Wimberly pauses a moment to turn down the rock and roll blaring from a radio nearby, before putting his feet back up on his desk and addressing another facet of Kelleher's persona that is central to keeping the Southwest magic alive. "Herb has a nice, light perspective on life. I'm like that, too. We both like Wild Turkey, and we smoke a little too much."
Kelleher, 60 years young, is best known perhaps for his amply articulated antic side. He has appeared at company bashes as Elvis Presley and Roy Orbison, doing barely credible renditions of "Jailhouse Rock" and "Pretty Woman." One Halloween night he turned up at Southwest's hangar in drag, as Corporal Klinger from "M*A*S*H," to thank mechanics for working overtime.
Jeff Sullivan, director of corporate development and training, says Southwest's ethos is founded on the idea that "people don't want to be managed, they want to be led." That, in turn, implies a bias for management example, not executive fiat.
One day each quarter Kelleher hits the front lines to sling bags, work the ticket counter, or serve drinks at 25,000 feet. It appears to be more than blue-collar slumming by the boss. Last year, when the Gulf Crisis hit and the price of jet fuel spiked, ground employees at Southwest's Dallas operation spontaneously -- and without Kelleher's knowledge -- started a payroll-deduction program to defray fuel costs. Dubbed "Fuel from the Heart," it soon gathered steam and raised $130,000 -- still a token sum, given the airline's energy bill, yet a strongly symbolic one. And voluntary payroll deductions to aid fellow employees with terminal illnesses and their families are routine at Southwest.
The airline's Dallas headquarters eschews corporate art in favor of hundreds of framed photos of employees (usually snapped at company parties), print ads, and mannequins sporting the various uniforms Southwest personnel have worn through the years. That mine of memorabilia -- much of it whimsical -- is arrayed so that if you walk from one side of the building to the other, you pass through Southwest's 20-year history. The feeling is of being in the den of your neighbor's house, with a generation's worth of family photos staring back at you from the pine paneling.
Southwest's work force is an anomaly. It is about 90% unionized, but it owns 11% of the company -- the highest percentage by far of any major airline. The age of the average employee (34) is among the industry's lowest; yet in average pay ($42,000 per employee), the company ranks among the very highest. In an industry noted for its fractious labor relations, Southwest and its workers make peace. Because employees know they have a large stake in the efficient operation of the company, Southwest and its unions are able to write labor contracts devoid of overly restrictive language. Most of the time, Southwest uses one gate agent, not the standard three, to board an aircraft. Typically, ground crews of six, half the industry average, service the plane -- and are responsible for Southwest's vaunted 15-minute "turn," while the planes of other major airlines typically spend an hour at the gate.
In 1990, 62,000 people applied for jobs at Southwest, where annual turnover, 7%, is the industry's lowest. The airline hired 1,400. Southwest assiduously looks for extroverted people who understand that the company's mission is to work hard and have fun, and who feel that by joining Southwest they're becoming part of an extended family, not a $1-billion corporation.
The circle of family widens to include customers. Each month Southwest invites its most frequent fliers to come in and interview prospective employees. "We hire people who match our customers in personality," says head of sales and marketing Don Valentine. "That reinforces the culture."
Adds Jeff Sullivan: "Our customers are as protective of our niche as we are. If we do something they don't like, we hear from them." The airline receives 5,000 letters a month from customers, and they are all read and answered by the staff. (Kelleher usually reads a couple hundred a week. A lot of the letters come from first-time Southwest fliers who want to know when the airline is coming to their city.) At smaller airports, Southwest flights can occasionally be delayed by customers chewing the fat with Southwest personnel they have come to know. Recalls Jim Wimberly, "I was in Lubbock the other day, standing at the gate with our station manager there, and I'll bet half the people getting on that flight said, 'Hi, Ernie.' "
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Strategy
That seamless, well-defined culture enables Kelleher to run his airline guerrilla-style. The mission at Southwest is straightforward: Keep it cheap, keep it simple, focus your energy. "We search out markets that are overpriced and underserved," says chief operations officer Gary Barron. Those tend to be smaller cities where the airport is closer to downtown and is less congested. Southwest can get its planes in and out faster. Its passengers can reach their final destinations faster.
Barron labels the airline "opportunistic." And fleet of foot. Within five days of deciding to serve Little Rock, Southwest had set up operations there and with two gates garnered 25% of the market almost immediately. In early 1991 USAir retrenched in California. Southwest quickly filled the void and took over USAir's abandoned gates in Sacramento. "The city had been after us for two years to come," says Kelleher. In the second quarter of 1991 Southwest carried 20% of all passengers between Sacramento and L.A.'s Ontario airport. It carried 39% of the traffic between Sacramento and Burbank. Those figures are none too shabby when you consider that Southwest started flying out of Sacramento just three weeks before the quarter ended.
Through the early and mid-'80s Southwest had waited patiently for gates at California airports to open up. In the meantime, airfares grew increasingly more gilded in the Golden State. By the time Southwest could attack key California routes, a one-way ticket between the Bay Area and the Los Angeles Basin varied from $79 to $220 -- with all but a handful at the upper end of the range. Southwest's seats went for between $29 and $59. The airline now carries 15.6% of all intrastate travelers -- and would carry a lot more if it flew between San Francisco and Los Angeles. Instead, it flies between less crowded Oakland and Burbank, which, according to Department of Transportation figures, was the 200th-busiest air route in the United States at the end of 1989. Southwest started flying that route on April 16, 1990. By the end of 1990 it had become the 21st-busiest route.
"We're not competing with other carriers," says sales-and-marketing director Valentine. "We want to pull people out of backyards and automobiles, and get them off the bus." Wherever Southwest goes, three things quickly happen: fares come down, traffic usually triples, and the airline rouses a rabid following. Last year 34 cities formally petitioned Southwest to set up operations at their airports. Kelleher didn't let the flattery turn his head and unleash an air armada. In 1991 Southwest went into just one new city, Sacramento, and only after USAir had pulled back.
