Southwest Airlines

At a time of rising customer complaints, sagging airline profits and cutbacks by major carriers, Southwest Airlines stands above the pack as brash and adventuresome as it was 30 years ago when Rollin King and Herb Kelleher launched the company as a three-airplane enterprise carrying passengers between Dallas, Houston and San Antonio.
From that modest start, Southwest has grown dramatically. Today it has 353 jet airplanes serving 58 airports in 29 states. In 2000, it carried 63.7 million passengers and last month declared its 100th consecutive quarterly dividend on profits of $175.6 million in the second quarter. In terms of domestic customers, it is now the nation’s fourth largest airline.

Southwest is truly a phenomenon, not only among airlines but among corporations generally. The ingredients of Southwest’s success may be numerous, but they certainly include a ton of notions about good customer relations, a heavy dose of innovative management and the ability to operate a big corporation with a sense of humor.

Here’s the way Southwest, itself, describes Rollin King’s and Herb Kelleher’s philosophy in launching the airline:

“They began with one simple notion: If you get your passengers to their destination on time at the lowest possible fares and make darn sure they have a good time doing it, people will fly your airline.”

And people in the airline industry privately agree with the Southwest philosophy even if their own airlines don’t practice it.

Recently, I had an employee of United Airlines tell me that the Southwest success in insisting on good customer relations “comes from the top.” Traveling occasionally on Southwest, the employee said she recently arrived just minutes before departure as the gate was being closed for a Southwest flight. “They couldn’t have been nicer about getting me on the flight,” she remarked.

Southwest is continuing to expand aggressively. One of its means for expansion has been centered around finding sleepy out-of-the way regional airports. A recent example of this was its entry into the New York-New Jersey market by gaining access to MacArthur Airport at Islip, NY on Long Island. Southwest’s share of the passengers has steadily increased over the last two years, and it now appears to be winning in head to head battles with Delta’s subsidiaries that fly out of Islip.

Southwest is creative in finding ways to cut costs. For one thing, it flies Boeing 737’s exclusively. This means that its parts inventory can be better and more cheaply managed. Similarly, its ground crews work every day on 737s and learn the intricacies of these planes while crews for otherairlines often face daunting tasks of learning an array of systems on different aircraft, jet and non-jet, used by their companies. This means lower training and maintenance costs for Southwest — and undoubtedly fewer mistakes.

Southwest also holds fares down by 20-minute airport turnarounds for its aircraft, ten minutes faster than the industry average.

Southwest doesn’t try to compete with other airlines on the basis of “gourmet” meals. In fact, Southwest doesn’t serve meals. On most flights it’s a choice of peanuts or raisins. Last year, the airline served 90.9 million bags of peanuts and 7.3 million bags of raisins. On longer flights, this menu is varied with the serving of plastic-wrapped snacks.

Southwest’s seating is purely democratic. Seats are not set aside for “first class” or “business class” or any other class. It is all one class with passengers queuing up according to when they arrived at the boarding counter. Passengers are free to take whatever seat is available when they board the plane.

Southwest has won a long list of awards. In May, the Wall Street Journal reported that Southwest ranked first among airlines for the highest customer service satisfaction according to a national survey conducted by the American Customer Satisfaction Index. Southwest came out on top as the most admired airline in the world for 1997, 1998, 1999 and 2000 in aFortune Magazine survey.

Herb Kelleher, Southwest’s chief, was listed by Business Week as one of the nation’s top 25 executives and was named CEO of the Year by Chief Executive Magazine.

Southwest’s personnel are 82 percent union members. Employees own about 12 per cent of the company’s stock through a profit-sharing plan that the company initiated in 1974.

Southwest Airlines is proving that a corporation can treat its employees fairly, earn ample profits [total operating revenue of $5.6 billion and a net income of $625.2 million in 2000] and serve the public’s need for low-cost service with good humor. The growing success of Southwest is also proving that the public can differentiate between the delivery of solid transportation and the unnecessary frills that are employed to paper over the often poor service delivered with a frown by some of the nation’s more illustrious air carriers?many of which don’t come close to matching Southwest’s record of consistent earnings.