Tribute to Herb Kelleher

A magnificent man and his flying machines – Spending a special day with aviation pioneer Herb Kelleher

‘I have green blood running through my veins’ – Ian Hyland, President of Ireland INC, pays tribute to Herb Kelleher, a global Irishman

In a reference to the importance of the Irish impact across corporate America Herb wrote;

“In hopes that you will not find a NYSE story unduly tedious, and with reference to Tom Farley (former CEO NYSE), many moons ago I was appointed to the NYSE Listed Company Advisory Committee and returned from my first Committee meeting proclaiming that the Irish had finally come of age in America, since so many of the Committee members were Irish.  My 50 yearlong business colleague Colleen Barrett (who is also 100% Irish, although she has many of the traits of Mussolini), said “Herb, who appointed all of you?”  I thought for a moment (speedy for me) and said:  “Oh yeah, John Phelan, Chairman of the NYSE and perennial Grand Marshal of the New York City St. Patrick’s Day Parade.”

Ireland Day 2016 at the New York Stock Exchange

As we walked across the trading floor of the NYSE Herb was met with a heroic welcome from business leaders, traders and US media anchors calling his name as he stopping at each opportunity to speak with those who queued to speak with the living legend.

As we climbed the stairs to the podium, Herb waved to the floor of peers and traders below then at 9.30am we had the honour of standing shoulder to shoulder with a renaissance man, Herb Kelleher, as he hit the opening bell and the market went green from the off to over 100m viewers across the world.

Herb then gave an interview to CNBC Squawk Box and in addition his up to the minute, finger on the pulse commentary on the aviation sector, Herb referred to the impact that Irish business was having across the United States.

“I co-founded Southwest Airlines in 1967. Because I am unable to perform competently any meaningful function at Southwest, our 25,000 employees let me be CEO. That is one among many reasons why I love the people of Southwest Airlines.”

Ireland INC – A history of Irish Business – interview

I had the opportunity of spending the morning with Herb and suggested we chat while I recorded thus producing the interview for the book A History of Irish Business. Below are extracts from what can best be described by a long chat with a man who changed the world.

It was in 1966 – while living in Texas with his wife Joan, four children and working for the law firm of Matthews, Nowlin, Macfarlane & Barrett – that Kelleher met the business colleagues who were soon to co-found the only airline to be ever featured on Fortune magazine’s top 10 list of the World’s Most Admired Companies. Southwest Airines Co was incorporated in 1967.

Starting with just three aircraft on three routes, Southwest Airlines planned to use a loophole to avoid the Civil Aeronautics Board by only flying in the state of Texas. While Kelleher and business partner Rollin King saw an opportunity to offer in-state flights at a cheaper price, competitors engaged in a legal dispute that would ground Kelleher’s commercial plans for nearly four years.

After three years of litigation the Texas Supreme Court finally upheld Southwest’s right to fly in the state in 1971. With the Airline Deregulation Act of 1978 Southwest finally spread its wings outside Texas, claiming New Orleans as its first port of call in December of the same year.

Never one to shy away from a challenge (or a publicity stunt), Herb Kelleher famously plotted out his plans for Southwest Airlines on the back of a cocktail napkin during dinner drinks in San Antonio. His unconventional style and strategy hinted at the barriers he was willing to break in business – with one of favourite slogans being ‘the business of business is people’.

Kelleher never shied away from his employee-first mindset. Having previously credited his workforce as more important than either shareholders or customers, his approach to Southwest Airlines “was somewhat of an anomaly I would say, in terms of our humanistic approach to our employees,” he recalls today.

As well as providing total job security to all employees – which was unusual in itself in the airline industry – the company prided itself on “keeping track of their every joy and every grief and being part of it – you know, when they had a baby, or lost a parent, and we felt that that was the appropriate thing to do”.

When it was once suggested that this was a strategy in itself, Kelleher quite simply clarified: “no, it’s not a strategy. It’s morality and work and I said if it evolves into a strategy than it’s just accidental”. The side-effect? Kelleher was guaranteed a dedicated workforce who were willing to look past the remuneration to work for a balanced company culture.

“We would have people come to Southwest Airlines to take 25% cuts in their salary because they liked our people and our atmosphere and the freedom they had with us, compared to where they were. It wasn’t designed to achieve that, but it did have that effect.”

It hasn’t always been plane sailing (pardon the pun) for the aviation entrepreneur, who was forced to defend his company and leadership to those who thought they knew better in its early days. “When I took over as CEO of Southwest Airlines full-time, some of the Wall Street analysts said ‘we’re dropping our recommendations on Southwest’s stock, we think you should sell it’. They said the reason was that lawyers don’t know how to run businesses. Well for 30 years, we produced a compounded annual return to shareholders of 25.99%. Not too bad, not too bad.” In fact, during his tenure Herb Kelleher produced the highest return to shareholders of any company in the S&P 500.

Staying positive

While Kelleher claims to never mourn a bad day, he has made mistakes in the past. One such mis-step was the company’s attempt at acquiring Muse Air: lawyers persuaded the businessman not to blend the airline and its employees with his successful Southwest Airlines model, but to operate it as a separate company.

