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People Top 5
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- May 02, 1994
- Vol. 41
- No. 16
Cleared for Takeoff
Southwest's Herb Kelleher Is Building America's Fastest-Growing Airline with Low Fares, No-Frills Service and the Personality of An Outgoing Turbojet
Baggage handler is only one of the many roles Kelleher assumes as one of America's least orthodox corporate chiefs. To keep things light and bright around headquarters, he comes to work once a year dressed as Elvis, and at Easter he has been known to board planes in a bunny costume. What's more, his offbeat management style—coupled with a fierce competitiveness—seems to be working. Kelleher has transformed Southwest from a puddle-jumping Texas commuter service into America's seventh-biggest—and fastest-growing—airline. This month an aviation research survey rated Southwest the highest-quality U.S. airline in baggage handling, fares and customer service.
Started in 1971 with just three planes flying between Dallas, Houston and San Antonio, Southwest now boasts a fleet of 161 jets that crisscross 17 states from San Francisco to Baltimore. Offering low-frills, short-hop service (average fare: $58), the airline racked up profits of $169.5 million on $2.3 billion in ticket sales last year. "Despite his antics, Kelleher has a clear understanding of why Southwest makes money," says John Ash of Global Aviation Inc., an industry consultant. "He keeps a lot of pressure on his troops to do well, and they respond."
The chairman's exuberance extends to his employees. From time lo time, flight attendants, who dress in shorts and colorful print shirts, recite safety instructions in rap. And they sometimes liven up flights by staging pass-the-toilet-paper contests, in which passengers on each side of the plane race to pass rolls from the front to the back. "At Southwest everyone can be themselves," says Deborah Franklin, a flight attendant who has worked for" the company for 23 years. "They don't try to put you in a mold."
No one can accuse Kelleher of not being himself. He drives a red Jaguar with a bumper sticker reading, Fly Southwest, Herb Needs the Money. When Southwest was named official airline for San Antonio's Sea World in 1988, he had a plane painted to look like Shamu, the park's killer whale. Robert Crandall, chairman of American Airlines, called to kid Herb about the plane. "It looks all right," he said, "but what are you going to do with all the whale s—t?" A few days later, Crandall received a very large bucket of chocolate mousse with a Shamu-shaped spoon sticking in it. "He loved it!" exults Kelleher.
By now, of course, Crandall—and everyone else in the airline business—knows that behind Kelleher's puckish facade hides a shrewdly calculating businessman. Southwest's seating is first-come, first-served. No meals are offered, just drinks and peanuts. The airline arranges no connections and transfers no baggage between planes. The result is that South west can turn its planes around at the gate in 15 minutes, half the time it Lakes other major airlines. (Southwest won't fly to congested airports such as Chicago's O'Hare or to New York City because turnaround lime is too slow.)
Southwest knows its unorthodox workplace isn't for everyone. To test adaptability, the company once asked a group of prospective pilots to change into Southwest Airlines shorts prior to their interviews. "They had come in all spiffed up in their suits," says Ann Rhoades, vice-president of South-west's people department. "It was done for fun, but we had another purpose in mind. If they couldn't handle it, we knew they might not be compatible with our philosophy."
Kelleher's attention to his employees—and his generous profit sharing—has made him something of a corporate; cult figure. Friday afternoons he hosts cookouts on the patio outside headquarters. He tries to know employees' names and attends their weddings, baby showers and funerals. "Herb's different," says Tom Burnett, head of the local Teamsters union in Dallas. "He's out in the hangar at 4 a.m., eating doughnuts and shooting the breeze with the mechanics. Not many CEOs do that." Adds customer service agent Carroll Herzog: "Herb's the only CEO I can think of who would get a 100 percent response from his employees if he needed a vital organ transplant."
Kelleher learned togetherness in a tight-knit family in which he was the fourth child born to Harry Kelleher, a general manager with Campbell Soup Co., and his wife, Ruth, a housewife. His happy childhood in Camden, N.J., was shattered when Harry died of a heart attack when Herb was 12. Shortly afterward, a brother was killed in World War II. With the other two siblings working, says Herb, "my mother and I were alone. We became very close. We'd sit up until 4 a.m. talking about business, polities, everything."
Kelleher went off to Wesleyan University in Connecticut, where he majored in literature and philosophy—and fell in love with Joan Negley, a student at nearby Connecticut College and the daughter of a prominent Texas ranch owner. The two married in 1955; Kelleher went on to law school at New York University, then clerked for a New Jersey Supreme Court justice before going into practice.
After moving to San Antonio and starting his own family of four children, Kelleher discovered that a conventional legal career wasn't for him. "Every day I went to work, I felt my shoulders droop a little more," he says. In 1966, Rollin King, a friend who was in the charier airline business, proposed starting a commuter airline, and Kelleher jumped at the chance. Initially, Kelleher was an investing partner; he served as the company's general counsel until 1978, when the board resolved a dispute between South-west's other two top officers by naming Kelleher president.
As a lawyer, Kelleher knew that one place to cut costs was legal fees. In 1992, Stevens Aviation Group, a small commuter airline, threatened to sue Southwest for appropriating its Just Plane Smart slogan. Kelleher proposed that he and Stevens's CEO Kurt Herwald settle the matter with an arm-wrestling match. An antic war of words ensued publicly. "Stevens wrote back that their boss bench-presses a Cessna every day," says Herb. "We responded that [Herwald] was a pusillanimous little wimp compared to our chairman, who's been known to kick, scratch and cry in order to win."
By the time the match look place (which Kelleher lost—owing, he says, to his training diet of Wild Turkey and his five-pack-a-day cigarette habit), the two CEOs had become such pals that Herwald offered to share the disputed slogan. Says Kelleher: "Who says a lighthearted approach to business is incompatible with success?"
ANNE MAIER in Dallas
- Anne Maier.
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