Thanks for So Much, Herb

You transformed the airline industry and you did it your way.

Jeffry Sonnenfeld of ChiefExecutive.net commented on the recent death of Herb Kelleher, the CEO of Southwest Airlines by stating, “Kelleher may not have seemed much of a threat to the clubby US airline industry of the 1970’s, but we know that the CEO’s of American, Delta, United and others often winced and shook their heads smiling when his name came up."

When I first came across Southwest, they were a tiny commuter airline serving three Texas cities with four planes and 198 employees. They now have 58,000 people carry over 120 million passengers a year. They have never had a pay cut and have been profitable every year since 1974.”

I had an office and factory in Houston and would frequently fly Southwest from Dallas to Houston. Dallas had built Dallas Ft. Worth International Airport and Houston had built Houston International. Both airports are a trek from the center of town, often congested and generally disliked by many passengers. The major airlines abandoned the convenient Hobby (Houston) and Love (DFW), but the locals loved those airports. They were near what was then downtown, not crowded and fun to use. One drawback at the time was that you could only fly from those airports to cities within Texas.

According to Sonnenfield, "The first three years were rocky for Southwest. Texas International and Continental tried to put Southwest under through litigation and price cutting. Southwest had to sell one of its planes to keep going.

They cut out the hub and spoke system, served secondary cities and interline baggage transfers. They do not charge for baggage. Kelleher was a genius at hedging fuel costs and in championing deregulatory battles."

Southwest responded with some clever counter moves.

They had the convenience of Hobby and Love Airports. Herb was never a conformist. His flight attendants all looked like models and were dressed like cheerleaders (hot pants and white boots). Remember, these were the 1970’s.

He only ever bought Boeing 737’s for the sake of a good deal from Boeing. It is the world’s most popular plane and has gone through several iterations. He wanted commonality of spare parts and training, which kept costs low.

On one flight, the fare from Houston to Dallas was $22 and I got a gift of a fifth of Chivas Regal. In other words, he payed me to fly from Love to Hobby so I could fall in love with the airline.

Sonnenfeld went on to say, "Kelleher, a lawyer by training, was not one of the flyboy pioneers of aviation like pilots Eddie Rickenbacker (Eastern Airlines), Howard Hughes (TWA), Walter Varney (Continental) or Paul Braniff (Braniff Airlines).”

I used to fly Braniff from Newark to Dallas for the amazing meals and service and then hop onto Southwest for the flight to Houston. Not incidentally, the Braniff planes were painted all different colors and the attractive flight attendants changed costumes frequently during the flight. Allegedly, when a pink 747 took off from JFK, the flight controller in the tower said, “tata, sweetie.”

Sonnenfeld said, “Kelleher was even more innovative in cultivating an irreverent leadership style which modeled an egalitarian sense of respect for all constituents, customer centric marketing and a spirited sense of humor. Famous for getting little sleep, drinking Wild Turkey, chain-smoking and clowning around in Elvis jumpsuits and heels with customers, employees and the media, Kelleher confessed his employees allowed him to serve as CEO since he could not handle critical jobs.

Perhaps Kelleher’s legacy is that you don’t have to be boring to be successful."

In running my company, I did my best to remember that.

According to the Wall Street Journal, "he rode a Harley and made air travel cheap enough for people who formerly relied on buses, trains or beat up cars which he astutely recognized as part of his competition. Rather than flying to Asia, Europe or South America, Southwest has concentrated on its home market. Southwest didn’t go after pampered corporate travelers who wanted bigger seats and mileage reward programs. It was expanding the market by making air travel more affordable for more people.

As a kid, Herb worked in the plant at The Campbell Soup Company in Camden, NJ. He studied English and Philosophy at Wesleyan University and earned a law degree at New York University. He worked as a clerk at the New Jersey Supreme Court.

In business school, we were assigned the Southwest Airlines case. I didn’t feel like staying up until two in the morning studying it so I called Dallas information and asked for Herb Kelleher’s home number. To my astonishment, he answered the phone. I told him that I was a student at Harvard Business School and that I had an office in Houston across from his flight attendant’s school. I said that in the afternoon when they were leaving class, we use to go to the window to ogle them. I also thanked him for the bottle of Chivas. He laughed. I also told him that my company was an award-winning supplier to Southwest.

Shown below is the model they awarded us.

I asked him how he did the start up and financing. We talked for half an hour. I scribbled as fast as I could.

The next day in class, the professor said, “Who wants to comment about this case?” I raised my hand. After 15 minutes at the white board, the professor said, "Wait! How do you know so much about this? I said, "I called and asked the CEO." He replied, “You get an A."

The professor then explained to the class that in business, you are not graded for effort. You are judged by the results.

And you don't have to be boring while succeeding..

What do you think?

Ira Friedman