Two interesting articles with some good background for those interested in Southwest. Very well written and factual (in my opinion)
http://www.sptimes.com/2005/04/18/Business/Southwest_s_tiger.shtml
Southwest's tiger
Published April 18, 2005
Southwest Airlines CEO Gary Kelly wants the airline to grow in big markets as other carriers retreat or move into international routes, an analyst says. The airline's strategy is to use low fares to squeeze the competition.
Don't let the corny on-board jokes and whimsical television ads fool you.
Southwest Airlines has emerged as the toughest competitor in a sharp-elbowed business with a series of aggressive expansion moves.
The nation's largest discount carrier won a bidding war in December for a bigger share of Chicago's huge air travel market. Southwest lands next month in Pittsburgh, a stronghold for bankrupt US Airways. Meanwhile, the airline is fighting a federal law that limits flying at its hometown airport in Dallas, a direct challenge to crosstown rival American Airlines.
The initiatives put a spotlight on Gary Kelly, Southwest's veteran chief financial officer who was promoted to chief executive in July. He has earned early rave reviews.
Analysts like Kelly's focus on costs. Labor leaders say he's in tune with the airline's employee-friendly, offbeat culture, such as dressing last fall as Gene Simmons of the rock band KISS at Southwest's annual Halloween bash. Kelly has moved quickly to seize growth opportunities.
"He's from the (Southwest) mold," said Darryl Jenkins, a visiting professor at Embry-Riddle Aeronautical University in Daytona Beach. "He's bright and he's very aggressive. He'll be a very tough competitor."
Southwest passed Delta Air Lines last year as the largest carrier of domestic air travelers. With competitors hobbled by high fuel prices and low fares, Kelly, 50, wants Southwest to grow in big markets as other carriers retreat or move planes into more lucrative international routes, says Robert Mann, an airline analyst in Port Washington, N.Y.
"Gary Kelly sees this business cycle as a window of opportunity to install Southwest as No. 1 and never look back," he said.
The discounter unseated Delta as Tampa International Airport's top airline in 2004, with 3.6-million passengers, or 19.6 percent of the market.
Tonight, Kelly will attend the dedication of Tampa International's Airside C, where Southwest will be largest tenant. The airline will eventually take 12 of the 16 gates, boosting its capacity by 50 percent.
Southwest has hit some bumps during airline industry's four-year slump. But thanks to low operating costs, a strong balance sheet and wise fuel management, Southwest has been one of the few carriers to make money.
On Thursday, the airline reported a $76-million profit for the first three months of the year, its 56th-straight quarter in the black. The industry is expected to lose a combined $2-billion for the first quarter.
Southwest will add 20 Boeing 737s this year to its fleet of 426, expanding capacity about 10 percent. Most of that will go into expanding service to Chicago and Philadelphia, a US Airways hub that Southwest began flying into last year.
Airline executives decided to ramp up growth a year before he took over as CEO, Kelly said in a recent interview.
Southwest always aggressively pursued growth opportunities, he said. He just happened to be the guy with his finger on the trigger when, for example, ATA Airlines filed for bankruptcy in October and put its gates at Chicago Midway Airport up for sale, Kelly said.
"Either you get up to bat and swing at it," he said, "or you don't."
* * *
Growing up in San Antonio, Texas, Kelly was almost 6 feet tall by the time he entered middle school and played "just about every sport but baseball," he told USA Today in an interview last year.
He dreamed of being an oceanographer and became certified as a scuba diver in high school. Kelly turned down football scholarships to study ocean life, then reverse d field and accepted an offer to play football at the University of Texas at El Paso in the west Texas desert.
Kelly suffered through a losing season, gave up the sport and transferred to the university system's flagship school in Austin. He graduated as a top accounting student and went to work for Arthur Young & Co. The firm's clients included a scrappy airline called Southwest.
Kelly landed at Southwest in 1986 as controller. The airline was performing financial and technical functions on paper or hiring companies with computers to do them. He made the case for Southwest to buy its first mainframe computer.
As chief financial officer in the early '90s, Kelly introduced Southwest to another breakthrough: contracts that lock in prices for future fuel purchases, known as "fuel hedges."
Hedges have shielded the airline from skyrocketing prices devastating other carriers. About 85 percent of Southwest's fuel this year is bought at oil prices averaging $26 per barrel. That saved $155-million in the first quarter - double Southwest's $76-million profit.
Kelly knew he was on a short list to run Southwest, but not so soon. Jim Parker, who succeeded legendary founder Herb Kelleher as CEO, abruptly retired last summer after just three years at the helm.
His tenure was marred by contentious negotiations with the union representing flight attendants that dragged on two years. Southwest had always prided itself on teamwork between management and workers, more than 80 percent of whom are unionized.
"It became more about winning than about solving problems," said Thom McDaniel, president of the Transport Workers Union local 556, which represents flight attendants.
Herb Kelleher, still serving as Southwest's chairman, took over from Parker as the company's chief negotiator. The two sides quickly reached a deal that flight attendants ratified.
In an executive reorganization, Kelly created a department of labor and employee relations. Union leaders in Dallas now get a face-to-face quarterly earnings presentation from Kelly on the same day as financial analysts and reporters.
"He has a sense of the culture," McDaniel said. "He seems to get it."
