Southwest Uses the Stopwatch to Speed Up Service, Raise Profits

One in an occasional series focused on efficiency

Equipped with stopwatches and clipboards, teams of Southwest Airlines Co. employees are moving into the carrier's largest airports to time almost everything workers do, from helping passengers use a ticketing kiosk to pushing wheelchairs down the jet bridge.

They're also tracking how long customers wait for boarding passes, flights and luggage, and how well flights stay on schedule.

It's the kind of work many companies would leave to outside consultants.

Southwest, one of the world's most efficient airlines, has been quietly using its own experts to figure how to be more efficient.

This month, it will bring Operational Excellence - or Rx for short - to Dallas Love Field.

It's a critical effort for the Dallas-based company, which has grown into the world's largest carrier of passengers but faces increasing cost pressures and a stagnant stock price.

With any growth spurt comes growing pains, and those pains are beginning to show.

Southwest continues to have one of the best records for on-time performance, but its numbers have slipped - albeit slightly - in recent years.

So has its record for mishandled bags.

It's a trend officials at Southwest don't like.

"After 9/11, we just got into survival mode, but competition is heating up again, and we need to keep our edge," said Greg Wells, Southwest's senior vice president of operations.

Alan Sbarra, an airline consultant based in San Francisco, said Southwest's growth has added complexity to its network, making efficiency even more important.

"It's harder and harder to squeeze out nonlabor costs," Mr. Sbarra said.

Attention to detail is part of the game in the airline industry, which has struggled to find firm financial footing since 9/11.

Jim Higgins, an airline analyst with Soleil Securities in New York, says the industry did so much cost-cutting after 2001 that finding major cost savings could be difficult.

"Southwest is already so efficient that they know there are no home runs left," Mr. Higgins said.

"They're going to be looking for every needle in every haystack."

Southwest has been profitable for 33 years, but profit is becoming more difficult to eke out with the price of fuel so high.

For years, Southwest maintained a valuable hedging program that locked in fuel prices below market value. But the hedges in place between now and 2010 are for fuel at much higher prices.

The average fuel cost per gallon jumped nearly 50 percent in 2006 over 2005, and Southwest expects to pay $300 million more for fuel this year than it did in 2006.

"Over the long term, it's imperative for them to get their costs down," said Jim Corridore, an airline equity analyst with Standard & Poor's.

Field testing

The Rx program was first tested two years ago after some managers expressed concern about Southwest's plans for major expansions in its Chicago, Phoenix and Las Vegas operations.

There was excitement about the growth but also unease.

None of the managers had headed an operation with more than 200 flights a day. Because Southwest flies point to point - unlike its competitors, who use traditional hub-and-spoke networks - the company didn't have a good model for a large operation. Managers also knew that much of the growth would have to be handled using existing staff.

The airline's growth spurt wasn't the only concern.

Southwest's longtime rivals have slashed costs through employee concessions or bankruptcy proceedings. Younger low-cost carriers have newer equipment and lower maintenance costs, which make them formidable competitors.

"We were starting to worry that with all those things happening, we wouldn't be able to hang on to our efficiency and customer service," Mr. Wells, the Southwest senior vice president, said.

Southwest's first target was Phoenix's Sky Harbor International Airport.

The station had grown to be the carrier's second-largest airport operation (it's now in third), but many things were being done the same way they had when Southwest opened there with 13 flights in 1982.

Hour by hour

At the heart of the Rx program is collecting and crunching data, tracking performance by the hour rather than by the month.

Southwest employees are being asked to consider every moment of their day, from how long customers wait in line when they arrive to how many minutes it takes for a passenger to board a plane after the last passenger from the previous flights gets off.

Operations experts call the Rx program "process mapping," where tasks are measured and analyzed in an attempt to improve productivity. It's something Southwest had never done before.

"In spite of ourselves, we were very successful in these complex operations," said Matt Hafner, who heads the Rx program.

Southwest's Rx team, which started with seven handpicked employees, has grown to 46 as it expands to more airports.

Before heading to an airport, each team member undergoes a week of training in process mapping by an outside consulting firm.

Customers probably don't notice the Rx team, whose members dress in business casual attire rather than in Southwest uniforms.

The process at each airport is lengthy. For the first month, armed with stopwatches and clipboards, the team shadows airport employees and collects data to use as benchmarks.

The team then leads brainstorming sessions to generate ideas from employees and help prioritize projects. The ideas run the gamut from easy to implement to wildly unrealistic. In Phoenix, one employee suggested building a dome over the airport to shield employees from the scorching desert heat.

