Heard and Overheard

Heard and Overheard from Southwest Airlines' Leaders

Heard and Overheard Year in Review for 2004

January 5: “ The star of the next reality television show isn’t a model, an actor, or a beach-dwelling survivor; it’s an airline. The show follows employees of Southwest Airlines as they deal with weather delays, blackouts, and passengers who are running late or too drunk or too smelly to board the plane. There are unhappy travelers and a few shouting matches.” – The Associated Press, on the debut of the real-life series “Airline” on A&E

January 14: “We’re going to rock their world.” – Senior Director Public Relations Ed Stewart on the effect Southwest service will have on Philadelphia, in the Philadelphia Daily News

January 15: “Does fair pricing work in the airline industry? Of course it does. Southwest Airlines has exactly that kind of pricing–often not the lowest, hardly ever the highest, and no fare higher than $598. Research tells us that price is the first consideration when buying an airline ticket. Does Southwest leave money on the table by not trying to squeeze every penny from its customers? Sure. But which airline has produced the highest return to shareholders over the last 20 years? And which airline has grown the most over the last 20 years? The one with the fair pricing system.” – The Wall Street Journal’s “Middle Seat” travel column

January 27: “ It’s so indicative of how the industry has changed that the people with deep pockets are low-fare carriers.” – Aviation consultantMo Garfinkle in USA Today

January 28: “ Wherever Southwest is, it’s such a great air service it doesn’t make sense to fly against those guys. If there ever was a market that didn’t need more domestic service, this [Salt Lake City] is it.” – JetBlue CEO David Neeleman, on the prospect of adding more flights at SLC

February 3: “ Don’t compete with Southwest; you will lose. Nobody wins against Southwest. It’s like a high school team playing against the [Oakland] Raiders.” – Airline consultant Adam Pilarski, in an article in Chief Executive magazine

February 18: “ It’s like a rising tide will lift all boats: The fact that (Southwest) is expanding more and becoming a larger airline will help BWI as much as the Philadelphia thing will hurt it,” said Air Travelers Association President David Stempler. “It’s not going to hurt Baltimore,” agreed Bestfares.com CEO Tom Parsons, “but the folks in Philadelphia will be dancing in the streets.” – The Baltimore Sun, on the implications of our entry into PHL

February 20: “One of the reasons Southwest is so successful and has such high customer service ratings is that they promise a product that is very simple and deliver on that promise very consistently. It’s a better paradigm ... and that’s where we need to move. The more complex your operation is, the more chances you have in disappointing your customers.” – American Airlines CEO Gerard Arpey, at a financial analysts conference recently

February 26: “Certainly the no-frills airlines business is a good one, just ask Southwest. But none of the larger carriers have successfully encroached on Southwest’s turf.” – The Motley Fool (www.fool.com)
March 2: “It used to be that the legacy carriers, as we like to now call ourselves, could command a premium. Our position with key real estate assets, known as hub cities, enabled us to enjoy pricing premiums. So, we could have higher costs since people were willing to pay more to fly us. But the number of passengers willing to do that is dwindling. Some would say even vaporizing.” – David N. Siegel, president and CEO of US Airways

March 30: “Brand loyalty is a luxury most of us can’t afford. And we don’t care that much about frills, either. I’d fly Joe’s Airline and spin the propeller for them if it got me there cheaper–and I wouldn’t care if they dusted a few acres of crops on the way.” – Philadelphia Daily News

April 6: “ The great benefit of ‘Airline’ is that it gives people a window into the front line of customer service. If you’re shouting and screaming at someone in front of you because you’re having a bad day, it’s not that person’s fault. So my lesson would be, cut them a break. They’re trying really hard.” – “Airline” producer Chris Carey, in USA Today

April 7: “ The report showed why low-fare airlines are gobbling up market share from traditional network carriers: They’re on time more, they bump fewer passengers, they mishandle less baggage, and they generate fewer complaints. ... The low-cost airlines perform well in ways that are important to their passengers.” – A story by The Associated Press in Newsday.com about the recently published Airline Quality Rating

April 14: “‘In the heyday of the ’90s, you know what? We probably took advantage’ of business travelers who had no choice but to pay high walkup fares. ‘The fact of the matter is we understand those days are never coming back.’” – David Hilfman, Continental Airlines’ vice president of sales, in The New York Times

April 21: “ Travel is part of our souls. It’s good for us; we need to do it. Commercial air travel gives us great freedom, and as much as we complain about it, we should remember that.” – Columnist Scott McCartney in The Wall Street Journal

