Speeches and Presentations from Southwest Leaders
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Gary Kelly |
Thank you, Sammy, for that kind introduction. It’s great to be here today. What a pleasure to be at the top of your lineup. I’m honored to help you get your conference underway.
Some of you might know that Southwest Airlines leads the industry in efficiency and profits– if our planes aren’t in the air, they aren’t making any money. Being ontime is a companywide objective. So, in the time it takes to give this speech, our aircraft will pull in safely to the gate; passengers will deplane; bags and cargo will be unloaded; the aircraft will be quick-cleaned, provisioned, and re-fueled; passengers will board; bags and cargo will be loaded; and we’ll push back from the gate for departure. there, i’ve just given you one of our prime competitive advantages.
Those of you who are visiting from out of town, welcome to Dallas, or “Big D,” as they say. I saw your agenda for the next few days – what a great conference lineup! Your theme of “Setting new trends” sure has taken on a whole new meaning lately in my business, where people are trying to keep up with the latest trend in “liquid free” travel.
I never thought the day would come when I would stand before an audience (on a hot day in September), and say, with all sincerity, that I hope you left your shampoo and deodorant at home. Nor did I realize I would have learned so much about gel inserts for shoes. I thought I might be wearing them someday, and right about now I wish that I had a pair…. but I never thought I’d have to spend so much time explaining why you can’t wear them on an airplane.
Whether you’re standing here in my shoes or sitting there in yours, we all follow trends. It’s part of our jobs. But for those who strive to set the trends, one thing is certain: you can’t be complacent. the world changes, whether it’s new competition or soaring costs. You have to embrace change. Of course change comes easier for some than others…but I propose that with a small dose of common sense and a big dose of optimism, change can set you free. And today I want to talk to you about how Southwest Airlines strives to hit the high notes as an instrument of change.
You won’t find many airlines who embrace change. But we do. And I heartily agree with Margaret Mead, who said, "Never doubt that a small group of thoughtful, concerned citizens can change the world. Indeed it is the only thing that ever has."
That could be the lead paragraph of the Southwest story. Southwest Airlines began as a small group of thoughtful, concerned people who passionately believed they could successfully offer something very different in the airline industry. little did they know in 1971 that they would set the trend in the constantly troubled airline industry.
When Herb Kelleher and Rollin King launched Southwest Airlines more than three decades ago, they did know one thing for certain: they wanted to buck the trends and try something new. Respected airlines like braniff, American, Texas international, and other “legends” were steeped in traditions that our tiny Texas airline didn’t have; we could set a course for success without that baggage.
Herb and Rollin decided to follow a simple notion. They thought, “Let’s get passengers to their destinations, safely, with lots of flights, when they want to go, on time, at the lowest fares possible, and have a good time doing it. let’s treat our employees like family and our customers like guests in our homes.”
Those key guiding principles remain to this day although the world has changed dramatically in 35 years, and so have we. It’s easy to look back now, given southwest’s rich history of success, and conclude it was easy—a lay-up. it wasn’t—it was hard. it took tremendous courage, conviction, and perseverance. my first flight ever was on southwest in 1972, as a teenager. I was one of three passengers on the flight. i remember thinking, “this airline is never going to make it!” i got very attentive service by three lovely ladies in hot pants, i might add. some memories are vivid, of course.
Our willingness to break the old airline mold has given the freedom of flight to millions of people who otherwise could not afford it. We have built a loyal customer base that has served us well in the best of times, and saved us in the worst of times.
Similarly, your willingness to break the mold and depart from a standard news format like those of your larger competitors has resulted in a strong and loyal base of customers for you. We have a lot in common – and I’ll demonstrate that more in just a few minutes. But first, a bit of history about our customers:
When Southwest Airlines started as a small Texas arline in 1971, only 15 percent of the population could afford to fly. the airline industry was famous for inefficiency, high costs leading to high fares serving elite customers.
Over the years we have taken flight beyond the borders of Texas and into many of your hometowns. With our efficient, low cost operations, came lower fares for millions of people. In fact, our low fares led our competitors to lower their fares, sometimes by as much as two thirds. Researchers at the U.S. Department of Transportation call this “The Southwest Effect,” and I’m pleased to report that it’s alive and well in America. our egalitarian approach democratized the skies.
Today, roughly a generation later, More than Eighty-five percent of Americans have realized the dream of air travel. Someday, perhaps the Southwest Effect will migrate across borders, taking more Americans to Canada, Mexico, and beyond. But we have a lot to do here at home, first. We have new markets to create right here at home, and we have wrong old amendments to do away with in Washington…but that’s a passionate speech that’s best left for another time.
