Issue Analysis.docx - Issue Identification: The Chairperson...

Issue Identification:
The Chairperson Ron Allen in his strategy to reduce costs in terms of current cost per seat available
mile from $ 9.26 cents $ to 7.5 cents per seat to ape South West airlines implemented the strategy
7.5. They had lost $ 10 per share straight in two years and grappling with a financial crisis, which
was triggered by acquisition on Pan Am at $ 491 million.
Strategy 7.5 meant reducing the cost per seat.
Issue Analysis:
The Chairperson decided to implement strategy 7.5. This meant reducing cost per seat mile from
current $ 9.26 to $ 7.5 cents. This was to match the costs of southwest airlines. The company
resorted to trimming the staff and downsizing the employees 11458 from 69555 people. Outsourcing
the cleaning, baggage handling and maintenance of the planes removing many old employees.
Removing experienced customer service professionals by inexperienced staff members. The result
was the share price doubled in two years. The debt rating upgraded. The company successfully cut
cost. The cost was fall in customer service levels, increase in customer complaints, the company
rating fell from number 4 in the industry to number 7 rank. The Delta acquired the tag of never being
on time “doesn’t ever leave the airport”. The employees started forming unions and employee morale
fell to an all-time low. One year later Chairperson Allen was fired for killing the spirit of the company.