April 26: “ In a corporate world overpopulated by self-serving senior execs, Southwest Airlines continues to symbolize what good managers can accomplish as leaders with a single-minded dedication to serving stakeholder interests. The latest example of (their) extraordinary talent for putting customers first ... was yet another example of why Southwest has become a great company. As surging petroleum costs have squeezed an already financially distressed industry, some airlines have added substantial fuel surcharges to fares. Southwest ... said it has no plans to levy a fuel surcharge. It was so Southwest, and helps explains why the company continually prospers in an industry known for being a black hole where money goes to die.” – Kansas City Star columnist Jerry Heaster

April 27: “The coming of the younger, smarter Dallas-based airline to the Philadelphia market should be cause for celebration for anyone who flies. ... Clearly, there is some magic to airline efficiency that goes beyond cutting employee compensation.”
– Philadelphia Inquirer

April 30: “ We know the city is excited about Southwest coming, but our general belief ... is when fares are the same, people are going to want to fly US Airways. Philadelphia is ours to lose, and we don’t plan to lose it.” – B. Ben Baldanza, US Airways’ senior vice president of marketing and planning, in The Philadelphia Inquirer

May 11 – PHL Inaugural:
- “If the enthusiasm among passengers that greeted Southwest’s first flights (at PHL) is any indication, the airline is clearly welcome. Passengers were already lined up to check in at Southwest’s ticket counter, festooned with lavender, red, and gold balloons, at 5:05 a.m.” – The New York Times
- “ Everything I have to say about Southwest is positive. I hope the other airlines learn from Southwest. When I heard they were flying to Philadelphia, there was cause for celebration.” – Southwest Customer Meenu Gupta, who flew aboard our inaugural PHL-MDW flight, in a story in The Philadelphia Inquirer
- “ Passengers on Southwest’s first flights to and from Chicago experienced the airline’s standard service, from ontime departures and arrivals a few minutes early to cheerful flight attendants who mixed jokes with the serious business of safety announcements.” – The Philadelphia Inquirer

May 13: “The reason that Southwest survives is not because of its low fares but because people like the way they’ve been treated.” – Airline analyst Michael Boyd in The Philadelphia Daily News

May 20:
- “Our fundamental business strategy remains unchanged: Offer our Customers low fares; take them where they want to go, when they want to go; and get them there ontime, with their bags, and with smiles on their faces.” – CEO Jim Parker
- “At Southwest Airlines, I believe we have good People at all levels. This is the true reason for all of our past accomplishments, and it is the best assurance of our future success.” – CEO Jim Parker
- “You have to size the aircraft to the market it serves. We want the airplane that can do everything well, as opposed to the airplane that can do some things well.” – Chairman Herb Kelleher, responding to a question about the possibility of adding 737-800s or -900s to our fleet

May 26: “Six weeks ago these (legacy) airlines were talking about how many people they had booked for summer travel, and now they’re talking about furloughs. They can’t expect to sell their products for below their costs and survive.” – Airline consultant Ron Kuhlmann, in a Dallas Morning News article about the affect of fuel prices on some airlines

May 31: “I tried to explain Herb Kelleher to my 11-year-old the other night. While on our family walk, I mentioned to my husband that I’d had lunch with Herb. My daughter wanted to know what was so special about Herb Kelleher. Her question was stunning in its simplicity. And my answer that he was a ‘living business legend’ left so much unsaid. In an age of Ken Lays and Dick Grassos, ‘Herb unplugged’ proves that a true leader can be honest, have fun, and make money, too.” – Dallas Morning News business columnist Cheryl Hall

June 11: “Most of us can remember 20 or 30 years ago when this was practically a ghost airport, with only a handful of scheduled flights. Today, it’s serving 18-1/2 million passengers, almost twice as many as when we began construction ... It’s one of the fastest growing airports in the nation.” – Chicago Mayor Richard Daley, at a Tuesday press conference at MDW celebrating the completion of the airport’s $927 million redevelopment project. Herb also spoke at the event.

June 23: “Southwest Airlines parked its 400th Boeing 737 under the noses of its competitors (last) Thursday to remind them who’s the low-fare boss. The Dallas-based carrier popped into New York’s LaGuardia International Airport to celebrate its 33rd birthday, along with the new jet’s delivery, and to kick up some dust with the New York-based national media. ‘Despite our size, it’s always surprising about who hasn’t yet heard our story,’ explained CFO Gary Kelly.” – The Dallas Morning News, about Southwest’s “flying press conference” last week aboard our 400th plane, which landed at LaGuardia to pick up some New York-based reporters and analysts for a two-hour flight over New York.

