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

Assuming the European Union as a whole opens itself up, Southwest could fly from Frankfurt with the same ease that you fly from Dallas to St. Louis.

Correct. And the fact that the Union has been formed breeds thoughts that finally you might have an entity that was large enough 'and had enough passenger traffic itself to justify opening up the U.S., but I don't think you'll see the results by and large that some people anticipate in the U.S., because the main reason the rest of the world doesn't want to open itself up to U.S. carriers is because United and American and Northwest and Delta have much lower costs. You remember when they opened skies with Canada. Canada said, "How about if you give us three years to come across the border before you're allowed to come across our border," for fear that their carriers, Air Canada and Canadian International, would just disappear from the face of the earth. So from the standpoint of other countries and other carriers, some are not particularly desirous of having their own countries open up to U.S. competition.

You've flown transcontinental at least once.

Yes, once. It was an experiment.

What's your take on that experiment?

It's something that taught us that there are a few things we have to adjust - for instance, where you put the trash on a longer haul flight like that. But it was basically to see what it was like and how it would work out. We don't intend to do it on a regular basis, but as a consequence of the change in the tax law, we're flying much longer flights than we ever flew before, like Nashville to San Diego because obviously the segment fee doesn't affect you as much when you're flying a longer haul. That's been very successful for us, but it doesn't portend any transcontinental service. We have no such plan and no such intention as of the present time.

There seems to be a rough analogy between Southwest and Wal-Mart; just as Wal-Mart has gone to a semi-rural area to set up its mega-stores, you've gone to secondary airports to create your point-to-point system.

We have and we haven't. Where we have the opportunity, we do. Where it looks as if it would be a promising opportunity, we do, but we serve Los Angeles International, Phoenix International, Las Vegas - the same airports that everybody else does. So, there again, it's not a rule. It's just something that you take advantage of if you have the opportunity.

So you're being tactical?

To do so, right.

We've got airlines like United doing its shuttle in California and USAir doing its Metro-jet. Are they trying to go head-to-head with you?

Yes.

So, their tactic is to meet you on the ground?

Yes. But it hasn't hurt our earnings any, has it?

Not so far. But...

It's been going on since '94.

So you think you can hold out because you will still have the cost advantage?

I think we have the cost advantage and we have the customer service advantage, and when we collide with one another in a city like Manchester, NH, what happens is that the market expands exponentially so that there are plenty of passengers on Metrojet and plenty of passengers on Southwest Airlines. Southwest's costs are far lower. We're making a profit. I don't know whether Metrojet is.