Today, Southwest Airlines is the undisputed king of American low-cost aviation. Yet without Herb Kelleher, Southwest as we know it today would’ve never been born. Imagine that!
Having founded Southwest Airlines (then called Air Southwest Co) in 1967, Herb would be the driving force in getting the airline off the ground (no pun intended) and growing it into one of the “Big Four” airlines.
Early Life
Herbert David “Herb” Kelleher would be born on March 12 1931 as the youngest of four children to Irish-American soup factory foreman, Harry Kelleher, and his wife, Ruth.
Born in the township of Haddon Heights, just outside Camden, New Jersey, the Kelleher family would soon move to the neighboring Audubon, due to Harry Kelleher getting a new job as a soup factory general manager at the Campbell’s Soup factory in the town.
Growing up, Herb Kelleher would attend school at Haddon Heights High School where he’d get good grades, especially in English-based subjects. Beyond getting good grades, Herb’s parents also instilled in him a strong work ethic.
As a teenager, Herb Kelleher would work odd jobs after school. For six years, Herb would work as a soup chef, warehouse foreman and part-time analyst at Campbell’s Soup factory where his father worked.
Beyond these jobs, he’d also work as the branch manager for the Philadelphia Bulletin, earning $2.50 per hour and mow people’s lawns, which allowed him help support his family.
Enrolling in Wesleyan University as an Olin Scholar in 1949, Herb would major in English and minor in Philosophy, intending to become a journalist after he graduated. However, a trustee at Wesleyan convinced Herb to get into law instead.
He’d even helping him enroll at the New York University School of Law as a Root-Tilden scholar, where he’d graduate cum laude in 1956.
Beginning Air Southwest Co.
Upon graduating, Herb would find work as a clerk for a New Jersey Supreme Court justice. Saving most of his paycheck, Herb intended to use this money to start his own business, preferably a law firm.
A year before graduating, in 1955, Herb Kelleher married Texas native Joan Negley, who’d been introduced to him by a mutual friend on a blind date whilst Herb was at Wesleyan.
Understanding that her husband wanted to start his own business and knowing it would be easier in the south, where taxes were lower (and incidentally where her family was), Joan and Herb would go on vacation to Texas in the early-to-mid 1960’s.
Falling in love with the state, the Kellehers would move to Texas, where Herb intended to start his own business. Arriving in the mid-1960’s, Herb would find work as a lawyer, in the hopes of establishing his name in the local area as the best lawyer.
It would be here, where he’d meet local businessman Rollin King, the owner of a local air charter company, who hired him as his outside counsel in 1966. Quickly finishing his job, the pair would celebrate a job well done at a San Antonio bar.
Here, the two immediately begin to bond over their shared interest in Pacific Southwest Airlines (PSA), the world’s first low-cost carrier. Talking more, both parties would disclose their desire to start their own low-cost airline in replication of PSA.
Deciding to combine their knowledge, the pair would begin to sketch out their own low-cost airline serving Houston, San Antonio and Dallas (colloquially known as the “Texas Triangle”). And they would pick their routes strategically.
By operating as an intrastate airline, their airline would avoid federal price-fixing regulations, which would allow them to offer lower prices than interstate airlines could, thus allowing them to undercut their more established competition.
Having their business plan nailed down, Herb Kelleher and Rollin King would bring airline veteran, Lamar Muse (to serve as the airline’s president) and banker John Parker (to finance the airline) before incorporating Air Southwest Co. on March 15 1967.
Legal Issues
Intending to begin offering flights straight away, this plan would disappear when three airlines – Continental, Braniff and Texas International – would instigate legal proceedings against Air Southwest that same year, citing unfair business practices.
As a lawyer (having been admitted to the bar in 1957), Kelleher would act as the airline’s legal counsel, fighting over 30 separate injunctions and lawsuits the three airlines instigated to wear the new airline down.
Within two years, the lawsuits had almost bankrupted Air Southwest. After all, they’d bought four 737-200s on credit (paying them back monthly) and had 70 employees to pay – all without earning an income.
