Final Communication Plan Team Report

Brooke Cox, Tanner Harris, Justin Moy, Alyssa Salvaggio, Laura Whitehead

University of Arizona
Southwest Airlines | Final Communication Plan Team Report 1

TABLE OF CONTENTS

Executive Summary ...………………………………………………………………………………….….. 2

Introduction ...…………..…………………………………………………………………………………. 3
Situation ...…………..………………………………………………………………………………….….. 4
Background & Analysis ………………………………………………………………………………….. 4
Recommendations ……………………………………………………………………………………….... 6
Recommendations (Continued) .…………………………………………………………………………... 7
Response …………………………………………………………………………………………………....8
Conclusion .……………………………………………………………………………………………....... 9
References ..……………………………………………………………………………………………… 10

Executive Summary
Southwest Airlines | Final Communication Plan Team Report 2

Overview
Per your request, we have developed the final communication plan for Southwest Airlines opportunity for
international expansion. Expanding worldwide will drive Southwest into the global market and grow the company
into an international powerhouse in the air transportation industry. In this summary we will be briefly discussing the
situation and background, the opportunity for global expansion, our recommendations for communicating with key
stakeholders, and our response methods including a projected budget and timeline for implementation.

Situation and Background

Our research indicates that Southwest Airlines has the opportunity to expand into the international market.
Southwest’s aligned internal and external narratives have allowed our team to identify the opportunity for global
market penetration. In order of prioritization, our key stakeholders include employees, customers, and shareholders.

Southwest’s commitment to fostering a safe and “funLUVing” corporate culture showcases the need to address the
challenges ahead their employees may face before identifying the needs of our remaining stakeholders. In addition, a
dedication to best-in-class customer service is a key point within Southwest’s mission statement; recognizing their
needs also remain a high priority. For Southwest to continue to lead in customer service through affordable methods,
then those that support the corporation’s market growth, the shareholders, will be a vital component during this
initiative.

Analysis
Through our research, we have identified several benefits for our stakeholders that result from international
expansion. We have discovered an increasing rate of international travel amongst US travellers. In the last year,
Roughly 29% of the revenue generated per mile for airlines was prompted by international travellers. The air
transportation industry is flourishing; in order further develop Southwest’s current market share, we must explore
worldwide expansion as an opportunity for growth and communicate a detailed plan to our key stakeholders to gain
their support for this endeavor.

Recommendation and Response

Southwest should communicate to our employees that we appreciate their undoubted commitment to Southwest
Airlines; we need be transparent about the challenges that accompany expansion, but we must also reiterate that
growth is critical for organizational success and providing employees with more opportunity. Our customers inspire
each decision we formulate; we are listening to them and their feedback will continue to be a crucial component of
the expansion process through a series of assessments. Shareholders need to know their return on investment;
revenues will decline in the initial stages of growth, but we are estimating revenue increases of 3 times our current
rate.

Initial next steps will include finalizing our estimated communication initiatives budget of $20,776,429 as well as
securing a formal assessment for each segment of Southwest customers--rewards members and general passengers.
We have included a complete breakdown of the projected communication budget as well as a tentative timeline to
accomplish the tasks addressed in the response segment.

Introduction
After identifying key stakeholders, Southwest has been presented with the opportunity for international expansion.
This report will detail Southwest Airlines current situation, provide background and analysis for the decision, a
Southwest Airlines | Final Communication Plan Team Report 3

communication recommendation for each critical stakeholder, and prepare a response to establish an immediate plan
of action.

Situation
The internal and external narratives of Southwest Airlines remain aligned and true. We noticed a substantial
opportunity to generate increased customer satisfaction and opportunity for employee growth. This opportunity
involves international expansion in order to penetrate the world market. Communication initiatives that are critical
to the success of this opportunity include meeting with each of our major stakeholders to discuss Southwest’s
current predicament and how a long-term plan for international growth will provide substantial benefits.

Background and Analysis

During our research we discovered that our internal narratives--customer service, employee satisfaction,
affordability--and our external narratives--investor and media relations--were true and the values of each narrative
align. The messages our stakeholders receive align with the message Southwest intends to send. While our
narratives are in sync, we have identified an opportunity for Southwest that would generously benefit our identified,
key stakeholders.