June 24: “US Airways says it is determined to survive the Southwest invasion by slashing its costs by 40 percent beyond cuts already made, and operating more like the low-cost airlines that are giving it fits. ‘We’re doing something that’s never been done before,’ US Airways senior vice president Chris Chiames said. ‘It’s the Extreme Makeover of the airline industry,’ he said, alluding to a reality TV show.” – The Philadelphia Inquirer

July 12: “Ever since its creation nearly a century ago, the commercial airline industry has been prone to abrupt ups and downs. Changing aircraft technology, big capital investments, and the shifting priorities of governments have repeatedly forced airline operators to scramble to stay aloft. Yet few of these periods of change have promised to transform air travel as thoroughly as the wave of increased competition, new entrants, and aggressive price cutting now sweeping through the airline business.” – The Economist

July 19: “This is truly a bittersweet moment for me, personally, and for Southwest Airlines. ... A thousand thank you’s, Jim.” – Chairman Herb Kelleher, on Jim Parker’s retirement from the Company
“ I think this is the greatest Company in the world, and I’m chomping at the bit, just raring to go.” – CEO Gary Kelly, on being named Southwest’s new top executive

July 20: “By almost any measure, Southwest Airlines soon will be among the nation’s top three or four airlines. As the Dallas carrier’s newly appointed chief executive, Gary Kelly has the job of making sure Southwest continues to look nothing like its competitors–culturally, perceptually, and especially financially.” – The Dallas Morning News

July 23: “In a business in which everyone sells the same thing, the low-cost producer usually comes out on top. It took 25 years, but that is exactly what has happened in the airline business. The discount carriers have won the war. The insurgents have taken the capital.” – The Boston Globe

July 30: “Cost-cutting measures put in place by the discounters help to keep their fares so low that they are stealing market share from the old-guard airlines. ... But the thing is, the discounters really aren’t all about eliminating frills. They are about eliminating the kinds of frills that their customers are willing to do without–and keeping or even adding benefits that their customers see as adding value. It’s all a matter of priorities.” – The Motley Fool (www.fool.com)

August 3: “Oil has been a slap in the face for an industry knocked around by terrorism, war, SARS, and an economic slump. But the slap has been a wake-up call. Carriers recognize fuel costs could stay high and are moving to streamline operations, weeding out bloat amassed through decades of evolving technologies and business strategies.” – www.thestreet.com

August 12:
- “Wanna get away? Democratic presidential candidate John Kerry inadvertently filmed a Southwest Airlines commercial when he belted out how he much loves ‘Buckeye football’ at a campaign rally. Uh, John, Bowling Green, Ohio, was earlier that day. This particular rally was across the border in Taylor, Mich.–deep in the heart of Wolverine country.” – St. Louis Post-Dispatch
- “While George W. Bush has Air Force One and John Kerry has his own Boeing 757, I have my unofficial campaign airline, called Southwest. I don’t have just one plane; I have the whole airline at my disposal. If you arrive late or have a special need, they give you a wink and say, ‘I’ll take care of that.’ And they give you peanuts. And they are roasted. Do you realize how important a factor that is for a hungry campaigner?” – Presidential candidate and consumer advocate Ralph Nader, in The New York Times

August 18: “Fortunately, not all award plans are alike. A recent FrequentFlier.com poll found Delta SkyMiles travelers to be the least satisfied and Southwest’s to be the most contented.” – Newsweek magazine

August 19: “Southwest and JetBlue, just to name two carriers that I personally admire, continue to enjoy success because consumers believe they consistently deliver a good value product. Yes, their low fares are important, but it is the totality of the travel experience that makes customers regard them to be a good value.” – Former Delta President and COO Fred Reid, who has been named as the new CEO for upstart airline Virgin America, at a June meeting of the International Aviation Club

August 27: “While the soaring price of fuel is a huge problem for the economy, it is rapidly becoming a catastrophe for the airline industry. At today’s prices, the fuel bill for U.S. airlines will be $6 billion more than it would have been with last year’s prices.” – From an Air Transport Association letter to Congress

August 30: “Jim Patton is the kind of customer every low-fare airline needs. Patton ... is fiercely loyal to those companies that keep ticket prices low and make air travel affordable. He’s vowed to keep flying on Independence Air even if ... major airlines match its fares. ‘If they can fly for $49 (each way) now, why couldn’t they fly for $49 when we were paying $800? They’ve been getting you for $750 up front every other time,’ he said.” – Greensboro, N.C., News & Record

September 2: “I’d like to offer some helpful suggestions for other revenue-generating actions airlines have overlooked that could let them extract even more money from passengers. Here are a few of the more-promising changes possibly ahead: Turbulence-avoidance collection, tray-table-usage fees, ... seat-reclining fees, ... and pay toilets: a swell idea whose time has returned.” – Wall Street Journal columnist Scott McCartney, on the introduction of new airline fees

