Compensation Essay

Submitted By tuscansun
Words: 4928
Pages: 20


Alex Fridkin
Alin Tran
Bong Moua
Yvonne Huynh

The airline industry has been around since the mid-19th century and has globalized itself into what it is today. It is now central to all other industries such as world trade, tourism, international investments, and economic growth. There are several airlines that have developed overtime, all of whom are attempting to grab more market share within this global industry. With growing airlines in the field, recruiting the most qualified workforce will be highly competitive, especially when employees will be utilized in business growth and decisions. Among those competing in the airline industry within the United States, we have identified Southwest Airlines and Continental Airlines (The Airline Industry).

Within our findings, we have come to discover how Southwest utilizes a unique HR strategy approach to encourage employee’s retention as well as offers a competitive incentive package to induce employee’s motivation. Southwest Airlines has effectively used a compensation strategy that aligns directly with its HR strategy and its business strategy. Although Continental has been narrowing the gap with Southwest, the company has not achieved its desired results. In comparison, Southwest has successfully achieved a compensation strategy that better aligns with the company's business strategy than Continental.

History & Financial Performance
Southwest Airlines
Rollin King and Herb Kelleher established Air Southwest Co. in Dallas, Texas in 1967. Although Southwest was approved to fly in 1968, the company was locked in legal battles for three years because Braniff, TransTexas, and Continental fought through political and legal means to keep it out of the market. Through the effort of attorney Herb Kelleher – Southwest’s co-founder and previous CEO, the company finally secured the support to fly of both the Texas Supreme Court and the United States Supreme Court. In 1971, Air Southwest changed name to Southwest Airlines, which grew from having 3 airplanes in 1971 to 537 airplanes under operation in 2011. Southwest is also regarded as a “cherry-picker” since the company picked up the larger airlines’ most profitable routes after deregulation in 1980. Currently, Southwest serves 72 cities in 37 states in the United State. The year 2009 marked the 37th consecutive year of profitability for Southwest. In an industry where it is difficult to manage and produce a profit, Southwest’s accomplishments are impressive (Southwest, Our history - By Date, 2011).
Continental Airlines
Continental Airlines is one of Southwest’s competitors within the airline industry. The company was founded by Walter Varney and his partner Louis Mueller as Varney Speed Lines in Colorado in 1934. In 1937, the company changed name to Continental Airlines. Deregulation of the airline industry in 1978, while bringing opportunities for Southwest, began more than a decade of turbulence for Continental. In 1983, the company filed for chapter 11 “Bankruptcy” and emerged from it in 1986. The year 1990 marked Continental’s second bankruptcy filing, whose emergence occurred in 1992. Continental operates flights to the U.S., Canada, Latin America, Europe, and the Asia-Pacific regions. Currently, Continental has 346 aircrafts under operation. In 2010, Continental Airlines and United Air Lines, Inc. were acquired by United Continental Holdings, Inc and are currently being operated under separate entities (Continental Airlines, 2011)
Compensation Strategies and How They Align with Business Strategies
Southwest Airlines
Southwest’s business strategy is to offer low airfare with outstanding customer service. In order to cut costs, Southwest flies only one type of aircraft – the fuel efficient Boeing 737 and utilizes point-to-point instead of the more expensive hub-to-spoke system. Southwest lacks many premium services that other carriers offer such as first class cabin, standard meals, reserved