Currently, Southwest holds 14.6% domestic market share and is a major competitor in the air transportation industry
(IBISWorld, 2017). However, Southwest lacks a significant presence in the international industry with only 1.5%
share in the Latin American market as seen in Figure 1.1 and 1.2. Our competitors--American, Delta, and United
Airlines--dominate the domestic and global market and continue to gain market share by providing value to a
customer base that Southwest has not yet developed.

Figure 1.1: U.S. Carrier Share of Passenger Revenue, Q2 2015

Southwest Airlines | Final Communication Plan Team Report 4

Figure 1.2: Regional Passenger Revenue as a Percent of Total Revenue by Carrier, Q2 2015

Both figures demonstrate the dominance of Southwest Airlines competitors in the global market (Stalnaker, Usman,
and Taylor, 2016). Taking advantage of this opportunity will allow our organization to better serve our three key
stakeholders: employees, customers, and shareholders.

International Initiative
We have the ability to communicate with our stakeholders in order to gain valuable feedback and recognize their
perspective on future expansion opportunities for Southwest Airlines. According to the National Travel and Tourism
Office, international air travel totaled 79.8 million people in 2017, which is upwards of 10% for that year (NTTO,
2018). This indicates an increasing amount of travelers who value an airline that can offer travel to global
destinations in addition to domestic flight options. We must communicate with our top three stakeholders that we
plan to expand our travel options, should it be presumed that international expansion is in the best interest of those
stakeholders.

Southwest’s Critical Stakeholders

Stakeholder 1: Customers
It is critical to communicate that we understand our customers desire for more destinations. Customers care about
airline offerings. This concept was highlighted during a study conducted by the International Business Program,
which identified three major segments of flyers: the frequent flyer, the business flyer, and the community flyer. All
three flyer segments selected airline offerings and services as their number one reason for choosing an airline to
travel with (Ali, 2017).

Stakeholder 2: Employees
We need to communicate with our employees that we plan to maintain a desirable work-life balance and appropriate
compensation plans in conjunction with extended flights. International flights require different aircraft and work
schedules; international expansion would be accompanied by additional training, compensation, and travel benefits.

Stakeholder 3: Shareholders
To our shareholders we want to communicate the revenue potential from offering additional travel destinations and
how this additional revenue will increase ROI. Shareholders will benefit in two ways: increasing travel volume and
increasing price per passenger.

First, volume of fliers will increase. This is shown in research conducted by the Bureau of Transportation Statistics
which highlighted Revenue Per Mile for domestic and international travellers. This research showed that roughly
Southwest Airlines | Final Communication Plan Team Report 5

29% of revenue per mile generated by the airline industry were generated on international flights, a 4% growth since
2016 (Smalen, 2017).

These flights contributed $612 billion in the airline industry. From our competitor’s standpoint, American Airlines
flew 21,445 passengers internationally last year which generated $5,726,005 per mile flown internationally. In the
second quarter of operations, it is not uncommon for international travel to generate half of American Airlines
revenue.

Not only will adding international destinations increase volume of flyers, but flyers traveling internationally spend
more money. International travelers are twice as likely to pay for premium seating as compared to domestic
travelers. Due to the longer mileage traveled, premium seating charges, and additional luxuries sold on these flights,
international flights hold an average profit margin of 24.1% in comparison to domestic profit margins of 19.5%

(Heimlich, 2016).
(Figure 1.2)

Communication Recommendations
[Transition]

Communicating with Employees

Our employees are the backbone of Southwest Airlines and the faces of our organization. Their loyalty and
happiness generate best in class customer service. It must be our first priority to align with our employees and
ensure their continued support in this endeavor to grow Southwest Airlines. Because it is change, we need to
communicate that we understand the difficult challenges ahead--especially those that come with international
expansion.

Employees are the number one, prioritized stakeholder. It was originally concluded that customers held our
communicative priorities; however, after further discussion, we determined that if we withhold communication from
our employees until after assessing our customers, it would be difficult to maintain a trusting, transparent
relationship, resulting in employee dissatisfaction.

