Speeches and Presentations from Southwest Leaders
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Gary Kelly |
Following a line of distinguished guests for Management and Organizations 611, “Business Leadership in Changing Times,” Southwest Airlines CEO Gary C. Kelly spoke to the class on October 4 about his experiences at the budget airline.
Taught by Professor Gerald Meyers of the Ross School of Business at the University of Michigan, the class began with a mock press conference in which students were assigned roles, including Southwest Airlines’ executive management and various stakeholders of the company, such as employees and Wall Street analysts. Professor Meyers moderated the press conference as Wolf Blitzer while the Southwest executive team answered questions regarding the company’s performance given fuel hedging and its labor relations, among others. After the simulation, Kelly addressed the class and conducted a question and answer segment.
Kelly seemed impressed by the simulation, and said it was “not often that you can sit on the sidelines and observe your life unfolding.” He then proceeded to inquire about the resumes of the students portraying the Southwest executive team, which included Angelita Becom, MBA2, playing Gary Kelly and Alison Leff, MBA2, as Herb Kelleher.
Earlier in his career, Kelly had been a media contact for Southwest, which he described as a “good training ground” for his future role as CEO. Kelly studied accounting in his undergraduate at the University of Texas, Austin, and joined Arthur Young & Co. in Dallas upon graduation. One of his firm’s top clients at the time was a start-up airline called Southwest. He joined the company in 1986 as Controller and three years later he was named CFO. When then CEO James Parker announced his retirement in July 2001, Kelly was promoted to the job.
Since then, Kelly has presided over a challenging period at Southwest. As America’s largest airline, based on the number of passengers boarded, the company now faces rising fuel costs, labor disputes, and stiff competition from budget airlines seeking to replicate its success. Kelly fielded questions from students that covered these issues, and other topics such as international expansion, increasing productivity, and leadership skills he finds important.
When asked about Southwest’s attempt to establish operations in Boeing Field of the Seattle area, Kelly responded by saying “airports are very difficult political issues.” He attributed the airline’s derailed efforts to a lack of support from the local neighborhood that feared noise pollution. This opposition influenced the local government that was up for re-election that year. Additionally, competitor Alaska Air’s efforts to join the deal hampered its fruition. In the end, these factors prohibited the company from doing what he called “what we think we’re good at, taking a secondary airport and making it a useful asset.”
In regards to anticipating labor contract negotiations with Southwest pilots, Kelly discussed what he learned from the company’s rocky bargaining with flight attendants from May 2002 to June 2004. Kelly recalled what he had learned from former CEO and founder Kelleher, who told him, “‘you are negotiating everyday.’” Kelly said he “[tries] to be on the road at least once a week.” Kelly considered labor contracts a challenge because companies were asked to commit to terms for long periods of time, despite the changing business environment surrounding them. His key lesson from the experience was that “you have to listen to your people, you can’t be tone-deaf,” he said.
Looking toward the future, the airline hopes to expand internationally. In his talk Kelly said, “we would like to be prepared to take international opportunities but we don’t have the infrastructure in place, and I think that we should.”
The airline has also explored the idea of assigned seating, and for the time being will not pursue the feature. Kelly described it as “the most apparent change people look to when they say ‘Oh, you’re becoming like everyone else,’ [it’s a] very polarized issue,” he said. Although the company is not offering assigned seating, it does possess to the technology to implement it.
Throughout the talk, Kelly was careful to distinguish Southwest from “legacy” carriers such as Delta or American Airlines. He believed Southwest was more productive than legacy carriers, and therefore he often reminded employees that the company adhered to its own standards, and not to those of older airlines. Kelly pointed out that the company has never had a pay cut or furlough in the history of the company, “not even after 9/11,” he said. He went on to say that Southwest did not “tie [employee] pay to what other guys pay,” he said the company “pays what we can afford, under the umbrella that we must be the low-cost producer.”
Kelly also discussed the attributes of good leaders with the class. “You need to be a good person and to truly feel joy by other’s success and not be so inwardly focused…an ideal leader is described by other people as someone that convinced them that they cared about them.”
© The Monroe Street Journal, 2006
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