Southwest Airlines


     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 flagship Boeing 737. 1991 Celebrates 20 years. 1992 Wins the
first annual Triple Crown in 1992 - a feat no other airline has been able to
match in a single month! 1993 Expand to the east coast and begins service to

Baltimore/Washington International Airport. Captures the second annual Triple

Crown in 1993. 1994 Introduces Ticketless Travel in four cities. Morris Air is
merged with Southwest. Arizona One joins the fleet. Seven new cities open,
including Seattle, Spokane, Portland, and Boise in the Pacific Northwest. Wins
the third consecutive Triple Crown. 1995 Ticketless Travel is available
systemwide in January. California One debuts in Sacramento. Adds service to

Omaha and wins the fourth consecutive Triple Crown in 1995. 1996 Florida service
is added - Tampa Bay and Ft. Lauderdale in January and Orlando in April.

Southwest celebrates 25 years of service. Ticketless Travel Online debuts on the

Southwest Airlines Home Gate webpage. In October, Southwest inaugurates service
from Providence, Rhode Island. Southwest wins the fifth annual Triple Crown for

1996. 1997 Starts out the year with service to their 50th city - Jacksonville,

Florida. Jackson, Mississippi becomes the 51st city added in August. In

December, Southwest accepts the delivery of its first Boeing 737-700. Southwest
is the launch customer for Boeing of the next generation Boeing 737-700. 1998

Begins new service to Manchester, New Hampshire on June 7. 1999 Begins new
service to Islip, New York on March 14. 3 As you can see, this airline has been
very busy the past 27 years. Southwest is a rare bird in American business, a
company that has cultivated an exceptional working atmosphere with amazing
success in its industry. Now let's take a look at how Southwest succeeds in one
of the world's most demanding airline industries. Section II: Culture Club
"There is a growing concern that companies cannot live by numbers
alone." So said Forbes Magazine to introduce the results of its 1995

Corporate Reputation Survey. "The one thing that the top ranking companies
in the survey have in common is culture. A company's culture, like a person's
character, drives reputation. It should come as no surprise that a company whose
culture honors customers, employees and shareholders alike have excellent
reputations." 4 Southwest's culture is the glue that holds the airline
together. It encompasses beliefs, expectations, norms, rituals, communication
patterns, symbols, heroes and reward structure. Culture is not about magic
formulas and secret plans but rather a combination of trust and loyalty.

Kelleher believes that culture is one of the most precious commodities a company
owns so everyone from the CEO to the baggage handler must work harder at it than
anything else. Kelleher defined Southwest formula to success as to: Blaze new
trails. Don't rest on the laurels of others. Ask yourself how can you do it
before you ask others how it's been done. Become a "risk doctor:"
help others recover from mistakes by accepting, encouraging and laughing.

Stand behind your commitment and those of your people. Own mistakes, share
mistakes, learn from mistakes and move on. Play to win! 5 Southwest's
commitment to culture has blended three important ingredients to make their
airline a thriving force: employees, customers and leadership. First of all, the
employees at Southwest have an uncompromising dedication to a cause or movement
that they deeply believe in. Secondly, Southwest has set the standard for low
fares for the customers. They have made it possible for people all over the
country to travel more conveniently and affordably. Finally, there is sound
leadership to ensure that the employee/customer relations merge to instill faith
and allegiance. 6 Southwest is obviously a collaborate effort. Kelleher has
surrounded himself with qualified and capable people who can run the airline
with or without him. Of course, they can survive without him however I'm sure it
would be quite difficult for them to live without him. He has set the benchmark
for all industry leaders to follow. Section III: Financial Success Southwest is
the team that everyone in the industry would want to play for. They have been a
genuine American success story. Let's take a look at a few of their successful
economical accomplishments. First is their profitability. In an industry that is
still reeling from the $12.8 billion loss it posted between 1990 and 1994,

Southwest was the only airline to be profitable each year during that period.

During this time the airline industry lost more money than it made in the
previous sixty years. Southwest is the only U.S. airline to earn a profit every
year since 1973. Secondly, Southwest has have maintained a steady growth rate.

