The Mile High Club

The Mile High Club

Herb Kelleher is still flying high after 35 years of leading Southwest Airlines

It's a warm and sunny morning outside of Southwest Airlines headquarters in Dallas, Texas. It's just after 7:00 when Herb Kelleher arrives, dressed rather casually for an airline chairman: neatly pressed khakis, shiny brown loafers, and a black and white stripped polo shirt. This may seem weird to the average person, but Southwest Airlines is not the average company, and Mr. Kelleher is not the average company executive. You see, Kelleher's colorful personality has created a company culture which has made Southwest employees well-known for not taking themselves seriously (flight attendants often singing in-flight announcements to the tune of popular theme songs) but their jobs seriously. Southwest has grown from humble beginnings in 1971 (only serving three cites in Texas) to become the third largest airline in America in terms of total number of passengers carried in 2005 with 81 million. And even though he stepped down as CEO in 2001, he retained the title of Executive Chairman and is still considered a legend in the airline industry, but you would never know it by the way he carries himself. After 35 years, Kelleher is still having fun every step of the way.

Today, like everyday in Kelleher's life, is a busy one. Filled with meetings and appearances, it's amazing that he has found time to sit down with me in his office, which overlooks the terminals and runways of Love Field Airport in Dallas, which is considered Southwest's home base. Immediately I notice the quirky behavior that Herb is known for. Pacing the room one minute, sprawling face up on the sofa the next, you can tell that Kelleher has a lot on his mind, but doesn't quite know what to do with it all. I inquire about what is on his mind, and his response is classic Kelleher style. "I used to brag to reporters about my chain smoking and whiskey drinking until I got letters from parents reminding me that I'm a role model. I have to be careful of what I say in front of you!" Apparently, Herb's cautiousness didn't last too long. Just two days after our meeting, when announcing he was being treated for prostate cancer, Kelleher said, "It's no big deal. I'm 74 years old so I'm losing my hair anyway." He's clearly beyond outrageous. During a press conference regarding announcing Southwest's 35th Anniversary Celebration, Kelleher was asked what he thought was his greatest accomplishment. I, along with the rest of the reporters in the room expected an uplifting answer about the success of his airline. Of course, we were not disappointed, "My greatest accomplishment is I've never acquired a serious venereal disease!"

When I asked Kelleher about his antics, he explained, "It's just me being me. This is who I am. It's not an act. I have too much responsibility to be uptight. You need a sense of humor to do this job. My style works for me and I'm too old to change! But at the same time, I clearly know where to draw the line." Such antics make it hard for other CEOs to emulate Kelleher. I felt it necessary to find out what other CEOs thought of Kelleher's style. "For most of us to try to behave like Herb does would only get us thrown out," says Phil Condit, CEO of Boeing, which makes all of Southwest's jets. However, Condit says there are things to be taken from Herb's style, such as his abilities to communicate and maintain optimism. "I've clearly learned from Herb that if you have a great attitude, it goes a long way," Condit says. Management expert Tom Peters says one of Kelleher's secrets is keeping things simple. "Kelleher hasn't strayed from what works and has resisted the urge to try things that would not," Peters says.

Gordon Bethune, former CEO of Houston based Continental Airlines and one of Kelleher's closest friends, just happened to be in Dallas to visit his buddy while I was there. He jokes with me on how he arrived, "I couldn't even get a seat on my own airline, so I had to take the next best thing!" In another classic example of "Herb being Herb," he slyly remarks, "No, you flew us because you wanted to get here before Christmas!" Bethune explains, "Herb is the most stalwart competitor in the universe. He's larger than life. He's also the flip side of Will Rogers. I've never met anyone who didn't like Herb Kelleher."

When it comes to competition, Kelleher is all for it. Aviation experts call it the "Southwest Effect." On average, fares drop 20-30% within 6 months of Southwest entering a new market. For instance, when Southwest began serving Philadelphia and Pittsburgh in 2004, US Airways was the dominant carrier in both cities. This gave US Airways a near monopoly in Pennsylvania, and thus allowed them to charge customers whatever they wanted for air service. That was until Southwest came in. This is because of Southwest's low cost model. Spend as little as possible on everything, and give the revenue back to the passengers and employees. US Airways was forced to lower fares in order to compete with Southwest. So far, Southwest has succeeded, particularly in Philadelphia, where they have quickly become the number 2 carrier, while US Airways has continued to struggle after exiting bankruptcy.

Kelleher insists that Southwest strategy for success is not rocket science. "Southwest keeps fares low by flying only one airplane: the Boeing 737. This keeps our maintenance costs low, and alleviates the need to train pilots and flight attendants on many types of aircraft. We also serve snacks instead of full meals, so we save money on catering. We do not offer assigned seating, which simplifies our computer systems, and we serve smaller, less congested airports which cuts down on delays, keeping our planes in the air longer, which is the only place they make money." He uses Chicago as an example of this, "We serve Midway International Airport versus the over congested O'Hare International Airport across town. Simplicity keeps us profitable," says Kelleher. On the subject of serving others, Kelleher had this to say, "The furnishing of customer service really has to come from the heart and the soul rather than the brain. Low fares are what spring to mind for most people when they think of Southwest," Kelleher said, "but Southwest's real appeal is how we treat our passengers. We treat them how we would want to be treated in the same situation. Crazy idea isn't it?"

Southwest is not rooted in a "customer is always right" policy, but in its employees;