We recommend that Southwest communicate our proposed expansion plan to our employees and retrieve their
feedback. First, each employee will be segmented based on the region in the United States closest to their home
location. Second, every employee will be required to attend a weekend forum in a specified regional location where
Southwest Airlines | Final Communication Plan Team Report 6

Southwest Senior Leadership will present the proposed initiative to the employees. The challenges that might
accompany international expansion will then be discussed. Following the presentation, employees would have the
opportunity to ask questions and voice concerns.

Scott McCartney explained, “Southwest, which has grown to be the fourth-largest U.S. airline and largest domestic
carrier in terms of number of passengers, says it decided several years ago that domestic markets were largely
saturated. Future growth would have to be international” (McCartney, 2015). Regardless, this expansion will occur,
but it would be beneficial to ask employees what benefits they might like to receive in exchange for increased flight
hours. Benefits might include but are not limited to enhanced benefits packages, hotel/meal compensation for
overnight stays, and higher end of the year bonuses.

Communicating with Customers

Our customers are the driving force behind the idea for international expansion. Initial reactions to our plan to
expand worldwide are speculated to be positive, but we first need to gauge whether or not increased airfares would
negatively impact our customer satisfaction and which international markets Southwest should expand into first.

The first step in communicating with our customers is creating a series of assessments to gather demographic data,
learn which international locations are most popular among our consumer base, and determine their attitude toward
increased ticket prices.

We will be fostering two specific control groups in this study--one that caters to our rewards members and one that
targets general passengers during their check-in for Southwest flights. For data collection and storage purposes, we
would look to invest in Qualtrics data collection platform. The data collection process to follow will take place for
approximately 2 months and overall communication costs will be an estimated $20,776,429.

Rewards Member Assessment

We have concluded that feedback collected from our rewards members should weigh more heavily in determining
the most desired international destinations in comparison to general passengers. Our rewards members will receive a
similar assessment in comparison to general passengers; however, there opinions will be solicited via e-mail and
they will be prompted to answer 5 questions (example below). As an incentive, we will provide 1,000 Rewards
Points for survey completion in addition to entrance into a sweepstakes opportunity to win a free Hawaiian vacation
for 4 people.

Rewards Member Assessment Example

1. What is your most often your main purpose for travel?
a. Business
b. Pleasure/Personal
2. Please indicate the highest dollar amount you would be willing to spend to purchase airfare.
a. Less than $100
b. $101 - $200
c. $201 - $300
d. $301 - $400
e. Greater than $400
3. Please rate how beneficial it would be if Southwest internationally expanded.
a. 1
b. 2
c. 3
d. 4
e. 5
Southwest Airlines | Final Communication Plan Team Report 7

4. Do you have an interest in traveling abroad?

a. Yes
b. No
5. Please indicate which international regions you have the most interest in travelling to.
a. Northern European (The United Kingdom, Germany, Austria, Switzerland, etc.)
b. Mediterranean (Spain, Portugal, Italy, France, Turkey, etc.)
c. Asia (China, Thailand, Hong Kong, Japan, South Korea, etc.)
d. Africa/Middle East (Morocco, India, Israel, UAE, etc.)

General Passenger Assessment

Southwest flies over 450,000 passengers per day, providing the communication team a large, diverse demographic
of people to retrieve feedback from. Our assessment will target general passengers at the Southwest self check-in
stations. Approximately 18% of general passengers utilize the self check-in kiosks, providing an estimated 81,000
assessment responses per day. The electronic kiosks will prompt the customer to answer TWO questions (examples
below) before printing their boarding passes; passengers will not be permitted to print their boarding passes until
these questions are answered. Utilizing our large customer base is critical to determining our market segments as
well as having a broader audience to receive feedback from.

General Passenger Assessment Example

1. What is your main purpose for taking this trip?
a. Business
b. Personal/Pleasure
2. Please indicate which international regions you have the most interest in travelling to.
a. Northern European (The United Kingdom, Germany, Austria, Switzerland, etc.)
b. Mediterranean (Spain, Portugal, Italy, France, Turkey, etc.)
c. Asia (China, Thailand, Malaysia, Japan, South Korea, etc.)
d. Africa/Middle East (Morocco, India, Israel, UAE, etc.)

