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Herb Kelleher Revolutionized the Airline Industry and Had a Blast Doing It

Herb Kelleher Revolutionized the Airline Industry and Had a Blast Doing It

He will be missed

Herb Kelleher, the former Chairman, CEO, and co-founder of Southwest Airlines passed away last week. His grit, humor, and authenticity revolutionized air travel and created a corporate culture, one big family, really, to be envied.

Before Southwest could take flight, Kelleher had to fight the big airlines who’d already cornered the market. Kelleher won and since 1973, Southwest consistently turned a profit.

Many obits out there on Kelleher, but I like this one in The Seattle Times. It speaks of his tenacity, ability to laugh at himself, and how in one of the most contentious industries, Kelleher managed to have fun and create a company whose employees loved him as much as he loved them. Not to mention his innovativeness in a burgeoning marketplace.

…To fly Southwest Airlines in its early years was a travel experience like no other. You’d get on a Friday flight from, say, Houston to Austin. The flight attendants would be cracking jokes over the intercom. The booze would start flowing pretty much the moment the flight was airborne. For the next hour-plus the plane would be filled with laughter. (During one of the interminable fare wars with Braniff, Kelleher offered customers a bottle of whiskey if they were willing to pay a higher fare to fly Southwest.) Every once in a great while, Kelleher himself would be on board dressed like Elvis Presley. You had to be a serious curmudgeon not to have a good time.

…But behind all the fun and games was a revolutionary business model.

Because its original routes were all short-haul flights around Texas, Kelleher and the other early Southwest executives understood that they were competing with automobiles — its customers could always choose to drive from Houston to Dallas instead of flying. So it was imperative to keep prices — and costs — low.

That’s why Southwest only used one type of plane, the Boeing 737 — it was easier and cheaper to maintain a one-plane fleet. That’s also why Southwest didn’t have seat assignments: that made it easier to turn around a plane in 20 minutes or less. (Kelleher used to say that planes didn’t make money sitting on the ground.) Everything Southwest did was designed to create efficiencies that none of the legacy airlines could match. The culture was so ingrained that even after Southwest began flying to contiguous states and then across the country, it never let go of that mindset.

Thus, in the early 1990s, when oil prices skyrocketed and the airline industry was losing billions, Southwest was the one airline that remained profitable. “I’ve always said,” Kelleher told Fortune, “manage in good times so that you’re ready for the bad times.” He added, “Most people think of us as this flamboyant airline, but we’re really very conservative from the fiscal standpoint.” As a result, Southwest never lost money after 1973, an astounding record given the vagaries of the airline industry.

Thanks to Kelleher, Southwest had a second competitive advantage: It treated its employees as akin to family. “We’ve never had layoffs,” he told me in 2008 as he was preparing to step down as the company’s chairman. He added:

“We could have made more money if we furloughed people. But we don’t do that. And we honor them constantly. Our people know that if they are sick, we will take care of them. If there are occasions of grief or joy, we will be there with them. They know that we value them as people, not just cogs in a machine.”

Kelleher’s last formal event as a Southwest director took place in May of that year: the company’s 2008 annual meeting. As I noted in a column I wrote at the time, American Airlines held its annual meeting earlier the same day. The company was losing money, and its chief executive complained from the podium that the state of the industry was untenable. Members of both the flight attendants’ union and the pilots’ union, in the middle of contentious contract negotiations, picketed the meeting and handed out anti-management fliers.

By contrast, the Southwest meeting was a love fest. The company had made $645 million in 2007, but that wasn’t uppermost on shareholders’ minds. They had come to pay homage to Kelleher. When he entered the room, they stood as one, cheering wildly. Southwest’s pilots were in contract negotiations, but instead of picketing they took out an ad in USA Today to thank him.

“The pilots of Southwest Airlines want to express our sentiment to Herb that it has been an honor and a privilege to be a part of his aviation legacy,” said the union president, Carl Kowitzky, in a statement.

From the getgo, Southwest’s commercials were fun. And these are some of the best:


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One of my greatest memories of SWA. The plane had just touched down in Houston, the pilot gets on the intercom and says:

“Woo! Big fellow, woo! Woo!

Southwest was fun to fly. I’ve often though how much I missed the hotpants (couldn’t do that for a long time now) and the rush to get on the plane and get in the air. I’ve known a couple of SWA stews, and they loved working for the company and Herb.

