Southwest Business History - Business Chronicler

Table of Contents

Establishment of Southwest
Lawsuits
Southwest’s Growth Story
More Expansion in the 1980s and 1990s
The 90s
Southwest in the 21st Century
2012-Present
Southwest Videos
- History of Southwest Airlines
- Southwest Airlines - Why They're Successful
Where is Southwest Today?
Corporate Social Responsibility (CSR) and Philanthropy
Southwest Controversies
Frequently Asked Questions about the Southwest Business History

Southwest Airlines Co. is a top American airline founded on March 15, 1967.

Its current net worth is $21.73Bn, meaning its value exceeds that of some of its major competitors, including American Airlines ($8.44Bn), Delta Airlines Inc. ($19.84Bn), and Alaska Airlines ($5.5Bn).

In addition, Southwest has often been recognized as one of the best places to work, explaining why it has won multiple accolades. For instance, in 2019, the airline bagged five TripAdvisor Traveler’s Choice Awards.

Keep reading to learn more about the Southwest business history from inception, growth, accomplishments, and social responsibility ventures that have transformed millions of lives.

Establishment of Southwest

Southwest, incorporated in 1967, began as a small carrier flying between three cities in Texas – Dallas, San Antonio, and Houston (Michael Dell’s home city).

When Herbert Kelleher and Rollin King envisioned establishing the airline (initially named “Air Southwest”) in 1966, they had only a cocktail napkin on which to lay out their plan.

These two visionaries wanted the air travel company to fly between intra-state routes to steer clear of regulations from the Civil Aeronautics Board (CAB). At the time, it controlled fares, flight schedules, and routes.

Without the CAB’s scrutiny, Kelleher and King could charge lower ticket fees, hopefully undercutting their competitors.

Lawsuits

Unfortunately, three other airlines, Continental Airlines, Trans-Texas Airways, and Braniff, discovered Southwest’s strategy to push them out and took legal action against them.

In 1970, Southwest resolved its lawsuits after the Texas Supreme Court maintained that it had every right to serve the cities it wanted. Therefore, it started operating scheduled flights and adopted its current name, “Southwest Airlines Co.” the following year.

Southwest’s Growth Story

In June 1971, Southwest acquired three Boeing 737-200 aircraft and began flying passengers from Dallas Love Field to San Antonio and Houston.

Southwest didn’t take long to bring in returns – the airline made its first annual profit in 1973, though it hadn’t added to its fleet yet.

By 1975, the airline had started operating flights to more cities in Texas. With more proceeds, it was able to purchase another plane by the end of 1976. Three years later, it began serving adjacent states, consequently increasing its customer base and raising enough cash to expand.

In 1979, it launched self-ticketing machines in several airports to enable passengers to acquire tickets faster. The following year saw it hire Louis Freeman, its first black pilot.

In 1981, Herb Kelleher, Southwest’s co-founder, replaced Howard Putnam as the president. Although there was a national recession at the time and an air traffic controllers strike, he was deadset on steering his company towards success by utilizing the most innovative practices.

More Expansion in the 1980s and 1990s

In the early 1980s, Southwest acquired ten 737-300s from Boeing, which now builds spacecraft like SpaceX. And it promised to purchase more if the company would make them.

By 1982, Southwest’s fleet had 37 aircraft, and it was flying to San Diego, Los Angeles, Kansas City, Phoenix, and San Francisco.

In 1983, it bought nine more aircraft and retrofitted the jets with leather exteriors to maximize comfort and elegance.

Two years later, the airline acquired Muse Air to merge with one of its subsidiaries. So, in 1986, it renamed the affiliate “TranStar.” Unfortunately, the latter operated briefly and shut down in 1987.

The 90s

In 1990, Southwest moved into its current head offices in Dallas, Texas. The company also registered its fleet in Houston so it could pay taxes as the law required.

Then, in 1992, the airline purchased Morris Air, which was among its top competitors and based in Utah. After completing the acquisition, it ‘inherited’ the new company’s routes, including those it didn’t previously travel.

Southwest established its initial website (Southwest Airlines Home Gate) in 1995, becoming the first airline to do so. Through it, its passengers could access company information and view schedules to identify the best time to purchase their tickets.