The next two to three months are spent testing new ways to do things. Some approaches may have been used at other airports; others address specific needs at a single airport.

The team determines which changes to implement and monitors the progress, making adjustments where necessary.

Success in Phoenix

The Phoenix experience is beginning to show results as changes have taken hold and become routine for employees.

From 2005 to 2006, Southwest's Phoenix schedule expanded from 190 daily flights to 208. The Rx program helped the company accommodate the extra flights without adding staff, saving $2.3 million. And on-time performance was up 11 percent.

Kiosks were rearranged to be more accessible, and a line monitor was added to help direct passengers. Employees started filling in for each other during breaks so kiosks don't have to be shut down.

The airline analyzed how its passenger mix changed throughout the day so employees could anticipate peak travel times for less experienced leisure travelers.

As a result, wait times in the lobby have been cut by more than half, from an average of 31 minutes to 13.7.

The average time that passengers wait for their luggage dropped 20 percent.

After seeing the results in Phoenix, Southwest formalized the program and began rolling it out at its biggest operations during mid-2006.

Southwest's operations in Chicago, Las Vegas and Baltimore completed the program late last year and are starting to see results.

Its Los Angeles and Houston operations are still working through the program and recently began testing suggested changes.

The Rx program will kick into gear this month at Southwest's oldest operation, Dallas Love Field, and in Oakland, Calif.

Southwest says it's beginning to reap significant savings. That's important when you consider that its 2006 operating costs exceeded $8.15 billion.

This year, the airline expects the program will help it shave about $12 million.

One thing that surprised airline officials was the reaction from employees.

"We thought they'd embrace us with open arms, but it didn't happen that way," Mr. Wells said.

"We've told them for years that they're the best in the industry, so they wanted to know what we wanted them to do."

'Nitpicky'

The team has learned to back off in some cases.

"It got so nitpicky as they timed the time it took to work with customers at the ticket counter that they dropped the effort," Mr. Wells said. "It just wasn't us."

For some employees, the program has sparked anxiety, said Charles Cerf, president of Local 555 of the Transport Workers Union, which represents Southwest's ramp and cargo workforce.

"Employees already feel like we're the most productive in the industry, so it's difficult to do more," Mr. Cerf said. "Sometimes we worry that customer service could be sacrificed in an effort to be more productive."

Eric Roggin, an operations agent who's now an Rx team member in Los Angeles, said being on the team is an eye-opener.

After 20 years at Southwest, Mr. Roggin admits he didn't have the vigor he had when he first started.

"We became very complacent because we were always No. 1," he said. "This is about giddyup."

One in an occasional series focused on efficiency

Coming Monday

Get a behind-the-scenes look at the airline industry with our new blog, Airline Biz.

Veteran Dallas Morning News reporters Terry Maxon and Suzanne Marta bring you news and analysis from around the industry, plus updates on issues that matter to business travelers.

DallasNews.com/business

WHAT THE Rx PROGRAM IS TACKLING

Teams of Southwest Airlines employees are working to improve efficiency in several area:

Problem:

Long lines

in the lobby

Solution: Line monitors better directed passengers to the ticket counter or the kiosks. The passenger mix was analyzed to see if more kiosks were needed. Customer service agents were trained to monitor additional kiosk screens so the machines didn't have to be shut down during lunch breaks.

Result: In Phoenix, the average wait went from 31 minutes to 13.7 minutes.

Problem: Local bags took too long

to get to the baggage carousel

Solution: Ramp agents split the luggage so that one shuttled local bags while another focused on those that were being transferred to other flights.

Result: In Phoenix, local bags arrived 4 minutes earlier, a 20 percent reduction in waiting time

Problem: At Chicago's Midway Airport, so many flights arrived at once that not all bags got transferred in time

Solution: The bags were sent to a centralized staging area, and bag carts were reorganized so that they could get in and out more easily and give priority to flights departing first.

Result: Bags are being transferred more efficiently, but numbers aren't available yet.

Problem: Staffing didn't match traffic levels

Solution: Traffic levels are now closely monitored on an hourly basis so more precise scheduling can occur.

Result: Southwest has been able to handle more flights without adding employees. During slower periods, those employees who want to work fewer hours can leave early.

Problem: Customer service agents could have a full flight plus several passengers with special needs to take care of in a short time

Solution: Employees post color-coded magnets above the entrance to the jet bridge to signal co-workers who pass by that they may need help.

Result: In Phoenix, on-time performance improved by 11 percent.

SOURCE: Southwest Airlines

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