Since deregulation in 1978, 120 airlines have gone bankrupt. They company has
experienced 133% traffic growth over the past five years, ranging from 20 to 30
percent annually. Next is their outstanding stock performance. Investment guru

Peter Lynch lauds Southwest as "The only U.S. airline to have made money
every year since 1973." Up 300 percent since 1990, Southwest's stock has
performed formidably. While airlines typically trade at typically at
approximately ten times their earnings, Southwest has generally traded at twenty
times earnings. Finally, Southwest continues to lead the industry with the
lowest fares, market dominance, most productive workforce, low employee
turnover, highest customer service rating and the youngest and safest fleet in
the world. 7 Kelleher calls his company "NUTS!" However nuts they may
be, they are living out one of the greatest success stories in the history of
commercial aviation and they're having fun while doing it. Section IV:

Conclusion Since 1971, this eccentric and outlandish company has established a
consistent pattern of deviating from convention. When other airlines were
creating big hubs, Southwest was flying point to point. Instead of serving
expensive meals, flight attendants pass out nuts. Instead of wearing stuffy
uniforms, they sport polo shirts and shorts. For these departures from
convention, and many others, the world has become fascinated with these crazy
people whose unrestrained enthusiasm comes from the desire to make their lives
and their company extraordinary. Somehow, while the competition was trying to
figure out who these "goofs" were, they never noticed that these
"goofs" had already passed them up! The "Southwest"

Experience By Dennis Brooks Instructor: Mr. Verret Course: MAS 602 Date: May 10,

1999 Bibliography Baiada, R. Michael. "Southwest Airlines: Below the

Surface." Airline Pilot, July 1994: pp. 19-22. Chakravarty, Subrata.
"A Model of Superb Management: Hit'em Hardest with the Mostest."

Forbes, September 1991: pp. 48-51. Freiberg, Kevin. Nuts! Southwest Airlines

Crazy Recipe for Business and Personal Success; 1st ed.; Bard Press: Texas,

1996. Jacob, Rahul. "Corporate Reputations." Fortune, March 1995 pp.

72-76. Jarboe, Jan. "A Boy and His Airline." Texas Monthly, April

1989: pp. 98- 103. Jones, Del. "Low-Cost Carrier Still Challenging

Industry." USA Today, July 10, 1995. Notes 1. Chakravarty, Subrata. "A

Model of Superb Management: Hit'em Hardest with the Mostest." Forbes,

September 1991: pp. 48- 51. 2. Jarboe, Jan. "A Boy and His Airline."

Texas Monthly, April 1989: pp. 98-103. 3. Baiada, R. Michael. "Southwest

Airlines: Below the Surface." Airline Pilot, July 1994: pp. 19-22. 4.

Chakravarty, p. 49. 5. Freiberg, Kevin. Nuts! Southwest Airlines Crazy Recipe
for Business and Personal Success; 1st ed.; Bard Press: Texas, 1996. 6. Jacob,

Rahul. "Corporate Reputations." Fortune, March 1995 pp. 72- 76. 7.

Jones, Del. "Low-Cost Carrier Still Challenging Industry." USA Today,

July 10, 1995. Abstract: The "Southwest" Experience Purpose: This
paper will give a historical overview of Southwest Airlines, discuss the
ingredients to the company success, offer some financial strengths and present a
final conclusion. Introduction: First flight and my strange yet refreshing
experience aboard Southwest Airlines. Section I: A brief year to year synopsis
of the airline. Section II: A club and its culture. Section III: A momentary
look at a few of their economical accomplishments. Section IV: Conclusion

Bibliography

Baiada, R. Michael. "Southwest Airlines: Below the Surface."

Airline Pilot, July 1994: pp. 19-22. Chakravarty, Subrata. "A Model of

Superb Management: Hit'em Hardest with the Mostest." Forbes, September

1991: pp. 48-51. Freiberg, Kevin. Nuts! Southwest Airlines Crazy Recipe for

Business and Personal Success; 1st ed.; Bard Press: Texas, 1996. Jacob, Rahul.
"Corporate Reputations." Fortune, March 1995 pp. 72-76. Jarboe, Jan.
"A Boy and His Airline." Texas Monthly, April 1989: pp. 98- 103.

Jones, Del. "Low-Cost Carrier Still Challenging Industry." USA Today,

July 10, 1995.