Southwest grew tremendously throughout the 80s and 90s, gaining more customers and adding new destinations. The airline also gained a reputation for its on-time solid record, proactive risk management, and creative ideas, which enabled it to flourish and explore new horizons in years to come.

Within the two decades, it was also recognized by various reputable publications, including Fortune Magazine and Indiana Business Magazine. Besides, the airline bagged several accolades.

In 1999, Herb Kelleher won Texas Monthly’s CEO of the Century award.

Southwest in the 21st Century

Southwest ushered in the 21st Century on a high note.

In 2001, the company, and its leaders, were honored by numerous publications and reputable organizations for a plethora of achievements. These included utilizing innovative technology, boasting impressive financial performance, providing excellent customer service, and demonstrating outstanding leadership.

By the end of 2001, Southwest’s market cap hit $11Bn, more than the combined valuations of its competitors, including US Airways, American Airlines, Northwest Airlines, and Continental.

In 2002, the company was flying more than 60M passengers, which was easy since its fleet had grown to 375 aircraft. By the end of 2004, it had purchased over 400 planes and was traveling to more than 60 locations across the US.

In 2011, Southwest attained AirTran Airways and its parent company, AirTran Holdings. The purchase closed at the same time the airline was commemorating its 40th anniversary.

2012-Present

Southwest has achieved many milestones since 2011. For instance, in 2014, it expanded its services to Aruba and different cities in Central America.

In 2017, it welcomed the first Boeing 737 MAX 8 in North America and began flying it the same year. Also, it ceased using Boeing 737-300 models. And added Hawaii to its route network two years after that.

Tragically, the Boeing 737 MAX was grounded in 2019 after two deadly crashes, causing significant operational complications for Southwest. The 2020 Covid-19 pandemic shook up the company even more, and it made an annual loss for the first time in almost fifty years.

In 2021, Southwest’s aircraft began hitting the skies again after travel restrictions were eased. As a result, it reported its fourth-quarter profit in 2022.

Southwest Videos

History of Southwest Airlines

This almost forty-minute video sums up the history of Southwest, explaining when the airline was established, its early humble beginnings and how it has become such a big name in the US air travel industry. Additional info you’ll find in this YouTube upload includes its controversies and partnerships, which have enabled it to avail better services.

Southwest Airlines – Why They’re Successful

I watched this video to understand why most Americans prefer Southwest to other airlines. Based on its information, the company has cultivated good relations with its customers by offering affordable, top-tier services.

Southwest’s co-founder, and long-time CEO, Herb Kelleher, also played a significant part in its success. Did you also know that he was a trained and experienced lawyer? His expertise in legal issues enabled the airline to win its many court cases and continue its operations unscathed.

Watch this clip to the end to discover more reasons behind Southwest’s success. Besides, it’ll help you grasp one or two things about the airline’s past.

Where is Southwest Today?

Despite its modest beginnings, Southwest has transformed into the largest low-cost carrier in the United States.

As of 2018, it served the most significant portion of Americans. Meeting the latter’s diverse requirements has proved straightforward, thanks to its large fleet, 50K+ experienced and competent employees, and the fact that it travels to up to 121 destinations in the United States, Mexico, and the Caribbean.

Bob Jordan is the current CEO of this Dallas-based airline. He recently replaced Gary Kelly, who is now the company’s chairman.

Giving back to society is among Southwest’s top priorities. Check out some of its CSR and charitable projects.

Human Trafficking Awareness

Southwest is fully aware of the human trafficking issue, and it helps curb it by promoting its awareness.

For starters, it has educated all its employees regarding the tell-tale signs of human traffickers and their victims. This makes it easier for the professionals to identify them if they’re on board.

Also, Southwest has partnered with many non-profit organizations known for rescuing survivors and helping them recover from the traumatizing ordeal. These include United Against Human Trafficking, Project Concern International, Polaris, Rethreaded, Ayuda, and Ho’ōla Nā Pua.

Medical Transportation Grant Program

Southwest established this initiative in 2007 to offer complimentary roundtrip tickets to 115+ medical transport companies and non-profit hospitals, helping patients access urgent medical care.