Data Analysis
The second step is analyzing the feedback we receive from customers. Our assessments not only should gauge our
customers willingness to, but indicate where Southwest should go next. International expansion is a step in the right
direction, and it is important to determine how this expansion will benefit our customers and why it would be worth
the increased airfare.

Overall Goal
Our greatest strength is our reputation for providing an exceptional customer experience. We already maintain a
trusting customer base and need continued transparency during the initial stages of transition into the global market.

Future efforts should be concentrated on expanding into the top three destinations indicated by passengers via these
assessments. Eventually, we would like to utilize “We LUV to go new places!” teaser campaigns and commercials.
The dominant figure presented in these campaigns should be the employees. In order to get our customers on board
with international travel, we need to showcase that our employees are ready to soar overseas as well.

Communicating with Shareholders

Communication with our shareholders is critical. In the first 3 to 5 years of international expansion, Southwest will
have potential revenue losses that could impact the value of stock due to new aircraft costs and maintenance,
increased employee compensation, and the construction of corporate offices abroad. We need to communicate with
Southwest Airlines | Final Communication Plan Team Report 8

our investors that international expansion will eventually grow our revenues and profits, but the initial years may
incur losses.

With 29% of revenues generated from international flights in the air transportation industry, we need to
communicate to our shareholders that international expansion is the most profitable opportunity for Southwest. With
Southwest’s acquisition of AirTran in 2014, their net income increased from $754,000 in 2013 to $1,136,000 in
2014, their largest monetary gain at the time. In 2015, their net income spiked to $2,181,000, an over $1,000,000
increase (Figure 1.3).

Similar to Southwest employees, discussions are recommended to take place within each region of the U.S. for all
962 investors based on their home location. Each investor would be invited to travel to a weekend forum where
Southwest leadership would present the proposed expansion plan as well as elicit questions and concerns from

shareholders.
(Figure 1.3)

Southwest’s Response
Stakeholder 1: Employees

Next Steps
Our employees need to be prepared for increased flight hours and understand the mechanics of larger aircraft. It is
vital that the pilots are trained and well-prepared to fly by the established date international travel begins. The
forums for employees will be scheduled for each regional location within the next month to ensure they are
informed and equipped with accurate information pertaining to Southwest’s international endeavor.

ROI
If the employees are willing to put in the effort during this time of change and progression they will have the ability
to grow with the company and experience new places with Southwest. With an increase in revenue after the initial
build up of international travel profit-sharing with cash out the largest sum yet. The employees will also have the
opportunity to travel parts of the world they may have not seen and be paid to do it.

Stakeholder 2: Customer

Next Steps
Southwest Airlines | Final Communication Plan Team Report 9

Assessment questions for customers will be finalized in the next two weeks, and Rewards Members will be
receiving the survey via e-mail within the next month. This will provide us better insight into customers
international destination interests and the highest amount they are willing to spend on airfare. A condensed version
of the survey will be linked to the self check-in kiosks, which allows for general passengers, who are non-members,
to have their opinions heard.

ROI
With the customers taking their time to complete this survey they have the opportunity to voice their opinions. From
collecting this data the company will be able to take a closer look at the most popular answers to come up with an
operations plan to start flights. The rapid reward customers also have the incentive described in the
recommendations section regarding the 1,000 points and an entrance to a trip to Hawaii. The customers are taking a
small amount of time to provide flights based off their opinions in the future.

Stakeholder 3: Shareholders

Next Steps
A shareholders meeting needs to called to let the shareholders know what to expect over the next period. The
shareholders will have times to meet with upper management and discuss any problems they have with the
upcoming change or any questions they might have. It is important that our shareholders feel that their voice has
been heard and remain committed to the airline. The shareholders will be presented the information that is collected
from the customers and the employees, to further strengthen our argument for international travel.

ROI
The return on investment has the ability to be great for the shareholders, if Southwest increases its revenue from
international travel. Not only will stock prices go up, but the amount of dividends paid will also increase. In the
equation below the shareholders can see how much the original net income of $459 million, found in the 10-Q 4th
quarter 2017 Southwest Airlines financial reports, could have been if the airline was already using international
travel.

