Management Mistakes and Successes, Tenth Edition

Chapter 13. Southwest Airlines: "Try to Match Our Prices"

In 1992, the airlines lost a combined $2 billion, matching a dismal 1991, and bringing their three-year red ink total to a disastrous $8 billion. Three carriers—TWA, Continental, and America West—were operating under Chapter 11 bankruptcy, and others were lining up to join them. But one airline, Southwest, was profitable as well as rapidly growing—with a 25 percent sales increase in 1992 alone. Interestingly enough, it was a low-price, bare-bones operation, run by a flamboyant CEO, Herb Kelleher. He had found a niche, a strategic window of opportunity, and oh how he milked it! See the following Information Box for further discussion of strategic windows of opportunity and their desirable accompaniment, SWOT analysis.

HERBERT D. KELLEHER

Herb Kelleher impressed people as an eccentric. He liked to tell stories, often with himself as the butt, and many involved practical jokes. He admitted that he sometimes was a little scatterbrained. In his cluttered office, he displayed a dozen ceramic wild turkeys as a testimonial to his favorite brand of whiskey. He smoked five packs of cigarettes a day. As an example of his zaniness, he painted one of his 737s to look like a killer whale, in celebration of the opening of Sea World in San Antonio. Another time, during a flight he had flight attendants dress up as reindeer and elves, while the pilot sang Christmas carols over the loudspeaker as he gently rocked the plane.

Kelleher is a "real ...