Southwest Airlines: LUV in the Air
Low Cost Does Not Mean Low Salary and Lousy Working Conditions
Aug 12, 2007
In an interview with Sandie Taylor LUV President and COO Colleen Barrett said, “after the employee…the company’s second focus is the passenger, with shareholders coming in a distant third. Usually, shareholders rankle at that kind of hierarchy.” Eric Torbenson of The Dallas Morning News said in a December 2005 article, “Among pilots flying Boeing 737s, Southwest pilots are the best-paid in the industry....”
But shareholders do not fret for LUV. Tom Gardner, Co-founder of The Motley Fool said; “Had you invested $10,000 in Southwest in 1980, you'd be sitting on $2.7 million today.” Thirty-five consecutive years of profits is a track record with which no one can argue.
Southwest Airline Business Model
The Southwest model is one that empowers people, in practice. “We don’t run things by a rule book,” Barrett concluded. “To me, it’s a way of life—you just use common sense.” The success is summed up in a few points made by Barrett:
- “I don’t understand why an employee should have one personality at work and another outside of work….We hire you for your individuality, and we aren’t going to try to spend six months molding you into corporate culture.”
- "We don't think you have to wear high heels and nylons to be safe. We'd rather our flight attendants be comfortable, so if we need one to kick the door open in an emergency landing, she's going to be able to do it."
- And the most powerful concept LUV has differently is: "We make no bones about telling a customer when they are wrong. We will not tolerate bad treatment of our people."
The Successes
Southwest has been copied all over the world; however, only a few have been successful. In the USA the number is low because the mentality of Barrett & CEO Gary Kelly (instilled by co-founder Herb Kelleher) is opposite of what is taught in the business world.
- Jet Blue (USA), founder David Neeleman and several executives were Southwest employees. It was financed by liberal Greek billionaire investor George Soros.
- Ryan Air (Ireland) is founded by Tony Ryan, Christy Ryan and Liam Lonergan. Ryan is a self made billionaire who started with $50,000 in his first company.
- Easy Jet (UK) is founded by Greek billionaire Stelios Haji-Ioannou who started working as a shipping clerk in his father’s factory.
- Air Arabia (UAE), founder Arab billionaire Dr Sheikh Mohamed Al Qassimi who brought liberal CEO Adel Ali former General Manager Middle East and Africa for British Airways and IT Director Ali Al Hamdany also from British Airways.
- Air Asia (Malaysia) bought and revitalized by former Time Warner executive Tony Fernandes.
The Failures
The list is nearly endless but this will focus on well-known company debacles.
- People’s Express (USA), founded by Don Burr and Gerry Gitner from Frank Lorenzo’s Texas Air Corp. Alfred Khan (the father of deregulation and economics professor) once said, with regard to People’s Express “…it [PE]… will be an example of airlines…under deregulation.”
- ValuJet (USA), founded by Robert Priddy, Maury Gallagher and Tim Flynn, from Continental (also under Frank Lorenzo), Florida Gulf and Mesa Airlines. All three of those airlines were known for their harsh, cruel management styles.
- Air Florida (USA), was considered a shady airline in the 1980s by employees. Its internal and external secrecy created an environment of distrust and fear.
When we examine the successful airlines we find one philosophy that permeates the corporate culture. Employees are treated with respect and everything else is secondary. In the failures we see that management feels employees are tools that can be replaced.
Successful airlines encourage their employees and failures distrust and resent them. Successful airlines buy new airplanes and maintain them well, failures go the cheapest route and use all federal loopholes to keep them in the air. Successes pay employees well while failures see pay as a means to reduce cost.
The villain of airlines, Frank Lorenzo (considered “unfit to run” an airline by the FAA) knows how to fail while Herb Kelleher (voted the #5 most influential business leader of the past 25 years) Gary Kelly and Colleen Barrett know how to succeed. There are two plans: success through empowerment or failure through confrontation.
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