𝟒𝟒𝟒, 𝟒𝟒𝟒, 𝟒𝟒𝟒 ∗ 𝟒. 𝟒𝟒 = 𝟒𝟒𝟒, 𝟒𝟒𝟒, 𝟒𝟒𝟒

Not only can the the shareholders expect an increase in profit after Southwest builds up its international travel
reputation, they will also be able to fly on Southwest planes at a discounted rate to other countries.

Projected Communication Team Budget

Line Item Approximate Amount ($)

Qualtrics Data Collection Platform $25,000

Employee Forum Flights & Hotel $19,550,650

Shareholder Forum Flights & Hotel $387,000

Employee and Shareholder Forum Catering $509,679 (56,631 @ $9.00 per person)

Rewards Members Incentives (Points) $300,000

Rewards Members Incentives (Hawaiian Vacation) $4,100

Southwest Airlines | Final Communication Plan Team Report 10

Total Budget $20,776,429

Timeline for Communication Plan Implementation

a. April 1, 2018: Approach CFO with new research and development budget that will be used for
further communication to determine where Southwest needs to build new corporate offices
abroad, .
b. May 1, 2018: Begin data collection on possible destinations our customers would like to travel to
via e-mail/text message to Southwest rewards members as well as during in-flight experiences via
the Southwest App.
c. June 15, 2018: Present international strategic plan to shareholders.
d. July 1 - August 15, 2018: Gather employees through a series of meetings/town-hall style
discussions to gauge their feedback and how to ensure a smooth transition into the international
market with their support.
e. September 30, 2018: Presentation to Southwest senior leadership to discuss international initiative
utilizing feedback received from customers, employees, and shareholders. This meeting will
establish a secured plan for international expansion.

[DON’T DELETE QUITE YET]

Collaborate with CFO to approve estimated communication budget to kick-start international initiative.

We can provide a rough budget estimation; however, without the proper budget to understand the financials we
would need to establish international corporate offices and travel expenses, we cannot provide accurate information.
Therefore, we need a budget for to aid in the research and development of expansion.

Finalize assessments to be sent to Rewards Members via e-mail.

Completing the survey will allow them to acquire 50 reward points as an incentive.

Finalize assessment for general passengers to be accessed through the Southwest App.

Passengers will have the option to complete the assessment and choose an incentive they would like to receive
following its submission. Incentives could include free wifi for the duration of their flight or a meal/beverage
voucher.

Conclude with Hawaiian expansion before initial start with international expansion.

Southwest must begin discussions with employees on how to best accommodate their needs during this expansion.
Key items to discuss are the potential for increased work hours, suggestions for benefits to compensate employees
for the additional hours.

We need to create a presentation that will communicate with shareholders the future changes expected to take place
following the end of the year, how it will affect revenue and market value, and why their support during this
expansion is crucial to its success.

Other key points to discuss with shareholders:

Return on Investment
Minimal payment for airfare for international travel
Southwest Airlines | Final Communication Plan Team Report 11

Long-term increase in overall market value

Opportunity to purchase more stock while share price is low; larger return on investment as our international travel
option becomes more successful

Conclusion
This communication plan has gone through the situation and narratives of Southwest, a background and analysis, a
communication recommendation for each of the prioritized stakeholders, and a response to Southwest if this
opportunity is acted upon. The communication plan has identified a clear strategy for communicating with each of
our key stakeholders utilizing formal presentations, questionnaires, and showing the importance of facts in . This is a
phenomenal opportunity that Southwest has to grow into the international marketplace. With the recent success of
revenue and the addition of Hawaii, now is the time to act and start communicating to our stakeholders.