As much as we have set the trend, and changed the airline industry, we also have been changed by forces beyond our control, like the Wright Amendment, 9/11, hurricane Katrina, the terrorist plot uncovered in England, soaring oil prices, and brutal competition. Our People have done a remarkable job of responding to these forces.
That’s because Southwest strives to maintain what founder Herb Kelleher calls “the alacrity of a puma.” That means, even though our small Texas airline has grown to become the largest domestic airline in America, we still think and act like a hometown business. We move swiftly to mitigate new emerging risks.
We are people-oriented and money-conscious. We keep things simple, and try to do things better than anyone else in the industry. We don’t limit ourselves to the intellectual capital that’s generated in management committee meetings; we welcome ideas from all our Employees. And we take the rest as it comes…with a servant’s heart and a warrior’s spirit.
Of course there’s a lot more to it than folk wisdom. We spend a great deal of time planning for the unpredicatable. And, there are some changes we know we can expect – the weather, fuel costs, government regulations, elections, and so on. Knowing we’ll have to adjust to these forces helps us prepare for them ahead of time.
When we are faced with a change of any kind – internal or external - we start, much like reporters do, by asking questions. At any pivotal moment in time, we want to know three things:
- First, how will this change affect our employees?
- Second, how will this change affect our customers’ experience?
- And third, how will this change affect our financial results?
Consider these questions in terms of the terrorist plot that continues to unfold in the papers….and the TSA’s new security guidelines that develop with each new headline.
In terms of the customer experience, well, passengers have to rethink the way they pack their bags and schedule their flights. In this situation, the customer experience is closely tied to traffic levels, especially of our short-haul business travelers. checking bags makes people think twice about taking shorter flights.
Recently, one of our passengers was overheard saying, “If it’s going to take me six hours to fly from Dallas to Houston, I might as well drive there myself.” of course, it doesn’t. but, we have to deal with that perception.
As far as our employees are concerned, the new limits on carry-on bags are a mixed blessing. We’ve been dealing with a growing trend in carry-on items. Our passenger cabins were absolutely stuffed to the gills with carryon luggage. People would rather carry on their bags, especially on short flights. But more passengers with bigger bags to stow means longer security check-point lines, slower boarding times, and longer turn-around times at the gate. And that can cost millions of dollars. (If we increased our turnaround time by a mere 10 minutes, we would have to buy 40 new Boeing 737s, which list for over $40 million apiece).
Ironically, the new TSA guidelines have given us some relief on board …and more room in our overhead bins. The new challenge is the shift from the overhead bins to the belly of the plane. And that has a heavy impact on our employees who work below, on the ramp.
So, clearly, we find ourselves in a period of adjustment, primarily with staffing for check-in and check-out processes. Is it something we take seriously? Of course. Nearly five years ago we picked ourselves up, dusted off, and pulled through the worst terrorist event in our nation’s history. We found a way to remain profitable in a Post 9-11 world. We don’t take that for granted.
It’s vital to stop and evaluate every now and then, so you can examine the implications of change that’s occured or that’s needed – on your employees, your Customers, and your business. That’s how you avoid complacency.
If we want to excel, then, we have to realize that we live in a volatile, 21st Century world. Events beyond our control are bound to throw a wrench in the best-laid plans of airlines . . . or newspapers. The only way to stay ahead is to have a winning strategy, execute well, and be ready to react and respond quickly and enthusiastically when things change.
And, we have to have an open mind: we have an interest in what other people are saying about Southwest Airlines. we love to read mail and blogs by our loyal customers and employees. We read what’s in your papers and on your websites. And, we read what you write about our competitors.
Our competitors really struggle with change. Some ignore the necessity of change until they’re faced with terribly unattractive alternatives, like bankruptcy. For some, even bankruptcy isn’t enough. And they seem to complain about everything. They complain about taxes. They complain about regulations. They complain about customer demands. They complain about gas prices. They complain about having to change. And they complain about us.
One airline executive1 said, “The problem for us is that while low-cost carriers have a cost structure that allows them to be profitable at lower fares, legacy airlines matching those fares – as they must – are operating in most cases at a loss, due to their higher cost structures. But adjusting to this changing competitive landscape requires far-reaching and often wrenching changes …”
Is it too late for the others to change? Someone2 said, “…Not every airline operating today will survive. Some airlines will win – some will lose. The winners will be the ones who deliver great customer service and low cost. The losers will be those carriers unable to meet the competitive bar.”