By the end of 1969, the other Air Southwest executives were ready to give up, only to have Herb Kelleher convince them that they’d come too far to fail now. Much to his surprise, the Air Southwest executives chose to give it one last push.
And this turned out to be one of the best decisions the Air Southwest board did. Within less than two years, the company would successfully beat the other airlines in court, that is, the Supreme Court of the United States and of Texas.
Winning these cases thus allowed Air Southwest to fly intrastate routes.
Now legally able to commence operations, Herb Kelleher, Lamar Muse and the rest of the Air Southwest executives would vote to change Air Southwest’s name to Southwest Airlines for branding reasons.
Beginnings of Southwest Airlines
With his airline now able to fly, the newly renamed Southwest Airlines commenced operations on June 18 1971.
In the beginning, Herb and Rollin copied PSA extensively, with Lamar Muse even going as far to say in a 1971 interview that Southwest was a “photocopy” of PSA.
For example, Southwest flight attendants would be hired based on the philosophy of “Long Legs and Short Nights” much like their PSA counterparts were, with Southwest flight attendants also wearing go-go boots and hot pants.
Indeed, to get the best flight attendants, Herb Kelleher would get help from someone who used to pick the Playboy Bunnies for Hugh Heffner!
Despite this, Herb would insist (partly at the insistence of Lamar) that Southwest distinguish itself from PSA.
To that end, Herb would begin Southwest’s now-famous “employee first” policy. This would see Herb and the rest of the Southwest executives encourage their employees to join unions, making the airline the most unionized in the world!
Whilst this has undoubtedly come back to bite Southwest on several occasions, namely in the form of higher wages in strikes, Southwest staff are among the most motivated in the industry.
All this leads up to a better service, which means the airline generates repeat customers, and Southwest is among the most loved airlines in the world.
Reflecting Herb’s own personal sense of humor, Southwest would adopt a laid back, yet serious corporate culture. Here, employees are encouraged to have fun whilst on the job, but still remain professional.
Beyond all this, Rollin and Herb would also mastermind another technique to keep employee moral high: targets.
Unlike other airlines that had targets that were almost unobtainable, Southwest set comparably low targets. Yet, there was an expectation that you’d exceed those targets each year, thus making employees they were doing a better job.
1978 Airline Deregulation Act
Between 1971 and 1978, Southwest Airlines hadn’t really done much expanding. Instead, the airline had focused on reducing costs as much as possible, becoming even more of a “no-frills” airline than PSA was.
Whilst it had succeeded in this goal, the lack of growth caused tension between co-founder Rollin King and then-CEO Lamar Muse, who ultimately resigned in early 1978, leaving Herb Kelleher as the interim CEO until Howard Putnam was hired in August that year.
Two months later, in October 1978, then-President Jimmy Carter would sign into law the Airline Deregulation Act, which removed the price-fixing legislation that prevented Southwest from flying interstate routes to begin with.
As the act was intended to, it allowed low-cost airlines like Southwest to begin flying from Texas to other states. Seeing this, Herb Kelleher, Rollin King and Howard Putnam would immediately begin looking to expand Southwest beyond Texas.
Researching the best cities to add to their route card, Herb would suggest New Orleans, which the rest of the Southwest board would agree to, with the company intending to launch its New Orleans route in early 1979.
Inadvertently, this combined with Herb and Southwest’s refusal to relocate their main Texas hub from Dallas Love Field to Dallas-Fort Worth, eventually led to the Wright Amendment being introduced by Texas Congressman, Jim Wright.
Despite being designed to hamper Southwest’s growth, it actually do the opposite: it would allow it to grow into the airline it is today!
Becoming Chairman, President & CEO
Prior to brief stint as CEO in 1978, Herb’s official role at Southwest was as its legal counsel. Following his brief stint as CEO, Herb would resume his role as legal counsel, whilst also serving on the Southwest board (after all, he was one of the co-founders).
However, when then-CEO Howard Putnam left Southwest to lead Braniff International Airways in 1981, the company board would elect Herb Kelleher to be its new chairman, president and CEO.
