That visionary was Herbert David Kelleher. With cofounder Rollin King, the Texas-based airline began in 1971 by flying within the state from secondary airports, making them exempt from Civil Aeronautic Board airfare restrictions. Their low-cost alternative approach built a steady passenger base, and when the airline industry was deregulated in 1978, Southwest expanded to other states. Their quirky model of open seating and no fees for the first two bags were embraced by travelers, and by 2012 they'd become the third largest airline in America.
Gary Kelly took over the CEO spot in 2004 and led the airline through immense growth. Things worked fairly well until the mid-1990s, when the strains of expansion and market competition choices began to take their toll on the close-knit, family business model that had served them well. Kelly stepped aside for a new CEO, but the troubles didn't stop. In 2022, flight cancellations had tripled, from 0.8% to 2.4%. The Pilots Union to the unusual acion of picketing the airline, not for increased pay, but for better scheduling systems. A Christmas season scheduling system meltdown cancels more than 60% of their flights over two days, and losses of $1.1B, exacerbating the problem.
Steady financial losses left them financially exposed, and when the hedge fund Elliott Investment Group bought a 10% interest in Southwest, demands for dramatic changes were forced onto the airline. Elliott gained six seats on the Board of Directors, and forced the decision to eliminate two key differentiating features: open seating and up to two free checked bags.
My flights are often chosen for convenience and total cost, using independent flight selection websites to see the total cost to fly (fare, taxes, fees and baggage). I've noticed that Southwest has been raising their fares to match or just stay under total cost on routes where they have sufficient competition. With these latest changes, I suspect there will be short term sale prices to appease their fans. But Southwest was never just about the money. Their success was equally driven by the persona they evoked, one of having fun with friends as we flew. They celebrated their passengers. Kept things light, so it felt more like a road trip with friends than cattle car indifference. One time, when snow and ice kept us from pulling up to a gate in Denver, an attendant whipped our a harmonica, and we all sang and clapped until we could gate the plane.
It's clear that things need to shift for Southwest to remain afloat. Operational changes, and reevaluating the size and scope of the airline, needs to happen. But the hedge fund-driven changes have favored gutting its soul in favor of a race to the bottom, with nothing other than memories to keep it afloat. I feel that these choices will destroy any loyalty factors, leaving them splitting pennies for minimal profits.
