CEO: Secrets of Southwest's Success

July 23, 2008 — -- Last Friday, I sat down for a special one-on-one interview with Southwest Airlines CEO Gary Kelly, and I thought I'd share some of it with you -- words of wisdom, pride and frustration from the man behind the country's only major domestic airline that's making any money.

Southwest has come a long way from its start-up days, when the "little airline that could" was luring business travelers with $26 fares and a free bottle of Chivas Regal.

Kelly told me, with justifiable pride: "We have money in the bank, have very little debt and, after 37 years, we still have the lowest cost structure."

But the lanky Texan isn't blind to what's going on in the industry; he expects to have to raise prices.

Kelly insisted, however, that Southwest's fares will always be a bargain and he'll never change the carrier's DNA.

"We're not trying to be a premium airline with china and onboard meals in first class," Kelly said. "That's just not who we are and not what our customers want from us."

Just don't call Southwest "cheap."

"Our customers don't have low expectations," Kelly said with just a touch of exasperation. "They have the right expectations."

Besides, he said, what with all the other carriers dropping their so-called frills left and right, the flying experience for most of us these days is pretty similar no matter what airline we fly (or, as Kelly put it, "coach is coach").

But there's still something of a mystique to Southwest's determinedly cheerful and unabashedly frugal functionality -- its fans are passionate and they come from all walks of life.

Just this past Sunday on "Meet the Press," after Tom Brokaw gently teased Al Gore about all those carbon foot-prints (wing-prints?) left behind from Gore's private jet flights, the former vice president proudly stated: "I'm flying on Southwest Airlines again today."

So what is the future of Southwest and, indeed, what is the entire airline industry going to look like? According to Kelly, it's going to look a lot like … Southwest. The strong (and the lean and the efficient) will survive: "It's not such a dire scenario, but you are going to need more 'Southwest-like' carriers out there and … it may be that all the inefficient carriers and all the high-cost structures get purged from the U.S."