & motivation employees of SW, they are more productive than others in the industry for similar pay. SW always tries to respond positively to their stakeholders whether they are employees including top management or their shareholders. They are promoting ownership among employee and introduced profit sharing plan with employees.
Their philosophy “our people are more conscious about protecting the company’s assts and accomplishing its goals because their well being is tied to the company’s well being” (Freiberg and Freiberg, 1996) always motivated employees. They had instituted various awards for employees to perform better and better basically SW had attempted to promote a close knit family like structure and culture so that company is very much inclined to perform better and increase the stoke holders value.
1. LeClaire, J. (2002) Southwest Airlines Celebrates Diversity, Aviation Career. net. 2. Southwest Airlines Annual Report (2006) Lovefield, TX: Southwest Airlines. 3. Brooker, Katrina and Wheat, Alynda, (2001) “The chairman of the board looks back,” Fortune (Asia), may 28, pp. 74-83. 4. Freiberg, Kevin and Freiberg, Jackie (1996) “Nuts, Southwest airlines crazy recipe for Business And Personal Success, Brad Press Inc. , Texas.