September 9: “Regrettably, (the massive reorganization of Delta) will impact Delta people. Achieving our goals will require enormous change. ... Our people want and deserve the facts as we know them, no matter how difficult, so there’s no sense sugar-coating the situation: A reduction of between 6,000-7,000 jobs over the course of the next 18 months; a 15 percent reduction in administrative overhead costs, including management reductions; reductions in compensation throughout the company, to be announced by the end of September and implemented at a later date; and increased employee contributions to health care costs.” – Delta CEO Gerald Grinstein, on the airline’s new “transformation plan” aimed at returning it to profitability

September 13: “To survive, U.S. airlines ... must reinvent themselves as more competitive and focused carriers. Radically cutting costs in the midst of crisis is a survival stopgap but is not alone a recipe for long-term competitiveness. Competitiveness depends in part on sustained cost controls and strategically focused growth. Just ask lower-cost airlines such as JetBlue and Southwest.” – The Dallas Morning News

September 16: “I think the real challenge for low-cost carriers will be continuing to differentiate themselves beyond being a lower-cost seller of tickets.” – Airline industry consultant Stuart Klaskin, in an article on moneycentral.msn.com

September 17:
- “For the first time in the Company’s history, Mechanics at Southwest Airlines have agreed to extend their labor contract for three years–a move that will help the discount carrier keep a lid on costs as it expands.” – Fort Worth Star-Telegram
- “I’ve got a big smile on my face today. This is a big win for everyone.” – Vice President Maintenance and Engineering Jim Sokol
- “Not least of the people pleased by the outcome is Chief Executive Gary Kelly. He lauded the parties involved in keeping his firm sanguine.” – Forbes.com
- “Our visionary, entrepreneurial Mechanics have shown, once again, that they are prepared to lead Southwest Airlines through the unprecedented turbulence facing our industry.” – CEO Gary Kelly

September 21: “The airline industry for most people in the business was a great romance. My message is it’s not a romance anymore. It’s a business and should be subject to the same economic pressures as any other industry. It should be an industry in which people can invest and make money by being innovative and cost-conscious like Southwest.” – Alfred Kahn, former head of the Civil Aeronautics Board and credited as the “father of deregulation,” in The St. Petersburg (Fla.) Times

September 27: “I’m feeling like Luke Skywalker. We’re battling every conceivable enemy, including the black holes that are oil prices and hurricanes.” – American CEO Gerard Arpey, speaking to a recent meeting of airline analysts

October 4:
- “The Number 1 issue facing the customer today is, in fact, energy prices. ... So when you take disposable income out of their pockets and transfer it to their oil companies, it is just money they do not have to spend.” – Lee Scott, chief executive of Wal-Mart Stores Inc., speaking at an analysts’ conference, in The Dallas Morning News
- “The airlines have no control over fuel prices. It’s one thing for rising fuel costs to lower your airline from very profitable to profitable, but it’s another thing to lower profits from awful to disastrous.” – Michael E. Levine, a Yale School law professor and former airline executive, in The Detroit News

October 15:
- “Southwest Airlines blew past Wall Street earnings expectations for the third quarter ... posting a 15 cent per share net income against analysts’ estimates of 12 cents. The world’s largest low-cost carrier saw its costs come under better control and improved its earnings despite the cost of fuel being 90 percent higher than during the same period in 2003.” – The Dallas Morning News
- “The airline did a ‘superb’ job on the cost side, wrote Merrill Lynch airline analyst Michael Linenberg in a research note.” – thestreet.com
- “Southwest Airlines is flying high.” – The Motley Fool (fool.com)

October 19: “What good news there is for the quarter may already be out of the bag, after Southwest Airlines kicked off airlines’ earnings season by reporting a profit of 15 cents a share, beating last year’s performance and analysts’ estimates. The low-cost darling kept expenses down in part by its prescient move to hedge the majority of its fuel prices. ‘They’re looking like geniuses now,’ said Jim Corridore, equity analyst at Standard & Poor’s.” – thestreet.com

October 25: “With its highly productive workers, efficient use of aircraft, and easy-to-use Web site, Southwest Airlines is as famous for its low costs as for its low fares. Recently, though, the discount king has been winning kudos for another kind of cost-cutting tactic: savvy fuel-hedging that has saved the airline millions of dollars as oil prices have hit records.” – Business Week magazine

October 29: “With these oil prices, it’s like treading water with a weight around your neck. You can do it for only so long. The whole industry is treading water right now. Some will survive. Others will inevitably head to the bottom.” – Airline consultant Robert Mann in the San Francisco Chronicle

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