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Founders · Apr 9Herb Kelleher: Founder of Southwest Airlines
Profitable 47 straight years versus five for the next best airline, it ran on 84 employees per aircraft against 115 to 160 for rivals. It paid for 80% of planes from earnings, won early lawsuits, invented peak/off-peak fares by accident and took over Midway's Chicago gates in hours.
Tips
- Herb Kelleher skipped formal strategic planning so Southwest could seize opportunities the day they appeared▶ 0:12A rigid plan would have cost three months of debate while rivals' gates and planes were up for grabs.
- Herb Kelleher chose profit over market share and refused to chase size for its own sake▶ 27:05Southwest was profitable for 47 straight years; the next most successful airline managed five.
- Kelleher built Southwest to survive downturns by paying for most planes out of earnings▶ 26:2780% of planes paid from earnings and the largest share of planes owned outright in the industry.
- Kelleher knew Southwest competed with ground transportation, not other airlines, and kept fares low▶ 28:20Southwest charged $15 against Braniff's $62 on Dallas to San Antonio.
- Southwest flew only the Boeing 737, which let it run with about half the staff per aircraft▶ 29:00Southwest ran 84 employees per aircraft versus 115 to 160 for the rest of the industry.
- Southwest cut fares on the Rio Grande Valley route and expanded the market more than double▶ 18:54Passengers rose from 123,000 to 325,000 in under 11 months, a gain bigger than the entire prior market.
- Southwest discovered peak and off-peak pricing by filling an empty plane that had to fly anyway▶ 21:05Traffic skyrocketed, and the two-tier fare system became one of the most widely copied marketing ideas in airline history.
- Kelleher fought Braniff's fare cut by telling customers the truth and offering free whiskey▶ 24:5476% of passengers paid the $26 fare and took the bottle, and two years later Braniff dropped the Dallas to Houston Hobby route.
- Kelleher fought four and a half years of lawsuits and paid court costs himself to get Southwest airborne▶ 12:58Braniff and Texas International were later indicted for conspiring to put Southwest out of business and pleaded no contest.
- Kelleher kept Southwest in its niche and refused jumbo jets, international routes or head-to-head fights with majors▶ 25:46Where rivals strayed from their niches and lost money, Southwest stayed profitable year after year.
- Southwest solved its lost-ticket problem with red lettering instead of a $2 million ticketing system▶ 31:59A caption on the receipt solved the problem at almost no cost, avoiding a $2 million purchase.
- Southwest took over bankrupt Midway Airlines' Chicago gates within hours of the news▶ 35:24A $20 million deal was negotiated and signed in under six hours.
- Kelleher demanded speed and told a new marketing vice president a nine month plan meant next Wednesday▶ 38:07A nine month production schedule was cut to about six days.
- Southwest rehearsed the future with what-if sessions called future scenario generation▶ 36:21The result was a set of multiple plans for different scenarios.
- Kelleher rallied employees against United with a vivid letter titled commencement of hostilities▶ 38:59Southwest had 20 airplanes against United's initial 25 new ones, with 100 more in reserve.
- Kelleher said people's devotion, not planes, was the one thing competitors could not copy▶ 7:37He told employees the indomitable dedication of its people was the core of Southwest's success.
- Kelleher read history so Southwest would not repeat the mistakes of the airline industry▶ 8:20Southwest avoided the debt and market share traps that repeatedly sent rival airlines into bankruptcy.
- Kelleher led from the front and worked the Thanksgiving Eve tarmac himself▶ 9:00He was seen loading bags on Thanksgiving Eve as founder and CEO.
- Kelleher advised CEOs to spend more time with their people and less with other CEOs▶ 41:56Southwest's motto was Only the Strong Survive, and it survived and stayed profitable.
David Senra · Oct 26
