He infused the airline’s nascent culture with a clear set of values, like opting for efficiency over costly frills, which he felt was the only way to increase profits. “If somebody makes a proposal, and it infringes on those values, you don’t study it for two years,” he said. “You just say `No, we don’t do that.’ And you go on quickly.”
As the airline’s co-founder and legal counsel, Mr. Kelleher fought its many courtroom battles. He became chief executive temporarily in 1978 and permanently in 1981.
He introduced countless efficiencies, beginning with fuel-saving short-haul flights. Southwest refused to pay millions of dollars to be part of larger airlines’ reservation systems, and its focus on customer service kept the brand polished.
In 1978, with the passage of the Airline Deregulation Act, Southwest added service to New Orleans, Albuquerque, Oklahoma City and 14 other cities. In early 1982 it added San Diego, Kansas City, Mo., Las Vegas and Phoenix. It was well on its way to becoming a major national carrier.
To stay close to customers, Mr. Kelleher would often board flights just to chat with passengers. In a 1997 article for the Peter F. Drucker Foundation, he wrote: “We market ourselves on the personality and spirit of ourselves. That sounds like an easy claim but, in fact, it is a supremely dangerous position to stake out because if you’re wrong, customers will let you know — with a vengeance. Customers are like a force of nature: You can’t fool them, and you ignore them at your peril.”
Mr. Kelleher, whose net worth was estimated at $2.5 billion, exhibited business savvy on other fronts. After the terrorist attacks of Sept. 11, 2001, he engaged in extensive fuel hedging, locking in contracts to buy fuel at a certain price regardless of whether prices rose or fell. The strategy saved the company hundreds of millions of dollars in energy costs. While every major United States airlines declared bankruptcy at one time or another, Southwest remained profitable and growth-oriented.
All the while, Mr. Kelleher “didn’t take himself too seriously,” Mr. Mann, the industry analyst, said.
“What was great about Southwest under Herb,” he said, “was it created expectations that were modest at best, but they routinely exceeded those expectations. The bigger airlines created expectations they could never meet.”