(cont)
http://www.sptimes.com/2005/04/18/Business/Southwest_s_tiger.shtml
Southwest's tiger
Gary Kelly, CEO since July, has proved to be a tough and aggressive competitor.
By STEVE HUETTEL, Times Staff Writer
By STEVE HUETTEL, Times Staff Writer
Published April 18, 2005
Southwest Airlines CEO Gary Kelly wants the airline to grow in big markets as other carriers retreat or move into international routes, an analyst says. The airline's strategy is to use low fares to squeeze the competition.
Don't let the corny on-board jokes and whimsical television ads fool you.
Southwest Airlines has emerged as the toughest competitor in a sharp-elbowed business with a series of aggressive expansion moves.
The nation's largest discount carrier won a bidding war in December for a bigger share of Chicago's huge air travel market. Southwest lands next month in Pittsburgh, a stronghold for bankrupt US Airways. Meanwhile, the airline is fighting a federal law that limits flying at its hometown airport in Dallas, a direct challenge to crosstown rival American Airlines.
The initiatives put a spotlight on Gary Kelly, Southwest's veteran chief financial officer who was promoted to chief executive in July. He has earned early rave reviews.
Analysts like Kelly's focus on costs. Labor leaders say he's in tune with the airline's employee-friendly, offbeat culture, such as dressing last fall as Gene Simmons of the rock band KISS at Southwest's annual Halloween bash. Kelly has moved quickly to seize growth opportunities.
"He's from the (Southwest) mold," said Darryl Jenkins, a visiting professor at Embry-Riddle Aeronautical University in Daytona Beach. "He's bright and he's very aggressive. He'll be a very tough competitor."
Southwest passed Delta Air Lines last year as the largest carrier of domestic air travelers. With competitors hobbled by high fuel prices and low fares, Kelly, 50, wants Southwest to grow in big markets as other carriers retreat or move planes into more lucrative international routes, says Robert Mann, an airline analyst in Port Washington, N.Y.
"Gary Kelly sees this business cycle as a window of opportunity to install Southwest as No. 1 and never look back," he said.
The discounter unseated Delta as Tampa International Airport's top airline in 2004, with 3.6-million passengers, or 19.6 percent of the market.
Tonight, Kelly will attend the dedication of Tampa International's Airside C, where Southwest will be largest tenant. The airline will eventually take 12 of the 16 gates, boosting its capacity by 50 percent.
Southwest has hit some bumps during airline industry's four-year slump. But thanks to low operating costs, a strong balance sheet and wise fuel management, Southwest has been one of the few carriers to make money.
On Thursday, the airline reported a $76-million profit for the first three months of the year, its 56th-straight quarter in the black. The industry is expected to lose a combined $2-billion for the first quarter.
Southwest will add 20 Boeing 737s this year to its fleet of 426, expanding capacity about 10 percent. Most of that will go into expanding service to Chicago and Philadelphia, a US Airways hub that Southwest began flying into last year.
Airline executives decided to ramp up growth a year before he took over as CEO, Kelly said in a recent interview.
Southwest always aggressively pursued growth opportunities, he said. He just happened to be the guy with his finger on the trigger when, for example, ATA Airlines filed for bankruptcy in October and put its gates at Chicago Midway Airport up for sale, Kelly said.
"Either you get up to bat and swing at it," he said, "or you don't."
* * *
Growing up in San Antonio, Texas, Kelly was almost 6 feet tall by the time he entered middle school and played "just about every sport but baseball," he told USA Today in an interview last year.
He dreamed of being an oceanographer and became certified as a scuba diver in high school. Kelly turned down football scholarships to study ocean life, then reverse d field and accepted an offer to play football at the University of Texas at El Paso in the west Texas desert.
Kelly suffered through a losing season, gave up the sport and transferred to the university system's flagship school in Austin. He graduated as a top accounting student and went to work for Arthur Young & Co. The firm's clients included a scrappy airline called Southwest.
Kelly landed at Southwest in 1986 as controller. The airline was performing financial and technical functions on paper or hiring companies with computers to do them. He made the case for Southwest to buy its first mainframe computer.
As chief financial officer in the early '90s, Kelly introduced Southwest to another breakthrough: contracts that lock in prices for future fuel purchases, known as "fuel hedges."
Hedges have shielded the airline from skyrocketing prices devastating other carriers. About 85 percent of Southwest's fuel this year is bought at oil prices averaging $26 per barrel. That saved $155-million in the first quarter - double Southwest's $76-million profit.
Kelly knew he was on a short list to run Southwest, but not so soon. Jim Parker, who succeeded legendary founder Herb Kelleher as CEO, abruptly retired last summer after just three years at the helm.
His tenure was marred by contentious negotiations with the union representing flight attendants that dragged on two years. Southwest had always prided itself on teamwork between management and workers, more than 80 percent of whom are unionized.
"It became more about winning than about solving problems," said Thom McDaniel, president of the Transport Workers Union local 556, which represents flight attendants.
Herb Kelleher, still serving as Southwest's chairman, took over from Parker as the company's chief negotiator. The two sides quickly reached a deal that flight attendants ratified.
In an executive reorganization, Kelly created a department of labor and employee relations. Union leaders in Dallas now get a face-to-face quarterly earnings presentation from Kelly on the same day as financial analysts and reporters.
"He has a sense of the culture," McDaniel said. "He seems to get it."
(cont)