We like clearing the bar, and we like raising it to ever-higher standards. Our employees are worthy of it, our customers deserve it, and our shareholders have come to expect it, after 35 years.
By the way, I’ve noticed something interesting about expectations. As we’ve grown to become america’s largest carrier in terms of passengers carried, more people expect us to stop being different. Wherever I go, invariably I’m asked the same question: Is Southwest Airlines becoming like the other guys?
So, I’d just like to assure you that you can count on us to keep on being different. We plan to be the low cost producer with the best Customer Service—that’s value. and, you can count on us to continue “hitting the high notes” as an instrument of change. Our plan is pretty straight-forward:
We strive to hire and retain the best employees in the industry. For us that means attracting the right kind of worker, being able to reward them with competitive pay and benefits, and then nurturing an environment in which they can grow and look forward to a future. we hire for attitude and train for skill.
We want to grow. so, we look for markets overpriced and underserved. our new service often stimulates traffic by three and four-fold! We’re actually in an enviable position right now – we have more demand than we have aircraft. We’re taking on 35 new aircraft this year. We plan to grow a conservative 8 to 10 percent. And we are adding flights all across our system to improve our schedule and “connect the dots.”
We will wisely deploy technology. we’re providing more and more tools and information to employees and customers, with a remarkable improvement in accuracy and productivity. Our online business is fantastic. In fact, we sell 70 percent of our seats online. over 60 percent of our boarding passes are issued by self-service means. We launched “Ding!” – an innovative program that delivers our fares directly to computer desktops so our customers can get a jump on the latest Southwest.com sales. And we get great leads from our log, where “Citizen CEOs” – our loyal customers and employees – participate in forums about improving the way we do business.
We strive to keep our system simple. People know exactly what to expect from us: our fare structure is easy to understand; our schedule is dependable; and we operate a fleet of 472 Boeing 737s – one kind of airplane – so that our employees are experts on the planes they maintain and operate.
We will strive for more on-time arrivals. Navigational technology, flexible flight plans(we can fly over water now that we’ve equipped all of our airplanes with life vests), and avoiding traditional hub-and-spoke systems and congested airports help us make it to the gate on time.
We will compete vigorously. We have an advantage with our industry leading fuel hedge, we keep our costs low and our spirits high, and that will help us continue to offer the lowest fares in the industry. And, we also have a pretty nifty boarding system and an award-winning frequent flyer plan.
We will follow the golden rule and remain true to our customers. We believe that People connections are as important as airport connections, or internet connections. We can be a better company by becoming more high-tech, but we will strive to remain high-touch, too. That means if you call us, you’re going to get a human being on the other end of the line. And if you write us, you’ll get a researched, personal response. We want people to think of us as their “hometown” airline. That means providing personalized service – service that makes people feel special, maybe even famous for a few minutes while they’re flying with us.
And we will promote a culture of change within our company. That starts with a desire to be the best among our competitors. and, that means we’re willing to take risks. We’re willing to use our imagination, our momentum, and a few defining moments to propel us into the future.
If you’re looking for ways to improve your business, consider these goals:
- Hire and retain great employees.
- Strive to grow.
- Embrace technology.
- Keep it simple.
- Ensure on-time deliveries.
- Compete vigorously.
- Follow the golden rule and Remain true to your customers.
- And promote a culture of change within your company.
Sound familiar? You see, the simpler and more straight-forward the strategy, the more universal its application, and, in my experience, the more successful the execution. Trend setting isn’t all that difficult if you’re willing to adapt, if you’re brave enough to change, and if you’re stubborn enough to stick to your founding principles.
I’ve spent a lot of time talking about change today, but there’s one thing that we won’t change at Southwest Airlines, and that is who we are as a company. We will not change our belief that people matter most; that you can have a good time and still arrive on time, and you can save people money and still make money.
It’s not rocket science, it’s airline science: people matter. Take care of them first, and best, and the rest will fall into place. (After all, we are in the Customer Service industry—we just happen to fly airplanes.)
Regardless of your position in this world -- whether you are an airline operator or an observer of the industry -- your ability to embrace change directly and profoundly impacts your success, and your happiness down the road, or down the runway.
Thank you very much for inviting me to join you today. Enjoy the rest of your conference.
1Joe Kolshak, Executive Vice President – Operations for Delta Air Lines
2Kolshak again
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