An in-Depth History of Southwest Airlines

Whilst it’s by far the youngest of the “Big Four” US airlines, the history of Southwest Airlines is no less interesting than that of United, or Delta or American Airlines. At least to a certain extent, it’s actually more intriguing!

Now the largest low-cost carrier in the world, Southwest has had to fight for almost everything it has today – be it actually getting off the ground in the beginning, operating outside of Texas or internationally – often having to sacrifice other parts of their business to do this.

Pre-Foundation

The story of Southwest Airlines starts with two men: Herb Kelleher and Rollin King, who both had a dream to revolutionize air travel. 

Herb Kelleher

Born into a poor, working-class Irish-American family in Camden, New Jersey, on March 12 1931, Herb Kelleher was forced to work odd jobs (such as an employee of a soup factory, copy boy and a lawn mower) to both support his mother, who was left widowed during WWII, and pay for college. 

Raised to have a strong work ethic, Kelleher excelled at school, especially at English and sports, and was able to attend Wesleyan University as an Olin Scholar. 

Majoring in English and minoring in Philosophy, Herb set his sights on becoming a lawyer after graduation in 1953. His grades at Wesleyan were so good that he was able to attend New York University Law School as a Root-Tilden Scholar, where he graduated cum laude in 1956 and clerked for a New Jersey Supreme Court Justice for three years. 

Becoming an associate at New Jersey law firm Lum, Biunno and Tompkins, Herb worked there for two years until his wife (who he’d met whilst studying at Wesleyan) convinced him to move down to her home state of Texas and work as a lawyer there.

Although it took his wife a long time to convince him to move, he eventually acquiesced believing that it would be easier to start his own law firm (his lifelong dream) in Texas, than it would be in New Jersey. 

Thanks to his education and his references from a top New Jersey law firm, Herb became a partner at San Antonio-based law firm Matthews, Nowlin, Macfarlane & Barrett in 1961.

Quickly becoming one of the top lawyers in his firm, Kelleher was introduced to local businessman Rollin King in 1966, when the latter hired Matthews, Nowlin, Macfarlane & Barrett to be his outside counsel.

As one of the top partners in his firm, Herb Kelleher became Rollin King’s lawyer, thus starting a partnership between the two men that would last until their deaths!  

Rollin King

Unlike Herb Kelleher, who was born into a poor second generation immigrant family, Rollin King was born into a family with a strong entrepreneurial tradition. 

Members of his family had founded White Motor Co. in 1900, which later went on to produce a car used by President Taft during his presidency, as well as the White Sewing Machine Co. which was one of the largest producers of sewing machines in the US.

Foundation

Completing their work together, Rollin King and Herb Kelleher went to the St Anthony’s Club in San Antonio for celebratory drinks. 

Quickly progressing beyond small talk, the pair started talking about California’s Pacific Southwest Airlines (PSA) who’d managed to undercut the larger airlines by only flying within California, thus bypassing federal regulation on air fares. 

Intrigued at the idea of doing something similar in Texas, and with Rollin King already owning an air charter company, the pair began sketching out their plan for a Texas-based low-cost airline that they called Air Southwest Co. 

Bringing in local banker John Parker to help provide capital for this venture, Rollin King brought his experience from his air charter company (as well as the startup capital), whilst Herb signed on the new airline’s legal counsel and bought a 1.8% stake in the airline for $10,000. 

Formally incorporating the company on March 15 1967, the company planned to fly between the so-called Texas Triangle (Dallas, Houston and San Antonio) as demand for air travel between one another had grown massively over the last decade.

Legal Issues

Before they could fly, however, three Texas-based legacy carriers (Continental, Trans-Texas Airways and Braniff) instigated legal proceedings against the new airline, after they realized that the airline’s low-cost model posed a threat to their business.

Claiming that as they were regulated by the Civil Aeronautics Board, they were bound by the same federal price regulations that they were, Herb (as Southwest’s lawyer) argued that the law clearly stated the regulations only apply if you cross state lines, which Southwest didn’t and thus, the regulations didn’t apply to them. 

Losing the first round in the Austin State District Court after an independent report claimed that the Texas Triangle was already sufficiently served, Herb appealed to the Third Court of Civil Appeals. After seven months of court battles, the Third Court of Civil Appeals upheld the lower court’s ruling, citing the same report as their reason. 

At this point, Southwest’s investors (who’d been brought onboard by Rollin and Herb to provide additional startup capital) were getting worried as they’d sunk millions of dollars into an airline two courts had said couldn’t fly. 

Yet Herb Kelleher and Rollin King stood firm. Knowing the company was short of funds to pay him (and having a personal stake in the company), Kelleher managed to convince his bosses to hold off on charging the company until they had sufficient funds. 

He even offered to pay the company’s legal fees out of his own pocket, so that they could appeal to the Texas Supreme Court.

At this point, Continental, Trans-Texas and Braniff had become overly cocky, believing that the Texas Supreme Court would uphold the ruling of the two lower courts by virtue of that report.

In a move that surprised everyone – including Herb Kelleher and Air Southwest – the Texas Supreme Court voted unanimously to overturn the two lower courts’ rulings, thus permitting them to commence operations.

