During my flight back to Texas last summer with Southwest Airlines, I had a memorable and enjoyable experience. It all began in the lobby before takeoff when the ticket counter representative asked if I wanted to participate in a game for a chance to win free round trip tickets. Excitedly, I agreed and received my boarding pass along with a mischievous question about how many holes were in my socks. Unfortunately, I was wearing sandals, so I couldn’t join in on this particular game.
However, the rest of the flight was filled with humor and excellent service from the pilot and flight attendants. One standout moment occurred during the safety announcements when our casually dressed flight attendant made a witty comment about there being only six ways to leave the aircraft compared to fifty ways to leave your lover.
This lighthearted atmosphere is fostered by Southwest Airlines’ CEO Herb Kelleher, who is known for his playful yet brilliant style and love for smoking and drinking Wild Turkey as he leads this successful airline company from Texas. He has participated in employee celebrations by dressing up as Roy Orbison, Elvis, a medieval knight, and even a teapot. On his orange and brown 737s, he personally distributed peanuts to the passengers.
In front of cheering employees, he once engaged in an arm-wrestling match with another CEO to gain the right to use the slogan “Plane Smart,” despite losing.Despite facing this setback, he firmly believes that if employees find joy in their work and feel that they are making valuable contributions while having fun, they will eagerly look forward to coming to work and handle stress more efficiently. He is convinced that maintaining a sense of humor is crucial in preventing minor issues from magnifying. Known as Herb among his partners and company staff, Kelleher brought about a transformation in air travel 25 years ago by introducing affordable fares and an unconventional approach.
This paper aims to provide a historical overview of the company while discussing the key ingredients to its success. Additionally, it will highlight some financial strengths before presenting a final conclusion.
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, joined forces to launch a unique airline. They started with one key idea: if you can ensure passengers reach their destinations punctually, at affordable prices, all while ensuring they have an enjoyable experience, then people will choose to fly with your airline. And guess what? They were correct.
Southwest Airlines has become the fifth largest major airline in the United States after 27 years. Currently, they transport an incredible 50 million passengers every year and serve more than 54 cities in the southwest region and beyond. To achieve this, they operate over 2,300 flights daily using their fleet of 267 advanced B-737 aircraft. Impressively, their aircraft have an average age of just 8.4 years, with over sixty percent owned by the airline.
In May 1988, the airline received the U.S. Department of Transportation Triple Crown for a month, which included the Best On-time Record, Best Baggage Handling, and Fewest Customer Complaints. They have since earned this honor thirty-one times and also won five annual Triple Crowns in 1992, 1993, 1994, 1995, and 1996.
They are an airline that has significantly contributed to the progress of the commercial airline industry. They were the pioneers of the frequent flyer program, which rewarded customers for the number of trips taken instead of miles flown. They also introduced various innovative initiatives such as senior discounts, Fun Fares, Fun Packs, a same-day air freight delivery service, ticketless travel, and many more. Below is a summarized timeline illustrating the journey of this small airline with three jets, which eventually became one of America’s largest and most beloved commercial airlines in history:
- 1971: Southwest Airlines, under the leadership of President Lamar Muse (a retired and experienced industry leader), takes its first flight and commences operations between Dallas, Houston, and San Antonio, marking the birth of America’s most unique airline.
1972 Houston’s Hobby Airport receives all Houston service from Houston Intercontinental. Kelleher states, “Customers shouldn’t have to drive 45 minutes for a 40-minute flight.”
1973 Southwest files for service extension to the Rio Grande Valley with the Texas Aeronautics Commission. Southwest introduces RUSH Cargo service, offering same-day airport cargo delivery, marking its first profitable year.
Southwest Airlines achieved a significant accomplishment in 1974 when they transported their one-millionth passenger. Alongside this, the company allocated $400,000 to improve their terminal at Houston’s Hobby Airport, which involved introducing two fresh boarding gates and departure lounges.
In 1975, Southwest Airlines was authorized to operate four roundtrip flights every business day to the Rio Grande Valley using the Harlingen Airport.
Southwest has obtained permission to begin offering service to multiple cities in 1976, including Austin, Corpus Christi, El Paso, Lubbock, and Midland/Odessa. Within a span of five years, Southwest adds its sixth Boeing 737 to its fleet and effectively transports over 1.5 million contented customers to their intended destinations.
1977 Southwest reaches a milestone by carrying its five millionth passenger. Additionally, Southwest’s stock is now listed on the New York Stock Exchange under the ticker symbol “LUV.”
1978 marks a pivotal moment for Southwest due to the 1978 Airline Regulation Act, which allows the airline to expand its services. Consequently, Southwest introduces new flights from Chicago’s Midway Airport to St. Louis, Kansas City, and Detroit. Furthermore, Lamar Muse steps down as President, prompting Kelleher to assume the roles of interim President, CEO, and Chairman of the Board. Later in the same year, Howard Putnam is unanimously chosen as the new President and Chief Executive Officer. Despite this change, Kelleher remains as permanent Chairman of the Board.
