Kelleher to Leave Executive Job in ’08
By Trebor Banstetter, Fort Worth Star-Telegram, Texas
Jul. 20–Six years ago, after relinquishing his job as CEO of Southwest Airlines, Herb Kelleher was preparing to ease up on his frenetic work schedule that had him in the office seven days a week and on call around the clock.
Then came 9-11, and Kelleher, who was still the airline’s executive chairman, knew that he would have to put off his rest. “It was all hands on deck,” he said. “It became a matter of survival.”
Now Kelleher, the legendary chain-smoking, Wild Turkey-guzzling co-founder of the nation’s largest discount airline, plans to finally get his chance to slow down. The Dallas-based airline announced Thursday that Kelleher, as well as company President Colleen Barrett, will step down from their leadership positions and board seats after the company’s annual meeting next year.
“Colleen and I have been working for 40 years for Southwest, and we’ve probably put in 80 years of time,” Kelleher, 76, said during a conference call with reporters. “So I think we’re going to be stepping back a little bit.”
The pair will remain as employees through 2013. Kelleher will probably focus on lobbying and governmental issues, while Barrett will stay involved in customer service and employee relations.
Barrett, 62, is considered the guardian of the airline’s corporate culture, which combines humor and a relaxed, positive attitude with a vigorous work ethic. She often says that the airline’s first responsibility is to its employees, then its customers and finally its shareholders.
Gary Kelly, the airline’s chief executive, had his contract extended through 2011. The board has not yet decided whether he will assume the chairman and president titles after Kelleher and Barrett step down.
“We’ve got a lot of work to do and a lot of challenges ahead,” Kelly said. But he said he was gratified with the board’s vote of confidence.
The airline declined to disclose details of pay packages for Kelleher and Barrett’s final year or their five-year extension. A spokeswoman said that information would be included in a filing with the Securities and Exchange Commission as early as today.
The transition comes as Southwest is struggling to reshape itself as it faces mounting challenges. The airline is grappling with high fuel costs, increased labor expenses and some growing pains as it expands into larger markets. It has also been battling a generation of competitors, like JetBlue Airways and AirTran Airways, that have mimicked many aspects of its low-cost business model.
“Southwest has some very serious issues right now,” said airline consultant Mike Boyd. “But part of Herb’s legacy is that he’s leaving the airline with an extremely good management team in place, and they know what they have to do.”
Kelleher, an attorney, founded the airline in 1967 with San Antonio businessman Rollin King. They launched with three planes in 1971, after a legal battle over the right to fly from Dallas Love Field.
“He was a truly great CEO,” King said in a phone interview from his vacation home in Wyoming. “But in the beginning, it was his legal expertise that was his great strength. That’s all he did for the first 10 years.”
Barrett was also there at the airline’s inception, working as Kelleher’s assistant. She has risen to become one of the nation’s top female corporate officers.
Kelleher became legendary for some of his high-profile antics, such as the time he arm-wrestled Kurt Herwald, chairman of Stevens Aviation, at the Dallas Sportatorium for the right to the slogan “Just Plane Smart.” Herwald won but allowed Southwest to keep using the phrase.
Kelleher still smokes at the podium during the airline’s annual meetings. He has dressed up as Elvis on Halloween and can be seen helping flight attendants pass out snacks when he travels on Southwest flights.
Boyd said many competitors have been blinded by his charm and folksy demeanor.
“A lot of guys saw the bourbon and the Elvis costume and thought, ‘This guy’s a pushover,’” he said. “That’s a big mistake.”
Indeed, under Kelleher’s leadership, Southwest has grown into the industry’s most consistently profitable airline and carries more passengers on domestic routes than any other carrier.
Kelleher has been very active in his role as chairman. He is in his office every day and oversees much of the airline’s strategic planning. In 2005 and 2006, he led the airline’s challenge to the Wright Amendment, testifying before Congress and helping negotiate a compromise with American Airlines, Dallas/Fort Worth Airport and the cities of Fort Worth and Dallas to eventually end the restrictions at Love Field.
The company’s stock (ticker: LUV) rose Thursday by 68 cents, or 4.3 percent, to close at $16.40. Kelleher joked that investors were relieved that he is finally stepping down.
“When I became CEO in the 1970s, the stock plunged,” he said. “So it’s only fair that it would go up now. Fate is evenhanded if you wait long enough.”
He had a quick answer when asked about his legacy.
“I think it will be that I consumed more Wild Turkey and cigarettes than anybody else in the industry,” he said.
Online: For more airline coverage, check out Sky Talk, the Star-Telegram’s aviation and travel blog, under Blogs/Chat at www.star-telegram.com.
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Trebor Banstetter, 817-390-7064 tbanstetter@star-telegram.com
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