However, the plaintiffs (Continental, Braniff and Trans-Texas) were not done. Knowing that Air Southwest would likely steal customers away from them, the plaintiffs appealed to the US Supreme Court to overturn the ruling. 

On December 7 1970, the US Supreme Court formally declined to review the case, in effect upholding the Texas Supreme Court’s ruling. Incidentally, this also set off the beginning of airline deregulation that the company would later use to become one of the four largest airlines in the US. 

Early Years And Expansion

1980’s

1990’s

2000’s

2010’s

COVID-19

The first case of Coronavirus, otherwise known as COVID or COVID-19, was reported in the Chinese city of Wuhan, Hubei Province in November 2019. Initially just a local outbreak, the disease moved to nearby cities and provinces within China.

However, due to how interconnected the modern is, the disease spread particularly quickly – primarily by air and by sea.

By March 2020, COVID had reached the US (and pretty much the rest of the Western World) and caused people to stop flying both domestically and internationally, both due to lockdowns and for fear of catching the virus.

With this, Southwest saw a 92% drop in traffic and their stock lose 50% of its value. Unable to bring in revenue through flights or through issuing (and selling) more shares, Southwest’s financial state was shaky to say the least.

Along with the other major US airlines, Southwest petitioned Congress to intervene or risk losing the US’s dominance of international air travel.

Causing much debate, Congress soon authorized a $2.3 billion grant to the company and a further $1 billion in the form of a low-interest loan, generating quite a bit of controversy from both sides of the political aisle.

Though this stopped Southwest from going bankrupt, it wasn’t enough.

Parking almost half their fleet and giving 16,800 employees (a little less than a third of all their full-time employees) early retirement or long-term leave, helped to save on costs but the airline was still losing up to $30 million a day – a record sum.

Though an unpopular move that garnered him much criticism, CEO Gary C. Kelly announced that non-unionized employees would receive pay cuts of up to 10%, and that he’d begun talks with unions for the same thing.

He argued that a 10% pay cut was better than unpaid furlough, though the unions (and to an extent, the media) disagreed seeing this as an attempt by a large corporation to pressure its workers into accepting less.

Perhaps in an attempt to soften the blow, it was also announced that Southwest senior management – including himself – would also receive 10% pay cuts.

In November 2020, the company made history by issuing 450 WARN Act notices to employees, threatening them with furlough due to a lack of available funds.

Following Congress enacting the Consolidated Appropriations Act, 2021 in late December 2020 providing $15 billion in aid to airlines, Southwest rescinded its WARN ACT notices and reversed pay cuts for all employees.

Expansion

Whilst COVID caused Southwest to post record losses of $3.1 billion in 2020 – the first time the company hadn’t made a profit since the disastrous year of 1972 – it also provided the company with a rather odd way of expanding.

Suspending a large portion of their less popular routes to lower costs, Southwest closely followed booking trends as lockdowns began to ease.

What they discovered was that whilst city breaks weren’t as popular as they had previously been, demand for vacation-style routes (such as to Colorado ski ranges) had dramatically increased.

Armed with this knowledge, Southwest strengthened its presence at traditionally legacy carrier hubs, namely Houston’s Bush Airport (a United hub) and Chicago O’Hare (a Delta and United hub) to complement its nearby Hobby (Houston) and Midway (Chicago) hubs.

Similarly, they also expanded their presence in Florida, adding Miami International Airport (traditionally an American hub) as a hub in the hopes of capitalizing on the huge increase in demand for Florida summer vacations at the time.

Other routes added included Eugene, Oregon, Syracuse, New York and Bellingham, Washington, which were all added in mid-to-late and late 2021.

Following the example of American, Alaska and United, Southwest became the fourth US airline to re-introduce the 737 MAX after the FAA lifted the jet’s grounding, which had been in effect for over a year.

In June 2021, just after the company had announced several new routes, CEO Gary C. Kelly announced he was stepping down as CEO in February 2022 to make way for longtime Executive Vice President, Bob Jordan, to succeed him.

Legacy

Airline Industry

Texas

When it was founded, Southwest Airlines (then Air Southwest Co.) was one of many airlines that called Texas home. By 1980, the state had five major airlines: Texas International (formerly Trans-Texas), Continental, Braniff, American and Southwest.

Over time, these airlines have either merged (such as Texas International-Continental and later, Continental-United) or gone out of business due to the ever-changing nature of the modern airline business.

Yet only two of these airlines remain: American and Southwest.

Though American is the larger of the two airlines by a wide margin, Southwest’s presence has altered the landscape of Texas monumentally.

As the home of one of the original low-cost carriers, when new low-cost carriers were looking to expand beyond their home state, many chose Texas, as Southwest’s success was almost proof that they too could succeed in the state.

Over the last 40 years, this has brought countless low-cost airlines to the state, and Dallas in particular (although usually Dallas-Fort Worth and not Dallas Love Field), bringing millions in revenue to state, either directly or indirectly.

What do you think about the history of Southwest Airlines? What would you have done differently? Tell me in the comments!

Featured image courtesy of Glenn Beltz via Flickr.