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Southwest Airlines – Flying High Since 1971

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To build a business career in the airline is a very sensible choice. Anything can go wrong anytime. Well, every business has some of the other risks it takes. But, airline companies need a lot to think through, for example, low fare, high capital investment, high maintenance, etc.

And, speaking of low fare, Southwest Airlines is the world’s largest low-cost carrier. Herb Kelleher established the company in 1967, but the operations finally started in 1971. Initially, the name of the company was Air Southwest Co. On 29th March 1971, Herb and the rest of his team renamed the company to Southwest Airlines Co. with headquarters based on Dallas.

Herb Kelleher

Herb Kelleher served as a lawyer in his early career. Later, he turned out to be one of the billionaires of New Jersey.

Herb Kelleher
Image Source: Google Images

Herb was born on 12th March 1931. Born and brought up in New Jersey, Herb completed his schooling from Haddon Heights High School. He went to Wesleyan University and later to New York University and acquired his law degree from there. After graduating, Herb worked at the New Jersey Supreme Court. But, the job was short-lived.

Herb fled to Texas as he had something bigger in mind. He wanted to start a law firm of his own or start a business. Though the idea of the business was little blurry, he started planning with Rollin King and John Parker. Rollin was a Texas businessman and John was a banker.

After talking about many potential business aspects, the trio finally came up with the idea of airlines. There’s a myth that the founders wrote the plan of Southwest Airlines on a cocktail napkin. But, Herb always declined this.

The take-off

The services of Southwest started from 1971 with two routes: from Dallas Love Field to Houston Intercontinental Airport and from Dallas Love Field to San Antonio. Within a year, the company made it to 100 take-offs each week leaving the Saturdays.

Southwest Airlines have taken ideas and inspiration from what made Pacific Southwest Airlines famous and successful. In 1978, the Airline Deregulation Act enacted and Southwest started planning expansion. The company declared that it would soon start its interstate service to New Orleans.

By the 1980s, Southwest started expanding to many new cities and routes which included Oklahoma City, Cleveland, Denver, Nashville, etc. In 1994, Southwest acquired Morris Air and that began services to Pacific Northwest.

Gaining Momentum

In 1985, the company made a huge acquisition for $60.5 million. It acquired Muse Air and renamed it as TranStar Airlines. During the early 1990s, Southwest had only 650 employees working at the headquarters and it grew twice in number by 2006.

Since the internet was gaining popularity at this time, Southwest planned to reach customers through the web. In 1995, the company created its first website where users could view the schedules, maps and about the company. By this time, Southwest became famous all over the world. The main reasons were low price, effectively combating fuel price fluctuation and strategic ways of making huge profits.

The Uniqueness

In 2008, the company started using the Ecopower water pressure washing system. It cleaned the turbine blades which turned out to improve fuel efficiency by 1.9%. In 2008, Southwest acquired some major assets of ATA Airlines for $7.5 million.

Southwest is also known worldwide for the cultural aspect. The employees are very welcoming which makes customers pay for Southwest’s services all the more. Herb, in one of his interviews, said that people from around the world showed interested to know how Southwest hired employees. From the first round to the kind of training the employees to undergo fascinates and challenges every other airline out there.

The Smooth Landing

In 2011, Southwest completed the acquisition of AirTran Airways. This broadened the area of Southwest’s business thus getting international access to Atlanta. Fortune magazine featured Southwest for ten consecutive years and ranked it 3rd among America’s Top Ten most admired corporations.

In May 2012, the company received permission for carrying out international services from William P. Hobby Airport. In 2014, the company decided to rebrand itself and created a new logo. After a couple of years, the company was granted approval for its services to Cuba. This became a great deal for Southwest as USDOT chose it as the sixth ever airline to initiate services in Cuba.

From 100 departures a week the company now commences 4000 departures every single day. According to 2018, the company’s annual revenue summed up to $21.965 billion. Southwest is planning to expand its services to Hilo in 2020.

Herb Kelleher : The Founder & Former CEO of Southwest Airlines

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An aspiring journalist, who eventually became a lawyer and then a successful entrepreneur- Herb Kelleher, also wanted to live the lavish life that he had been seeing people living in his surrounding, and with the help of the right business plan and with the help of right people, he not only started one of the best airlines of America but also became one of the best CEOs of the country. Under his leadership, the airlines not only became the most preferred one by the consumers but was also voted Fortune magazine’s Best Place to Work in America

Early Life

Kelleher was born on 12 March 1931, to Harry Kelleher and Ruth Moore, in Camden, New Jersey. His father worked as the general manager at the Campbell’s Soup factory. He used to work at the same factory after school and also in the summer breaks, as a part-timer. He completed his high school education from Haddon Heights High School. He was a bright student and was also active in sports. He was in the Football team of the school and was a letterman in basketball and track. Later, he joined the Wesleyan University, to pursue a bachelor’s degree in English and Philosophy, in 1953. He was a member of Delta Kappa Epsilon fraternity at the university. Influenced by a Wesleyan trustee, he then went to study law at New York University as a Root-Tilden Scholar and earned a graduate degree in the same.

herb
Image Source: experience.hsm.com

Career

In 1956, Kelleher started working as a clerk at the New Jersey Supreme Court. In 1959, he joined the Newark, New Jersey, firm of Lum, Biunno and Tompkins, where he practised law for two years. In 1961, he moved to Texas and became a partner in the law firm of Matthews, Nowlin, Macfarlane & Barrett.

Founding Southwest Airlines

While living in Texas, Kelleher got influenced by the lifestyle of the local people and started looking for something challenging that could help him be like one of them. He wanted to start his own law firm or any other business. In 1966, he joined the Texas businessman Rollin King as his outside counsel. One evening in a meeting with a client, an air charter service owner, in the St. Anthony’s Club in San Antonio, they sketched out a plan on a napkin.

King and his banker, John Parker wanted to launch an affordable airline between Dallas, Houston, and San Antonio. Kelleher joined hands with the two, and on 15 March 1967, with a seed money of $500,000, they launched the Southwest Airlines Co. Kelleher managed to buy a 1.8 per cent stake in the newly started airline company and was appointed as its first CEO. But due to some legalities, the airline kept from flying for a four-long year and had its first flight on 18 June 1971. The low prices of the flights, and other facilities like eliminating unnecessary services, made the airline an instant hit.

As the CEO of the company, Keheller brought a better working culture, making the employees work more passionately. In 1974, Southwest became the first airline to offer a profit-sharing plan, according to which employees owned 13 per cent of the company’s common stock. Southwest Airlines has constantly maintained its name in the top five Most Admired Corporations in America, in the Fortune magazine’s annual poll.

In 1982, Kelleher was assigned the post of the chairman and the president of the company, remaining on the position of the CEO. In 2003, the airlines had 33000 employees, and operated 2800 flights between 30 airports, with a total annual revenue of $6 billion and net profits of $442 million.

On 21 May 2008, Kelleher resigned as the chairman of Southwest Airlines.

Personal Life

Kelleher met his future wife, Joan Negley when he was in college and married her in 1955 when he was still studying law at the New York University. Fortune has also called him perhaps the best CEO in America. Kelleher was inducted into the Junior Achievement U.S. Business Hall of Fame in 2004. He was named the CEO of the Year from Chief Executive magazine in 1999 and also from the Fortune magazine in 2001. In 1990, the Financial World named him as the CEO of the Decade in the Airline Industry and was also named as the CEO of the Century by Texas Monthly in the same year.