The decision, while it protected Southwest from debt and liability, proved fatal for the new acquisition. “I think that was a mistake in judgement,” he says. “I listened too much to the labour lawyers that were involved and maybe a little too much to the financial people.” The airline was eventually shut down, but Kelleher received three letters from union leaders who thanked him for the fair severance packages offered to the Muse Air workforce.

Not to be disheartened, Southwest went on to successfully acquire other carriers – but Kelleher made sure not to get carried away with experts and to trust his own intuition and accept his shortcomings. “But we correct mistakes quickly: one of the things I’ve always preached is never let your ego get in the way of rectifying a mistake that you have made – and I mean quickly.”

Despite any number of successes or failures, nothing could prepare the aviation industry for the effects of 9/11. Surprisingly, Kelleher believes that the challenging time showed the importance of having heart at the centre of your business plan. When asked for a personal highlight of his career, it wasn’t the wealth, the awards or the honours bestowed upon him that come to mind. Kelleher happened to recall one of the darkest periods in America’s recent history.

“9/11 demonstrated the kind of culture Southwest Airlines had, because if you remember – at least reading about it – the FAA said no flights could fly more than an hour. You could remain in the air for an hour after this happened but you had to put down somewhere.”

“The upside of that was that a lot of our airplanes had to land in cities we didn’t serve. We called a hotel in Flint Michigan, which we didn’t serve at that time, and said we’d like to talk to our captain on that flight. They said ‘we’re sorry you can’t’. ‘Well why not?’ ‘He’s taken all of the passengers to a movie downtown at his expense to keep them entertained’.

“We called another hotel… and we were told the pilot had bought Amtrak tickets for all of the passengers on our airplane out of his own pocket to get them on to their destinations on the ground.”

The culture of care is echoed in an old tale that Kelleher emphasises has always been at the core of his company ethos. “When I was quite younger, a lot younger, in San Antonio, this friend of mine was talking to his mother and he said that she got a new automobile every year without fail. He said ‘mom, let me tell you something – I’ve talked to this other automobile dealer and he said you’re paying about $1,500 or $2,000 more every year for your car’.

“She said ‘dummy, don’t you understand? When something goes wrong with this shit the owner comes out and fixes it’. Suddenly it hit me she wasn’t buying the car, she was buying the care.”

In the public eye

Kelleher has always been keen to toy with the public’s interest. In 1990 he started using the phrase ‘Just Plane Smart’. This was quickly disputed by Stevens Aviation chairman Kurt Herwald, who had previously been using ‘Plane Smart’ as part of their marketing plan. When he was challenged with a lawsuit for copyright over his use of the pun phrase in 1992, Kelleher decided to settle the legal matter by agreeing to an arm-wrestling match with his opponent at the Dallas Sportatrium in downtown Dallas. While he may have technically lost the battle, the public interest for Southwest Airlines was certainly spiked.

A characterful approach to dealing with the public brings to mind, on this side of the Atlantic, the entrepreneurial manner of Michael O’Leary. Kelleher isn’t blind to the Kildare man’s influence. “I think that Spirit Airlines in the US, at least intellectually and conceptually, was following Michael’s model with Ryanair – so he’s had a pervasive influence around the world. People say Spirit Airlines and other airlines of that get nature get a lot of complaints from passengers, and you just hear constant griping about them. But it’s very interesting to me that they operate at a 90% load factor. So there is a market for a totally price-conscious market and they are appealing to it.”

Recalling his own immigrant past, Kelleher has always been proud of his Irish ancestry – a bridge between his hard work and a strong resilience instilled in him from his parents. “Well, I think the Irish have a wonderful spirit and that’s always inspired me and really buoyed me up during difficult times when things would not be going too well. Their feeling for fellow human beings has always inspired me.”

From his perspective in an America that sees a wealth of Irish companies and individuals investing, Kelleher says that there is an opportunity to use the Irish spirit to show how business is a joint partnership between the company and the people it hires.

That’s a great story to tell about the Irish businesses in the US and all the value that they bring here. Of the hundreds and thousands of people that they employ in the US, I think it’s important for America to realise that it’s not just a one-way street.

In remembering any unique individual who creates their own footprints rather than walking in those of others, what sets the really great ones aside in my view, is humility. In this context with reference to our intention to recognize Herb for his achievement as a member of the Global Irish diaspora. Herb concluded his acceptance of our invitation –

“Ian, I am as excited about your generous Global Irish Business Award as I was when I got my first three-wheeled Trike.”

Herb Kelleher created and ran Southwest Airlines with a childlike energy, vision and rule bending, game changing attitude. That said he was no fool. He treated every member of staff and his customers with a family like respect.

The results speak for themselves.

Herb Kelleher was a one-off, a disruptor, a maverick and a one of the best examples of Irish America – this world needs more like him.

Sleep well Herb!

This article was originally published in Business & Finance on January 7th 2019.