Years later, Herb would reveal to business magazine, BuinsessWeek, that when he first took the permanent CEO job he had no idea what he was doing, and was essentially learning on the job.
Interestingly, when Herb officially became CEO in late 1981, Southwest’s stock price would tank (having only been floated a few months before) due to investors getting spooked about an inexperienced CEO making a wrong move.
Seeing this (as well as owning millions of dollars worth of Southwest stock himself), Herb hoped to prove investors wrong. To that end, he’d aim to improve Southwest’s financial position considerably.
Prior to his takeover, Southwest had been profitable since 1973 (making small losses in 1971 and 1972), however, not by much. Becoming CEO, Herb Kelleher made a push to lower overheads.
For example, Herb instituted the airline’s policy of cross-training their employees, allowing them to reduce turnaround time, and thus keep their fleet in the air for longer.
To save on maintenance costs, Herb also instituted the company’s policy of only using one type of jet – the Boeing 737 – a policy the airline still uses today, over 40 years later!
Muse Air & Further Acquisitions
After resigning from Southwest in 1978, Lamar Muse would establish his own airline, Muse Air in 1981. Using MD-80/DC-9 jets, Muse Air would soon have several high-value routes on their route card.
Despite offering competitive fares, using one type of jet and only hiring non-unionized employees (unlike Herb and Southwest), Muse Air could never maintain profitability, passing ownership of several occasions.
Realizing that he could restructure Muse Air more along the lines of Southwest and make it profitable again, Herb Kelleher (as the CEO of Southwest) would lead the takeover of Muse Air in June 1985.
Acquiring Muse Air, Herb would kick Lamar Muse out, rename the airline as TranStar Airlines and reorganize it. From here, it would operate as a subsidiary of Southwest until 1987, when it was absorbed completely by Southwest at Herb’s orders.
Having expanded further into the south and southwest by absorbing TranStar, Southwest would look to expand northwards.
To that end, Herb and Southwest would enter talks with the co-founders of low-cost airline Morris Air, David Neeleman and June Morris, to buy out their airline which was the largest low-cost airline in the western United States.
Leading the acquisition, Herb would negotiate for Southwest to buy out Morris Air for $120 million in December 1993, before Morris Air’s operations were merged into Southwest’s completely by October 1994.
Stepping Down From Southwest
Over the next seven years, Southwest would add more and more destinations, eventually leading it to become one of the “Big Four” US airlines (a position that would be cemented with Pan Am’s bankruptcy in 1991 and the TWA-American Airlines merger in 2001).
Having been diagnosed with prostate cancer in 1999, Herb Kelleher would undergo the necessary radiation therapy to survive it. However, the side effects of the radiation therapy also made it difficult for Herb to fully execute his roles as chairman, president and CEO.
To that end, he’d begin to delegate most of these roles to trusted associates. By 2001, however, at the age of 70 years old, Herb would step down as president and CEO, but remained as chairman.
As CEO, Herb would pass the torch on to James Parker, the man who’d replaced him a Southwest’s legal counsel when he became CEO in 1981.
At the same time, he’d pass the role of president onto Colleen Barrett, his former personal assistant who’d risen up the ranks of Southwest to become Vice President of Administrations.
Herb Kelleher would remain chairman until July 2007, but would remain on the board of directors, before resigning in that capacity less than a year later in May 2008.
Despite having given up all connection to the company, Herb Kelleher was named as the company’s chairman emeritus with him keeping his office at Southwest’s Dallas headquarters.
For the next 11 years, Herb would continue to act as an advisor to the company, regularly consulting Southwest CEO, Gary C. Kelly (who’d become CEO in 2004), on everything to do with Southwest.
Death
Despite being one of the most successful aviation entrepreneurs in recent history, Herb (sadly) wasn’t immortal.
Herb Kelleher would die of natural causes on January 3 2019 at the age of 87 at his Dallas home. His death would be announced by Southwest via their inflight intercom systems and Twitter accounts.
