Air Herb's secret weapon - Chief Executive of the Year - interview with Southwest Airlines Chief Executive Officer Herb Kelleher - Cover Story

Chief Executive, The, July-August, 1999 by J.P. Donlon

No, it's not fancy stealth technology - that's our flight of fancy behind Herb Kelleher - but it's every bit as formidable. The question is, how long can Southwest Airlines maintain its flight path when the time comes for him to leave the CEO

Low costs; high spirits. This aspect of Southwest Airlines has been well documented. But the company's true innovation is that its short haul, high frequency, low-fare strategy is aimed not just at other airlines but at surface transportation. Southwest occupies the nexus between two market spaces, the flying passenger who doesn't wish to pay for things that are not important, such as meals or reserved seating, and people who might otherwise consider driving to their destination. In doing this, the company has forged a unique culture, one that is inseparable from its folkloric CEO, Herb Kelleher, and uses it as a clever competitive weapon to establish dominance in a new market.

In their chronicle of Southwest Airlines, Nuts!, Kevin and Jackie Freiberg write: "The idea of corporate culture is too important to the effective functioning of today's corporations to be dismissed as a 'fleeting craze. Culture is the glue that holds an organization together." As he relates in the

following interview, Herb Kelleher credits Southwest's culture for achieving financial results and maintains that it's the one task on which he works the most.

If Joseph Campbell, author of The Hero with 1,000 Faces and celebrated Princeton scholar of the world's mythologies, were alive today, no doubt he would find Southwest Airlines worthy of closer study. (Heaven knows everyone else has; on "corporate culture" day held twice a year, the company charges some 150 outsiders $100 each to attend.) The bedrock values of the company are evident in what Campbell would call its foundation myth. After graduating from NYU Law School in 1956, Herb Kelleher clerked for a New Jersey Supreme Court justice for several years before joining a Newark law firm.

Becoming increasingly restless, he was attracted by the opportunities in Texas, from whence his wife hails. Soon the Haddon Heights, NJ, native, whose first paying job was as a branch manager for the Philadelphia Bulletin earning $2.50 a week, was working for a Texas law firm. In 1966, a Texas businessman, Rollin King, who was planning to launch an intrastate airline, hired him as an outside counsel. (The business plan was drawn up between the two men on a cocktail napkin in a local bar.)

From the outset, the fledgling company was almost shot down by legal challenges from rival carriers Texas International, Braniff, and Continental, which tried to persuade Texas courts that the state couldn't support another contender. Kelleher, by now a partner in the venture, argued the case all the way to the U.S. Supreme Court and won. Since then the company has always thought of itself as an underdog, its employees wearing that moniker as a badge of pride.

When Southwest finally received permission to operate in 1971, it had four Boeings and less than 70 employees, barely enough to operate. When it could not meet payroll, the company had to make a choice: sell one of its planes or lay off people. It decided to do the former and asked its employees to cut turnaround time at the gate from 55 to 15 minutes. The tradition of Southwest employees, from pilots to ramp agents, pitching in to do what's necessary in order to help the company was born.

Kelleher himself tries to set an example: A Dallas teacher once wrote to him saying none of her students had ever flown on any airline. He sent the class on a free round trip to Austin and threw in a tour of the capital. When it was pointed out to him that mechanics on the graveyard shift found it difficult to participate in company picnics, he held a 2 A.M.. bar-b-q with himself and the pilots as chefs. At company gatherings he arrives on a motorcycle in jeans and a T-shirt. He sings rap songs with lyrics that make fun of himself.

When Stevens Aviation, a South Carolina charter company, used "plane smart," a Southwest slogan, in its TV ads, Kelleher contacted Stevens' CEO Kurt Herwald, and suggested that they settle the dispute, not with lawyers, but with a CEO-to-CEO arm wrestling match. (Southwest got to keep the slogan.)

Halloween is practically a national holiday at Southwest, with people going to great lengths in costume creation. Last year the women in the communications department dressed up as "Herb's killer tomatoes." Yes, it's true Kelleher once showed up dressed as Elvis, but folklore notwithstanding, he never dressed up as the Easter Bunny. "Hey, I've got a corporate image to maintain here," he jokes.

Part of the fun is reserved for passengers who might find a flight attendant greeting them from the overhead cargo bin or singing the flight safety instruction to a C&W tune. Others find entertainment in watching the frenzied crews turnaround planes in less than 20 minutes, less than half the industry average. (Total operating costs are about half the industry average.)