With his own legal experience and his partner’s business acumen, Kelleher was convinced the two of them could see their business lift off. What was their idea? They wanted to create a no-frills airline, and one that would be exempt from the restraints of federal price regulations. By refusing to cross state borders, and operating flights only within the state of Texas, they were able to do so. Kelleher’s new Southwest Airlines offered drastically reduced fares and quickly became a hit with passengers.
But before Kelleher was able to even get his business off the ground, he had to overcome a barrage of legal challenges. In choosing to fly intrastate, Kelleher had found a legal loophole. Other airlines realized the company’s potential for success and fought hard to keep Southwest from ever being able to fly. Texas International, Braniff, and Continental Airlines all took Kelleher to court. In the end, however, after arguing over 30 cases, Kelleher prevailed. With that, in 1971, Southwest could finally take to the skies.
In the beginning, Southwest had just four planes and 70 employees. All of the legal battles had left the company in a struggling state, forcing Kelleher to make a decision: he could either sell one of the planes or lay off some of his employees. He chose to sell off the plane. In return, Kelleher asked his employees to cut gate turnaround times from 55 to just 15 minutes. They obliged, and Southwest was on its way to developing one of the friendliest management/labour relationships in the industry.
It was not long before Southwest began making a name for itself. It could offer cheap fares because it did not have to follow the ticket prices mandated by the Civil Aeronautics Board. It also eliminated unnecessary services, focused on providing the bare essentials, and avoided the hub-and-spoke routing of the other airlines, choosing instead to offer direct point-to-point flights. On top of that, however, Kelleher made sure that Southwest offered personality. For instance, instead of the usual in-flight travel announcements of the other airlines, Southwest employees would often do such things as sing their messages to the tune of popular theme songs.
Despite all of the legal and financial difficulties that plagued the airline when it was first conceived, Kelleher’s vision had been realized. Today, Southwest is consistently named one of the top five Most Admired Corporations in America by Fortune magazine, which also calls Kelleher perhaps the best CEO in America. It has never experienced an in-flight fatality and continues to enjoy growing success. Southwest is also the only airline to have over 30 consecutive years of profit, despite the terrorist attacks of September 11, 2001, which threatened the rest of the industry.
In 2001, Kelleher resigned as CEO and president of Southwest, thanks in large part to a personal battle with prostate cancer – something Kelleher called “a temporary setback.” On July 19, 2007, Kelleher announced that he would step down as Chairman and board member in May 2008, although he would continue to work for the company on a full-time basis until 2013.
Reaching New Horizons: Southwest Airlines Takes Off
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