SWA started out contentiously. Dallas and Fort Worth had decided a new, bigger and better airport was a necessity. Dallas-Ft Worth Airport (DFW) was necessary for any number of reasons, but the requirement for an airport with more acreage than Manhattan also required locating out in what was then the boondocks. Unlike Love Field, within the city limits of Dallas, this was not convenient for short haul business flights. All the airlines flying out of Dallas Love field signed contracts to leave Love once DFW was operational and did so. In the interval Herb founded SWA and commenced operations from Love. When DFW commenced operations, the cities demanded SWA move to DFW. Herb pointed out that there was no contractual requirement for SWA to move out of Love. Subsequent court action proved Herb right and the retribution was Ft Worth Congresscritter Jim Wright’s Amendment prohibiting any flights originating in Dallas Love (or Ft. Worth Meacham – never much of a player then or now) flying beyond contiguous states without a stop in a contiguous state and also limited the number of seats planes flying from Love could be designed to hold. The Wright Amendment was finally repealed after a bill filed 2005 by my Congresscritter, Jeb Hensarling, and Sam Johnson and an Amendment by Sen. Kit Bond (R-MO). The Wright Amendment had been losing in Federal court battles for years by that point.

I think it was a Southwest flight back in the late 70s where a flight attendant said “FAA regulations require us to tell you about the flotation devices on the airplane, which is ridiculous since the largest body of water that we’ll be flying over is somebody’s backyard swimming pool.”

just a good man–flying out of austin one afternoon, was in a hurry to get on the plane and depart–always tried to sit in the rear of the aircraft and made my way to the back of the plane–sat down next to a guy in a blue suit who was wearing sunglasses and reading a magazine–didn’t really pay attention to him until we were airborne and then, as we had a little time to kill, introduced myself and asked him what he did for a living–he said ” well, i sort of run this operation. “–it was herb–liked him immediately–genuine, sincere, down-to-earth–watched how he interacted with the stewardesses and one of the pilots who came back to say hello to him–was a true master class in management–was evident from how they spoke to him/treated him how much they genuinely liked and respected him–a true leader, in the flesh–when we arrived, got up to leave and shook his hand–he called me by name, wished me a safe trip and thanked me for flying southwest–just one helluva good guy

    guyjones in reply to texansamurai. | January 7, 2019 at 10:45 am

    That’s a cool anecdote — thanks for sharing. I love Herb’s self-effacing modesty in response to your question — he didn’t say, “I’m the co-founder and CEO of Southwest” — which would have been completely legitimate and truthful, as an answer. He chose to characterize his role in a more humble and down-to-earth manner. Just a guy at the office, who happens to be running things. Which suggests to me that he didn’t have much of an ego — something of a rarity in the echelons of high-level executives.

    Mauiobserver in reply to texansamurai. | January 7, 2019 at 1:36 pm

    I had a couple of business interactions with him in the 90’s. Even though on my first meeting we barely interacted on my second years later he greeted me by name as I approached (he did that with thousands of employees as well). During a tour of the SWA HQ he pointed to a veranda and said too bad I was leaving mid afternoon as they had cocktails out there at 5P. Probably a joke but maybe not.

    A very fine man, and wonderful leader.

      guyjones in reply to Mauiobserver. | January 7, 2019 at 4:11 pm

      That’s really cool. He sounds like a good guy, all-around. When you’ve interacted with tens of thousands of customers, employees and peers in an industry, and, upon your death, almost everyone has nothing to offer but praise and fond memories of their interactions with you, you know you’ve lived by the right principles.

      In the business world, memories are long, and someone who has an abrasive personality and who doesn’t treat people well, is going to be remembered by many people in that fashion.

Adam Grant, Social Psychologist and author:

“[P]ower doesn’t always corrupt. More often it reveals. As people gain influence, they feel free to show their true colors. The true test of character is how you treat people who lack power.”

RIP Mr.Kelleher.

Kelleher was definitely an iconoclast in aviation. Southwest still carries that slightly cheeky, tongue-in-cheek attitude in their marketing and in their customer interactions. There’s a reason that such a style has been well-received by passengers — it stands out as authentic, different and fun, in an era when rote conformity in all things is pretty much the order of the day, especially in an industry that is as relatively staid as aviation.

He is free to move around the afterlife.

Kelleher was a true entrepreneurial capitalist. He saw a niche and he took immense risks to fill it, never asking for BIG GOVERNMENT to do him favors in the process.

Just about everything that could be thrown at SW airlines was thrown at it, including the rise of a competitive airline headed by one of his former head executives.

My best friend was a career Southwest pilot until retiring in 2017. He & everyone he worked with loved working for Kelleher. Despite all the humorous aspects of their marketing and in-flight experiences, they were seriously focused on operational safety; Kelleher knew that no amount of self-deprecating humor could overcome accidents or lousy service. That they’ve had only one fatality in all their years of operation, and that one a truly freak accident, is testament to that dedication to safety. It remains a great place to work, though perhaps not quite as superficially raucous as it once was.

Kelleher made long-term contracts for fuel so as to anticipate major fuel cost fluctuations. When the fuel price crisis hit the airlines, Southwest was well set.

    Daiwa in reply to alaskabob. | January 7, 2019 at 8:03 pm

    Just one of many genius moves he made. He was amazing at anticipating fluctuations in the fuel market, one of the principal reasons they remained profitable regardless of those fluctuations.