Commentary | The former chairman and chief executive of Southwest Airlines, who died Thursday, did the near impossible: building, from scratch, a consistently profitable airline that today carries more passengers than United Airlines.
Herb Kelleher made it look easy.
The former chairman and chief executive of Southwest Airlines, who died Thursday at 87, never stopped laughing, never stopped joking, never stopped drinking his Wild Turkey bourbon or smoking his Kool cigarettes — and never stopped making time for anyone and everyone who worked for him — while doing the near impossible: building, from scratch, a consistently profitable airline that today carries more passengers than United Airlines.
Kelleher liked to tell people that Southwest was founded (where else?) in a bar in San Antonio in 1966. He was then 35, a transplant from New Jersey with a thriving law practice. In the bar that fateful day, his co-founder, Rollin King, convinced him that an airline that flew only to destinations in Texas could be successful. But before a single plane could get off the ground, Kelleher had to fight the incumbent carriers — Braniff, Texas International and Continental — which were determined to kill it aborning.
Kelleher spent the next five years engaged in court battles before Southwest was allowed to fly in June 1971. That set the tone. Fighting the other carriers didn’t wear Kelleher down, the way it might someone else. He found it thrilling, exhilarating. As he later told Fortune magazine:
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“I love battles. I think it’s part of the Irish in me. It’s like what Patton said, ‘War is hell, and I love it so.’ That’s how I feel. I’ve never gotten tired of fighting. For the past 35 years, my job has been helping Southwest Airlines get through one battle after another. We’ve been like the French Foreign Legion — they had a firefight just about every two days.”
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.
The obituaries all emphasized Kelleher’s antics — and why not? That’s what he was famous for: like the time he settled a dispute over an advertising slogan with an arm-wrestling contest, or the time when after a competitor accused Southwest of operating a “cattle car,” he starred in an ad with a bag over his head. (He said Southwest would give a bag to anyone who was embarrassed to fly the airline.)
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.
When I was at Fortune, we once persuaded Kelleher to pose for the cover wearing a fedora, smoking a cigarette and holding a glass of Wild Turkey. (It didn’t take much persuading.)
The headline practically wrote itself: “I Did It My Way.”
Airline passengers should be thankful he did.