In 1979, Southwest started serving New Orleans from Dallas, making it the first city outside of Texas to be served by the airline.
In 1980, Southwest Airlines added their 22nd Boeing 737 to their fleet and named it the “Rollin W. King” in recognition of the airline’s co-founder. This particular aircraft became the first fully owned 737 by Southwest Airlines.
1981 marks Southwest’s 10-year celebration of “Love Southwest Style,” which includes fun, games, and increased savings for all customers. This milestone also signifies the start of another decade of exceptional service from Southwest.
1982 – Kelleher joins Southwest as permanent President, CEO, and Chairman of the Board. Southwest introduces new service to San Francisco, Los Angeles, San Diego, Las Vegas, and Phoenix.
In 1983, Southwest makes major schedule increases and purchases three more Boeing 737-200s, resulting in over 9,500,000 satisfied customers.
In 1984, Southwest achieves the highest customer satisfaction ranking for the fourth year in a row and introduces the initial 300 series plane, named “Spirit of Kitty Hawk,” in its Boeing 737 fleet. In 1985, Southwest designates the Ronald McDonald House as its main charity and initiates the “Just Say When” campaign, positioning Southwest as the most convenient point-to-point airline in the country.
1986 Southwest marks 15 years with affordable fares, enjoyable moments, and positive vibes! The addition of Fun Fares enhances the enjoyment for over 13 million passengers.
In 1987, Southwest continues its streak of being recognized as the continental U.S. carrier with the best track record for consumer satisfaction for the sixth consecutive year. They also introduce Weekend Fun Packs, which consist of both airfare and hotel accommodations. Furthermore, they lower the prices of their Fun Fares by up to 25% when purchased at least 14 days in advance.
Southwest and Sea World of Texas team up to promote Texas as a top tourist destination in 1988. They launch the “New Friends” campaign, with Southwest becoming the designated airline for Sea World of Texas. As part of this partnership, Southwest introduces Shamu One, a Boeing 737 that is adorned with a paint job resembling Shamu the killer whale. In the same year, Southwest also becomes the official airline for Sea World of California. Additionally, Southwest achieves a remarkable milestone by winning the first Triple Crown accolade, which encompasses Best On-Time Record, Best Baggage Handling, and Fewest Customer Complaints.
1989 Southwest wins its second Triple Crown when Shamu Two is born and service starts from Oakland’s International Airport, just a little more than a year and a half later.
Southwest Airlines reaches a significant milestone in 1990 by achieving billion-dollar revenue and being recognized as a “Major” airline. To celebrate this accomplishment, Shamu Three emerges to proudly display its colors. Additionally, Lone Star One, a Boeing 737, takes flight as the flagship aircraft for Southwest Airlines’ 20th Anniversary.
In 1992, the airline achieves the remarkable accomplishment of winning the first annual Triple Crown, a feat that no other airline has been able to accomplish within a single month! In 1993, it extends its services to the east coast and starts operating flights to Baltimore/Washington International Airport. Furthermore, the airline secures the second annual Triple Crown in 1993.
In 1994, Southwest introduces Ticketless Travel in four cities and merges with Morris Air. Arizona One is added to the fleet. Additionally, the company opens seven new cities, including Seattle, Spokane, Portland, and Boise in the Pacific Northwest. Furthermore, they achieve their third consecutive Triple Crown victory.
In January of 1995, the systemwide availability of Ticketless Travel is introduced. Additionally, California One makes its debut in Sacramento. Adding to the accomplishments, the service to Omaha is established and the fourth consecutive Triple Crown is won in 1995.
1996 saw the addition of Florida service, with Tampa Bay and Ft. Lauderdale joining in January and Orlando in April. Southwest Airlines celebrated 25 years of service during this time. The official launch of Ticketless Travel Online was showcased on the Southwest Airlines Home Gate webpage. In October, Southwest began its service from Providence, Rhode Island. Additionally, Southwest clinched the fifth annual Triple Crown award for 1996.
In 1997, Southwest begins the year by extending its service to its 50th city, Jacksonville, Florida. Later in August, Southwest adds Jackson, Mississippi as its 51st city. In December, Southwest receives its first Boeing 737-700, becoming the launch customer for Boeing’s next generation aircraft.
Starting on June 7, 1998, the airline company begins a new service to Manchester, New Hampshire.
Southwest started a new service to Islip, New York on March 14, 1999. This airline has been incredibly active for the past 27 years, standing out in the American business world as a company that has achieved remarkable success by establishing an exceptional workplace environment. Now, let’s delve into how Southwest manages to excel in the highly challenging airline industry.
