Those who stood out (5): Herbert D. Kellenher

The entrepreneur

Kellenher was born on March 12, 1931, in Camden, New Jersey. He received his bachelor’s degree from Wesleyan and his law degree from New York University. He started his career practicing law before relocating to Texas with the idea of starting his own law firm.

In 1967, Kellenher along with one of his clients, Rollin King, co-founded Southwest Airlines. They envisioned a revolutionary business model for an airline company at that time: eliminating all the unnecessary services and utilizing secondary airports in order to offer the lowest fares in the industry.

In 1981, Kelleher became president and CEO of the company. He was a charismatic and dynamic leader boasting a great reputation among the company's employees and media.

In 2007, Kelleher announced his decision to step down as chairman and resign from the board of directors. He remained a full-time employee until 2012.

Herbert Kellenher has received numerous awards in recognition of his impressive professional career. He has been considered one of the most influential leaders in the airline industry.

The Company: Southwest Airlines

Southwest Airlines Co. headquartered in Dallas, Texas, is a major U.S. airline and the world's largest low-cost carrier. The airline was established in 1967 and adopted their current name in 1971. The airline has 44,831 employees as of December 2013 and operates more than 3,400 flights per day, carrying the highest number of domestic passengers of any U.S. airline. Southwest has scheduled services to 89 destinations in 42 states in the US and Puerto Rico.

Southwest Airlines mainly operates Boeing 737’s becoming the largest operator of this Boeing model worldwide with over 550 aircrafts in service. Each of these 550 aircrafts operates an average of six flights per day.

In May 2011, Southwest acquired AirTran Airways. The integration of the two carriers is expected to be completed by 2014.

Southwest Airlines is the fifth-largest airline in the United States and the only one to turn a profit for 40 consecutive years.

The financial statements of the company in 2012 presented $17 billion USD of revenues with $421 million USD of net income.

Key takeaways

What does Southwest do better than anyone else? It keeps things simple and consistent.

Let’s summarize the factors that have been considered essential to the company success:

1. One Plane Fits All

Southwest flies almost just one plane type, the Boeing 737 series. That simplifies maintenance, reducing significantly the cost—spare-parts inventories, mechanic training, etc

2. Point-to-Point Flying

Most of Southwest flying is nonstop between two points. That minimizes the time that planes sit on the ground and allows the average Southwest aircraft to be in the air for more than an hour longer each day than a similarly sized jet flown by a carrier using the existing network hubs.

3. Simple In-Flight Service

There is just one class of service, a decent coach cabin that is slightly more spacious than those of Southwest's competitors. There are no assigned seats. There are just beverages and snacks available. Keeping it basic allows Southwest to decrease costs and offer more competitive tariffs.

4. No Frills, No Fees

The airline only sells one-way fares and only in a few price levels. Prices are all-inclusive too: Southwest doesn't have fuel surcharges, doesn't charge for ticket changes, and continues to permit travelers to check two pieces of luggage for free.

5. Strong Management

Despite the non-executive image that Kelleher offered to the public, the company is built over strong and disciplined foundations. Management ranks are lean, but well compensated and extremely productive.

6. A Happy Workforce

Southwest has never had a strike. The company is offering one of the highest salary and benefit packages in the industry. Since Southwest has about 30 percent fewer employees per aircraft than its network competitors, it has the lowest cost per mile of any of the major carriers.

7. Aggressive Fuel Hedging

Fuel prices now represent around 40 percent of an airline's costs. Southwest Airlines has implemented an aggressive fuel-hedging program that has saved the company an estimated of $3.5 billion in an environment of rampaging fuel prices.

Amazing innovation within a mature and developed industry...