Gary Kelly, Chairman, President and CEO of Southwest Airlines, Talks Success, Culture and Business Approaches

May 02, 2013


At the final Voices of Experience of the 2012-2013 season, Daniels Dean Christine Riordan sat down with Gary Kelly, chairman, president and CEO of Southwest Airlines. Kelly is a 27-year Southwest veteran, who joined the company in 1986 as controller. He moved up through the ranks to CFO and VP finance, executive vice president and CFO, and CEO and vice chairman. Kelly became chairman and president in 2008, filling the big shoes of co-founder and Southwest icon Herb Kelleher.

Through a question-and-answer session with Dean Riordan, Kelly discussed the airline industry, Southwest’s profitable history and the foundation of its culture: its “luv” for its customers.

While the airline industry has had its share of ups and downs—with deregulation in the 1970s contributing to the eventual shutdown or bankruptcy of every airline in existence at the time—Kelly said he believes the industry is getting healthier.

Throughout its 42-year existence, Southwest’s health has been very good, with 40 consecutive profit years. What’s their secret? “I don’t know that I can put my finger on just one thing, but I can say that we’re different,” said Kelly. “We just take a very different approach to the market.”

One example is Southwest’s efficiencies. Their entire airline fleet is composed of Boeing 737s, allowing them to keep unit costs and maintenance down. They have maintained an investment grade balance sheet. They take pride in having never had a layoff or a furlough. And perhaps most important, Kelly said, their low-fare brand is embedded in customer’s minds.

“We walk that fine line of, we’re not cheap,” Kelly admitted. “We are very passionate about the customer experience and customer service. And there are airlines today that are very low cost and they don’t care a bit about customer service. So we want to be very good at both.”

Known for its high-quality customer service, Southwest Airlines has stayed true to its promise to not ding customers with fees at every opportunity. Unlike its competition, Southwest allows free ticket changes and two free checked bags per passenger. To Kelly, it is about caring about customers’ desires. “I like to feel like we’re just customer driven,” he said. “If that’s what customers want, for whatever reason, then I think we’ll work hard to meet our customers’ needs.”

A common question is whether Southwest will eventually expand to offer international flights—to which Kelly responded hopefully. “I really think the next era for us will be going beyond the borders of the 48 states,” said Kelly, adding that the company has always sought out markets that are both underserved and overpriced. Yet the move will not be without its challenges, with dramatically rising energy costs and international treaties to deal with.

Coloradans will be happy to learn that Denver is one of Southwest’s top five markets, and “an important part of our system,” said Kelly. In the future, flyers can expect more nonstop departures and more destinations.

What sets Southwest Airlines apart as an employer? “The first word that comes to my mind is family,” Kelly said. “I think family does the best job of summarizing the passion or emotion we want to bring to the workforce.” With 46,000 employees serving more than 100 million customers each year, Southwest places a high emphasis on encouraging employees to enjoy their work—celebrating, recognizing and rewarding great customer service. As for the “luv” philosophy that makes up the very fiber of Southwest, it was inspired by their headquarters, located in Love Field in Dallas.

Kelly strives to be a collaborative leader, and encourages open communication and teamwork. He says that starts with making sure all employees understand and embrace their sense of purpose: taking care of customers. “The neat thing about the Southwest people is that they just seem to have a knack for being there at the right time to take care of a customer when they really need it,” Kelly said.

When asked about what traits leaders today need in the face of such a tumultuous business environment, Kelly said it boils down to interpersonal skills. “The technical aspects of our chosen professions are the easiest parts of the job,” he said. “It’s the interpersonal relationship with your boss or with your peers or with people you’re trying to supervise—that’s where the challenge is. And I think that’s what leaders need to focus on.”