Southwest Airlines Introduction While flying home to Texas last summer with Southwest Airlines, I had the most fun and unique experience with an airline that I could ever remember. It all started out quite oddly enough in the lobby just before takeoff. As I was checking in at the ticket counter, the representative asked me if I wanted to play a game that could get me free round trip tickets. Sure, who wouldn’t, I exclaimed. As she gave me my boarding pass she said, Great, how many holes do you have in your socks? Initially caught off guard, I responded, Excuse me! The free tickets are being given to the customer who has the most holes in their socks, she explained with a perky smile.
It was just my luck that I was wearing sandals. I told her, Too bad your not checking underwear, because I’m sure I could be in the running for some free tickets with that sort of game. The remainder of the flight was filled with jokes and gags yet quality service from the pilot to the flight attendants. I can remember our flight attendant, dressed in a T-shirt, shorts and tennis shoes along with the rest of the staff, enhanced the safety announcements with the remark: There may be fifty ways to leave your lover, but there are only six ways to leave this aircraft. Having fun is obviously a big part of Southwest Airlines formula to success. It all starts from the top with their childish yet brilliant boss Herb Kelleher.
Kelleher, the company’s CEO, is the nut behind these shenanigans. This chain-smoking, Wild Turkey-drinking Texas transplant from New Jersey has: Dressed for employee celebrations as Roy Orbison, Elvis, a medieval knight and a teapot; Passed out the peanuts himself on board his orange and brown 737s In front of cheering employees, arm-wrestled another CEO for the right to use the slogan Plane Smart. (He got whipped, but he used the slogan anyway.) This man, once called The High Priest of Ha Ha by Fortune Magazine firmly believes: If you feel real good about coming to work, if you feel real good about what you’re doing, if you feel you are doing something for a meaningful cause and you’re having fun while you’re doing it, then you look forward to coming to work. You don’t succumb to stress as easily and you cooperate with other people more quickly and more easily. If you have a sense of humor .
. . it tends to not allow you to make mountains out of molehills. 1 Kelleher, known as Herb to the troops and his partners, reinvented air travel twenty-five years ago with its low fares and zany irreverent style. This paper will give a historical overview of the company, discuss the ingredients to the company success, offer some financial strengths and present a final conclusion.
Section I: Southwest’s History Twenty-seven years ago, Rollin King, a San Antonio entrepreneur who owned a small commuter air service, and Kelleher, who was a lawyer at the time, got together and decided to start a different kind of airline. They began with one simple notion. If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make certain they have a good time doing it, people will fly your airline. And you know what? They were right. Within those 27 years, Southwest Airlines became the fifth largest major airline in America. Today, they have flown over 50 million passengers a year to 54 cities all over the southwest and beyond. They do it over 2,300 times a day with over 267 of the newest jets in the nation and fly only one type aircraft; the B-737.
The average age of their fleet is only 8.4 years and they own over sixty percent of them. In May 1988, they were the first airline to win the coveted U.S. Department of Transportation Triple Crown for a month – Best On-time Record, Best Baggage Handling, and Fewest Customer Complaints. Since then, they’ve won it thirty-one times, as well as five annual Triple Crowns for 1992, 1993, 1994, 1995, and 1996. They have been an airline whose has led to the advancement of the commercial airline industry. They were the first airline with a frequent flyer program to give credit for the number of trips taken and not the number of miles flown.
They have pioneered senior discounts, Fun Fares, Fun Packs, a same-day air freight delivery service, ticketless travel, and many other unique programs. 2 Here is a brief year to year synopsis about this little upstart three-jet airline and how it got off the ground to become one of America’s largest and best-loved commercial airlines in history: 1971 With President Lamar Muse ( retired and seasoned industry leader) at the helm, Southwest Airlines takes off on its maiden voyage and begins service between Dallas, Houston, and San Antonio. America’s most unique airline is born. 1972 All Houston service is transferred to Houston’s Hobby Airport from Houston Intercontinental. Said Kelleher, Why should our customers have to drive 45 minutes to take a 40-minute flight? 1973 Southwest files with the Texas Aeronautics Commission to extend service to the Rio Grande Valley. RUSH Cargo service, which provides same-day airport cargo delivery, is introduced and Southwest has its first profitable year. 1974 Southwest carries its one-millionth passenger and spends $400,000 to renovate their terminal at Houston’s Hobby Airport by adding two new boarding gates and departure lounges.
1975 Permission was finally granted for Southwest to fly to the Rio Grande Valley via the Harlingen Airport with four roundtrips each business day. 1976 Southwest gets clearance to begin service to Austin, Corpus Christi, El Paso, Lubbock, and Midland/Odessa. Within five short years, Southwest places its sixth Boeing 737 into service while flying over one and a half million satisfied customers to their destinations. 1977 Southwest carries its five millionth passenger. Southwest stock is listed on the New York Stock Exchange as LUV. 1978 The 1978 Airline Regulation Act gives Southwest the opportunity to really take off with new service to St.
Louis, Kansas City, and Detroit from Chicago’s convenient Midway Airport. Lamar Muse steps down as President and Kelleher fills in as interim President, CEO, and Chairman of the Board. Later in the year, Howard Putnam is unanimously elected President and Chief Executive Officer. Kelleher stays on as permanent Chairman of the Board. 1979 Begin service to New Orleans from Dallas – the first city outside of Texas to be served by Southwest.
1980 Southwest added its 22nd Boeing 737 to the fleet and christened it the Rollin W. King in honor of the co-founder of the airline. It was the first 737 to be completely owned by Southwest Airlines. 1981 Southwest celebrates a decade of Love Southwest Style. With fun, games, and more savings for everyone, Southwest launches its next decade of outstanding service.
1982 Kelleher comes aboard as permanent President, CEO, and Chairman of the Board for Southwest. New service to San Francisco, Los Angeles, San Diego, Las Vegas, and Phoenix. 1983 Major schedule increases are adopted, three additional Boeing 737- 200s are purchased, and Southwest flies over 9,500,000 satisfied Customers. 1984 Fourth consecutive year Southwest is ranked number one in customer satisfaction. Unveils the first 300 series aircraft in its Boeing 737 fleet christened the Spirit of Kitty Hawk. 1985 Southwest names the Ronald McDonald House as its primary charity.
Launched the Just Say When campaign, which establishes Southwest as the most convenient point-to-point carrier in the nation. 1986 Southwest celebrates 15 years of low fares, good times, and high spirits! Southwest fliers have even more fun with the introduction of Fun Fares. Over 13 million passengers. 1987 Southwest celebrates the sixth year in a row as a recipient of the Best Consumer Satisfaction record of any continental U.S. carrier.
Weekend Fun Packs, which include roundtrip airfare and hotel, are introduced, and 14-day advance purchase Fun Fares are reduced by as much as 25%. 1988 Southwest and Sea World of Texas join fins to promote Texas as a major tourist attraction. Through the New Friends campaign, Southwest becomes Sea World of Texas’ official airline and creates Shamu One, a Boeing 737 painted like Shamu the killer whale. Later in the year, Southwest becomes the official airline of Sea World of California. Southwest wins the first Triple Crown: Best On-Time Record, Best Baggage Handling, and Fewest Customer Complaints. 1989 A little more than a year and a half later, Southwest wins its second Triple Crown.
Shamu Two is born. Service begins from Oakland’s International Airport. 1990 Announces the billion-dollar revenue mark and becomes a Major airline. Shamu Three comes to the surface to fly its colors. Lone Star One takes to the sky as Southwest Airlines’ 20th Anniversary …