His funeral would be a private event, held six days later at the Christ Episcopal Church in San Antonio, Texas, with his friends and family being invited (sadly, Southwest co-founder Rollin King had died five years earlier).
Over the ensuing two weeks, Southwest would host a series of memorials to honor their founder and leader for so many years. Some of these would be private and for employees-only whilst others would be more open to the press.
Whilst by no means the only tribute, by far the most famous was that done by native Texan singer, Gary Morris, who’d sing his original rendition of Wind Beneath My Wings as well as the patriotic America The Beautiful at one of these memorials.
At the time of his death, Forbes estimated his net worth to be at $2.5 billion. Today, given that almost all of Herb’s net worth came from his Southwest stock, he’d be worth around $2.9 billion at Southwest’s current stock price ($55).
Over his lifetime, Herb had been given more than 100 awards, including being named CEO of the year in 1999, being inducted into both the International Aviation & Space Hall of Fame and National Aviation Hall of Fame in 2002 and 2008 respectively.
Management Style
During his tenure as president, chairman and CEO of Southwest Airlines, Herb Kelleher was renowned for his should I say, unique style of management…
As with all CEOs, Herb expected results from his employees. Unlike his competitors, who set unrealistically high targets for their employees, Herb set more realistic targets, with the expectation that his employees would far exceed them.
Whilst his competitors laughed at him, this worked wonders for Herb Kelleher.
You see, when his employees surpassed their targets – by as much as 10 or 20% in some cases – it made them feel like they were doing a great job, thus encouraging them to work harder, and thus increasing customer satisfaction and profits.
Herb was also a rather unconventional CEO.
Giving speeches at company events, Herb would often light a cigarette and drink a glass of bourbon to lighten the mood.
Although it seems odd, this actually made employees respect him more, as despite his billions he seemed like he was “one of them” as one former Southwest employee I spoke to put it.
Guess what? This was all done deliberately. Herb was a lifelong believer in the phrase “employees first” once saying:
“Your employees come first. And if you treat your employees right, guess what? Your customers come back, and that makes your shareholders happy. Start with employees and the rest follows from that.
Do you want to know the best part? All of these management techniques continue to this day, having been picked up by Herb’s successor, Gary C. Kelly.
Legacy
As not only the founder, but also the longtime chairman and CEO of the US’s largest domestic airline, Herb Kelleher understandably left a rather large impact on the aviation industry as a whole, most of which we can still see today!
Southwest Airlines
It should go without saying, but without Herb Kelleher, Southwest would be a completely different airline… assuming it had ever gotten of the drawing board anyway.
Although stuck in the company’s legal department for its first few years, once Herb became CEO in 1981, Southwest began to take off (no pun intended).
Just remember, it would be under his leadership where Southwest would go from a minor carrier in Texas and the surrounding states to one of the four largest airlines in the US (colloquially known as the “Big Four”).
However, Herb didn’t just grow Southwest, he molded it too. Even in death, from a corporate point of view, Southwest is indistinguishable now from when it was with led by Herb Kelleher.
He molded it into a mirror image of himself, not just his passion for aviation and his business savvy, but also his humor too!
Aviation Industry
It’s safe to say that without Herb Kelleher, the airline industry would be completely different. Although he didn’t invent the concept of low-cost carriers, he certainly took it to new heights.
Before Southwest, low-cost carriers had mostly been small, independent regional airlines that competed with the regional subsidiaries of major airlines on certain routes.
However, Herb would expand Southwest to become not just a national carrier, but one of the four largest airlines in the country! Southwest’s success would also encourage many aviation entrepreneurs to start their own low-cost airlines.
The seemingly mass-introduction of these low-cost carriers has wrought havoc on the airline industry, particularly legacy carriers, by increasing the amount of competition in the industry and forcing prices down.
Had Herb never got involved in aviation, chances are other low-cost airlines like Europe’s Ryanair and easyJet and the US’s Allegiant Air and Spirit Airlines would’ve never been started, with the airline industry still being quite expensive!
What do you think of Herb Kelleher? Did you ever get to meet him? Tell me in the comments!