References
Air Transport World. (January 11, 2017). Airbus and Boeing Average List Prices 2017. Retrieved February 20,
2018, from http://atwonline.com/data-financials/airbus-and-boeing-aver age-list-prices-2017
American Airlines. (2018). Financial Report. Retrieved February 21, 2018, from https://americanairlin es.gcs-
web.com/financial-results/financial-aal
Bureau of Transportation Statistics. (March 26, 2015). Summary 2014 U.S.- Based Airline Traffic. Retrieved
February 21, 2018, from https://www.rita.dot.gov/bts/press_releases/bts015_15
Delta. (2018). Earnings Releases. Retrieved February 21, 2018, from https://ir.delta.com/stock-and-fin
ancial/earnings -releases/default.aspx
International Trade Administration. (2016). US Residential Travel to International Destinations Increased Nine
Percent in 2015. Retrieved February 21, 2018, from https://travel.trade.gov/ou
treachpages/download_data_table/2015_Outbound_Analysis.pdf
IPSOS Public Affairs. (April 2016). Status of Air Travel in the USA. Retrieved February 20, 2018, from
http://airlines.org/wp-content/uploads/2016/04/2016Survey.pdf
Mergent Online. (2018). As Reported Annual Income Statement. Retrieved February 20, 2018, from
http://www.mergentonline.com.ezproxy4.library.arizona.edu/companyfinancials.php?pagetype=asreported
&compnumber=7750&period=Annuals&dataarea=PL&range=10&currency=AsRep&scale=AsRep&Subm
it=Refresh
McCartney, S. (April 9, 2015). The Battle for Overseas Fliers, Retrievered February 21, 2018, from
http://zp9vv3zm2k.ssscom.ezproxy2.library.arizona.edu/?genre=article&spage=D1&SS_issnh=0099-
9660&issn=00999660&SS_referer=http%3A%2F%2Feds.a.ebscohost.com%2Fehost%2Fdetail%2Fdetail%
3Fvid%3D3%26sid%3D39ecff32-4e34-4b57-a984-
0087e4aadaed%2540sessionmgr4010%26bdata%3DJnNpdGU9ZWhvc3QtbGl2ZQ%253d%253d&issue=8
2&date=2015-04-
09&aulast=MCCARTNEY&author=MCCARTNEY%2C+SCOTT&atitle=The+Battle+for+Overseas+Flier
s.&title=Wall+Street+Journal+-+Eastern+Edition&localeid=1033&aufirst=SCOTT&paramdict=en-
US&SS_LibHash=ZP9VV3ZM2K&sid=EBSCO%3ABusiness+Source+Ultimate&SS_authors=MCCART
NEY%2C+SCOTT&SS_source=36520&SS_RefProviderCode=PRVEBS&l=ZP9VV3ZM2K&SS_Referen
tFormat=JournalFormat&au=MCCARTNEY%2C+SCOTT&PP=true&volume=265&SS_RequestType=1
&&SS_jc=WALLSTRJOUEA&SS_multi=true&SS_V=DPEMPTY-EEMPTY
Saylor, B. (2017). IBISWorld Industry Report 4811b: Domestic Airlines in the US (pp. 1-40, Rep.).

IBISWorld. Retrieved February 6, 2018, from

http://clients1.ibisworld.com.ezproxy4.library.arizona.edu/reports/us/industry/majorcompanies.aspx?entid=

1125
Southwest Airlines | Final Communication Plan Team Report 12

Smallen, D. (March 16, 2017). 2016 Annual and December U.S. Air Traffic Data. Retrieved February 20, 2017,
from https://www.rita.dot.gov/bts/press_releases/bts013_17
Southwest. (January 25, 2018). Southwest Airlines Reports Record Fourth Quarter and Annual Profit; 45th
Consecutive Year of Profitability. Retrieved February 20, 2018, from
http://www.southwestairlinesinvestorrelations.com/news-and-events/news-releases/2018/01-25-2018-
113046083
Statista. (2018). Domestic Market Share of Leading U.S. Airlines in 2017. Retrieved February 21, 2018, from
https://www.statista.com/statistics/250577/domestic-market-share-of-leading-us -airlines/
USA Today. (n.d.). What Kind of Plane Does Southwest Airlines Fly? Retrieved February 21, 2018, from
http://traveltips.usatoday.com/kind-planes-southwest-airlines-fly-62394.html
YCharts. (2018). Southwest Airlines Profit Margin (Quarterly). Retrieved February 21, 2018, from
https://ycharts.com/companies/LUV/profit_margin

http://clients1.ibisworld.com.ezproxy4.library.arizona.edu/reports/us/industry/majorcompanies.aspx?entid=1125

http://www.oliverwyman.com/content/dam/oliver-wyman/global/en/2016/jan/oliver-wyman-airline-economic-
analysis-2015-2016.pdf

https://www.southwest.com/html/southwest-difference/southwest-
citizenship/index.html?clk=GFOOTER-ABOUT-DIFFERENCE-SOUTHWEST-CARES