Case 13 Southwest Airlines: How Herb Kelleher Led the Way
CASE 13
SOUTHWEST AIRLINES: HOW HERB KELLEHER LED THE WAY The U.S. airline industry experienced problems in the early 1990s. From 1989 through 1993, the largest airlines, including American, United, Delta, and USAIR, lost billions of dollars. Only Southwest Airlines remained profitable throughout that period. Herb Kelleher, cofounder of Southwest Airlines in 1971 and until recently its CEO, pointed out that “We didn’t make much for a while there. It was like being the tallest guy in a tribe of dwarfs.” (1) Nevertheless, Southwest Airlines has grown to the point of having operating revenue of $5.5 billion in 2002, which also was its 30th consecutive year of profitability. This is particularly noteworthy since Southwest flies to only 58 cities in 30 states, and its average flight length is 537 miles. (2) How did a little airline get to be so big? Its success is due to its core values, developed by Kelleher and carried out daily by the company’s 35,000 employees. These core values are humor, altruism, and “luv” (the company’s stock ticker symbol). (3)
Southwest Airlines’ Unique Character and Success One of the things that make Southwest Airlines so unique is its short-haul focus. The airline does not assign seats or sell tickets through the reservation systems used by travel agents. Many passengers buy tickets at the gate. The only foods served are peanuts, pretzels, and similar snacks, but passengers don’t seem to mind. In fact, serving Customers (at Southwest, always written with a capital “C”) is the focus of the company’s employees. When Colleen Barrett, currently Southwest’s President and Chief Operating Officer, was the Executive Vice President for Customers, she said, “ We will never jump on employees for leaning too far toward the customer, but we come down on them hard for not using common sense.” (4) Southwest’s core values produce employees who are highly motivated and who care about the customers and about one another. One way
SOUTHWEST AIRLINES: HOW HERB KELLEHER LED THE WAY The U.S. airline industry experienced problems in the early 1990s. From 1989 through 1993, the largest airlines, including American, United, Delta, and USAIR, lost billions of dollars. Only Southwest Airlines remained profitable throughout that period. Herb Kelleher, cofounder of Southwest Airlines in 1971 and until recently its CEO, pointed out that “We didn’t make much for a while there. It was like being the tallest guy in a tribe of dwarfs.” (1) Nevertheless, Southwest Airlines has grown to the point of having operating revenue of $5.5 billion in 2002, which also was its 30th consecutive year of profitability. This is particularly noteworthy since Southwest flies to only 58 cities in 30 states, and its average flight length is 537 miles. (2) How did a little airline get to be so big? Its success is due to its core values, developed by Kelleher and carried out daily by the company’s 35,000 employees. These core values are humor, altruism, and “luv” (the company’s stock ticker symbol). (3)
Southwest Airlines’ Unique Character and Success One of the things that make Southwest Airlines so unique is its short-haul focus. The airline does not assign seats or sell tickets through the reservation systems used by travel agents. Many passengers buy tickets at the gate. The only foods served are peanuts, pretzels, and similar snacks, but passengers don’t seem to mind. In fact, serving Customers (at Southwest, always written with a capital “C”) is the focus of the company’s employees. When Colleen Barrett, currently Southwest’s President and Chief Operating Officer, was the Executive Vice President for Customers, she said, “ We will never jump on employees for leaning too far toward the customer, but we come down on them hard for not using common sense.” (4) Southwest’s core values produce employees who are highly motivated and who care about the customers and about one another. One way