DALLAS – It’s been a decade of transformative change for Southwest Airlines, as the Dallas-based carrier weathered the lows of the recession, acquired rival AirTran, expanded internationally for the first time and steadily built up its network to a total of 100 destinations.
Now, for the first time in what seems like years, the pace of change has slowed, with Southwest’s preparations to fly to Hawaii the only headline-grabbing initiative under way in 2018.
But that doesn’t mean Southwest will be taking it easy, with CEO Gary Kelly preaching a back-to-the-basics message to employees that focuses on running a strong operation and defending the carrier’s turf from encroaching rivals.
Kelly sat down with The Dallas Morning News this week after an employee rally that drew thousands of workers. Here’s what he had to say about where Southwest has been, where it’s going and what stands in its way. The interview has been edited for length and clarity.
Southwest has been through a lot of change in recent years. Did the results meet your expectations?
There’s risk in everything a company does with respect to really transformative initiatives like we were going through. It was a lot of change for our employees to absorb.
We’re at a point in time now where we can take a bit of a breather in the sense of change management and try to perfect the things that we’ve been implementing over the past five to 10 years.
Honestly, we’re doing better than I had ever hoped. There was a lost decade there after Sept. 11. It really would test your soul. ‘Are we ever going to get through this?’
I’m just grateful for what we have, grateful for what our people have done. It’s like I tell investors: Our folks did what they said they were going to do.
Southwest already flies to a hundred destinations. Why is adding Hawaii so important?
For an airline that grew up as all continental, lower-48 states, it’s just a big deal. It’s learning some new tricks. To have a five-hour flight all over water is pretty exotic for an airline, not to mention what an attractive destination it is.
We’ve been the No. 1 carrier in California, I bet you, for 25 years. Knowing that that destination is so important to our California customers, then it becomes almost a strategic imperative.
Especially given the fact that our equipment will do the mission, then why wouldn’t you?
You’re facing fierce competition in California from foes both new and old. What is Southwest doing to keep its edge?
I think mainly it’s our people. (The) team, without a memo from headquarters, decided that we’re going to take it to the competition and created what they call California Strong.
It’s not real fancy. It doesn’t require technology. It’s just putting the surprise and delight into every day and trying to win every single customer as if it was the first time they’d set foot on Southwest Airlines.
We have a number of things we’re focused on. We need more real estate. We need some facilities upgrades just from a pure maintenance perspective.
Our roots are in the short-haul business, and there is a lot of short-haul traffic within California and in and out of California. It just plays to our strong suits.
You recently told investors 2018 will be about focusing on the basics like on-time performance. Why is that a priority this year?
No. 1, it’s what customers want. We need to be dependable in that sense so they can make their plans and know their plans will be fulfilled. People don’t want to be late.
No. 2 is we have a very labor-intensive business. Being late is really hard on our employees. They have longer days and less predictability in trying to meet their customers’ needs. Everyone has a more enjoyable day if the customer is happy. And then it’s just more costly if we have to keep people longer or bring more resources in.
There’s been a lot of lobbying but little progress on reforming the air traffic control system. What will it take to break the gridlock?
I don’t know that a breakthrough is imminent, so we’re going to have to continue to see if we can find ways to reach a compromise with our opponents.
Every issue that I’ve seen raised in my view is a non-issue; they’ve been addressed.
What I sense is the opposition will continue to maintain their position as long as they sense they have support in Congress to keep it status quo. The sad thing is it’s just the tail wagging the dog.
Everyone agrees that we must modernize the system, but it’s not happening.
The status quo is just unacceptable, which is why we came forward and said, ‘It appears to us the only way forward is to finally reform the FAA like other countries around the world have done,’ which would benefit everybody in aviation, not just commercial airlines.
What’s the biggest challenge facing Southwest in the coming years? What about the biggest opportunity?
It’s focus. Herb (Kelleher) was a master at saying no to things and being really focused.
It’s easier now to see what we ought to be doing than it was 25 years ago, I think. We’ve built such a robust route system and have such a vast customer base with untapped potential.
We don’t do a tenth of what we ultimately could do in terms of managing our customers more efficiently. We’re just going to have to stay mindful of what customers want.
The competition is fierce and we’ll have to continue to be on our toes and continue to innovate. One of these days we may have to reinvent ourselves, and we have to be mentally prepared to do that. Now is not the time to do it.
What would reinventing Southwest look like?
I don’t know that I’m smart enough to know. I think most people are humble enough to admit nobody knows the future. We just need to continue to be open-minded and challenge the paradigm.
I don’t see us assigning seats anytime soon. But even something like that, we’ve always got to be willing to challenge and see if there’s a better way to serve our customers.
Are you thinking any more about retirement now than you were a few years ago?
No.
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