Forbes Magazine introduced the results of its 1995 Corporate Reputation Survey by stating that there is a growing concern about companies relying solely on numbers. The top ranking companies in the survey all had one thing in common – culture. A company’s culture, similar to a person’s character, is what drives its reputation. It is not surprising that companies with cultures that value customers, employees, and shareholders have excellent reputations. Southwest Airlines’ culture is what holds the company together and includes beliefs, expectations, norms, rituals, communication patterns, symbols, heroes, and reward structure. Culture is not about magic formulas or secret plans; instead, it relies on trust and loyalty. Kelleher, the CEO of Southwest Airlines, believes that culture is one of the company’s most valuable assets and that everyone, from the CEO to the baggage handler, must prioritize it above everything else.
Kelleher’s definition of the Southwest formula for success is to blaze new trails and not to rest on the laurels of others.
Before seeking guidance from others on how to accomplish something, take a moment to consider how you can achieve it on your own.
Assume the role of a “risk doctor” who provides support to individuals in their quest for recovery from mistakes. Embrace these experiences by accepting, encouraging, and finding amusement in them.
Support your own commitments and the commitments of your team.
Embrace your own mistakes, share them with others, and collectively learn and grow to progress.
Southwest Airlines has achieved success by blending three essential elements – employees, customers, and leadership. The employees demonstrate unwavering dedication to a cause they deeply believe in. Meanwhile, Southwest has become the industry standard for low fares, making travel more convenient and affordable nationwide. Effective leadership ensures harmonious employee/customer relations, fostering trust and loyalty.
Operating as a collaborative effort, Southwest surrounds its leader Kelleher with qualified individuals capable of independently running the airline. While survival without Kelleher is possible, it would undoubtedly present challenges as he has set the benchmark for industry leaders to follow. Southwest is hailed as the dream team within the industry and serves as a genuine American success story. Let’s explore some of their noteworthy economic achievements.
Southwest stands out in terms of profitability. While the airline industry suffered a staggering $12.8 billion loss between 1990 and 1994, Southwest remained the sole profitable airline throughout that period. Moreover, during those five years, the airline industry’s losses surpassed its earnings over the preceding sixty years. Astonishingly, Southwest has been the only U.S. airline to consistently generate profit annually since 1973.
Despite the bankruptcy of 120 airlines, Southwest has continuously expanded since deregulation in 1978, maintaining a consistent growth rate. In the last five years alone, the company’s traffic has grown by an impressive 133%, with annual increases varying from 20% to 30%.
Next, Southwest’s stock performance has been outstanding. According to investment guru Peter Lynch, Southwest is the only U.S. airline that has consistently made money every year since 1973. Since 1990, the stock has increased by 300 percent, demonstrating impressive growth. While other airlines typically trade at around ten times their earnings, Southwest tends to trade at double that, around twenty times earnings. Additionally, Southwest remains at the forefront of the industry with their market dominance, lowest fares, highly productive workforce, low employee turnover, highest customer service rating, and the youngest and safest fleet worldwide. Despite the craziness, Southwest is experiencing great success and enjoying themselves in one of the most remarkable stories in commercial aviation history.
Since 1971, Southwest Airlines has stood out by consistently defying convention. While other airlines were creating large hub systems, Southwest opted for point-to-point flights. Instead of serving expensive meals, they simply pass out nuts. In contrast to stuffy uniforms, their flight attendants sport polo shirts and shorts. These departures from the norm have captivated the world’s attention, as these unconventional individuals exude unrestrained enthusiasm in their quest to make their lives and company extraordinary. Surprisingly, while the competition was busy trying to decipher who these “goofs” were, they failed to recognize that these “goofs” had already surpassed them! (Instructor: Mr. Verret, Course: MAS 602, Date: May 10, 1999, Baiada, R. Michael. “Southwest Airlines: Below the Surface.” Airline 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-
Jones, Del. “Low-Cost Carrier Still Challenging Industry.” USA Today, 1.
Chakravarty, Subrata. “A Model of Superb Management: Hit’em Hardest with the Mostest.” Forbes, September 1991: pp. 48-2.
Jarboe, Jan. “A Boy and His Airline.” Texas Monthly, April 1989: pp. 3.
Baiada, R. Michael. “Southwest Airlines: Below the Surface.” Airline
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. 72-7. Jones, Del. “Low-Cost Carrier Still Challenging Industry.” USA Today, Abstract: The “Southwest” Experience Purpose: This paper will provide a historical overview of Southwest Airlines, analyze the factors contributing to the company’s success, highlight its financial strengths, and conclude with a final summary.
Introduction: This is a story about my first flight and the unique and rejuvenating experience I had with 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.
Bibliography: 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.
Two articles are mentioned in the text: “A Boy and His Airline” by Jan Jarboe published in Texas Monthly in April 1989 (pp. 98-103), and “Low-Cost Carrier Still Challenging Industry” by Del Jones published in USA Today on July 10, 1995.