Since its foundation, this program has funneled up to $38.6M towards 96,000 air travel round trips.

Some of the medical facilities it assists include:

Children’s of Alabama
Arkansas Children’s Hospital
Cedars-Sinai Medical Center
Scripps Health (California)
Children’s Hospital of Los Angeles
Banner University Medical Center
Craig Hospital (Colorado)
Washington Hospital Center
The Queen’s Health System (Honolulu)

In 2022, Southwest announced through the Medical Transportation Grant Program that it would select 76 medical organizations to receive a share of the over $4M it was donating in free flights.

Southwest Airlines Scholarship Program

Southwest strongly believes that education empowers the community.

Therefore, it launched this scholarship program to help students interested in aviation-related careers pursue higher education.

Southwest also provides the Herbert D. Kelleher and Rollin W. King Scholarship, established in 1981. It’s specifically meant for the children or dependents of the airline’s workers. And they can apply for it when they need financial assistance to follow their desired educational pathways.

Of course, students must meet the stipulated qualifications to win these scholarships.

Adopt-A-Pilot

Since 1997, Southwest has been running the Adopt-A-Pilot program to educate students through math, writing, and geography.

Basically, the initiative focuses on aviation-themed topics. And the airline’s pilots are allowed to mentor passionate kids across the country. This allows the children to master various life skills and identify the career paths they’d like to pursue in the future.

So far, the Adopt-A-Pilot program has impacted the lives of thousands of students in the US.

Each year, they participate in a contest where they showcase 5,000+ creative designs. The winner’s work is worn by pilots taking part in the initiative the following year.

¡Lánzate! /Take Off! Travel Award Program

Southwest collaborated with the Hispanic Association of Colleges and Universities (HACU) to launch this initiative in 2005. Their main objective was to enable Hispanic college students to leave their home countries to pursue tertiary education and hopefully build thriving careers after graduation.

So, the airline gives them roundtrip tickets so they can also check on their loved ones when it’s convenient.

As of this writing, Southwest has spent over $2M to help more than 1700 students travel for further studies.

Beneficiaries must finish an online application and submit an essay explaining why they wish to attend college.

Philanthropy

In 2020, Southwest donated $1M to support over a hundred non-profit companies devoted to helping the people in all the domestic cities it serves. This charitable act was to celebrate its 35th LUV Classic Golf Tournament & Party.

Southwest workers were involved in selecting the recipients of the funds.

Southwest Controversies

Despite ranking among the best airlines serving the US, Southwest is no stranger to controversy. Below, I’ve explained some incidents that have drawn the public’s interest within the past decade.

Southwest Closes Reservation Centers

In June 2022, Southwest demonstrated its devotion to homespun service by announcing it’d be closing all its reservation call centers by September 1.

Most of the airline’s support agents had been working remotely since the beginning of the Covid-19 pandemic, like the workers of many other companies, including Alaska Airlines, Alibaba, and Amazon.

However, it wasn’t clear if this was what the customer service professionals wanted as the labor union representing them alleged Southwest didn’t consult them before making the controversial decision.

The company claimed it was the best decision since it’d maximize flexibility and improve efficiency. But then airlines have been known to have job functions that cannot be completed remotely.

So, was this really a brilliant move for Southwest? Many people who leverage its flight services have been asking the same question.

Notably, this announcement came a few weeks after it canceled and delayed almost 2,000 flights, citing “technological issues”.

Southwest Starts Selling Alcohol

In February 2022, Southwest announced it was bringing back alcoholic drinks on its planes for those traveling over 176 miles. But, like some people, I didn’t understand why the company’s flight attendants were outraged. After all, many other airlines had made a move hoping to enhance their passengers’ experiences.

But after digging into the issue, I got why Southwest Airlines’ flight attendants thought it was “unsafe and irresponsible”, and the perfect recipe for disaster.

The professionals have had some pretty nasty encounters with passengers, and helping them get drunk could breed even worse situations.

For instance, in November 2021, a passenger punched one of the airline’s employees in the head after an attendant asked her to get off the plane.

In the same month, the FAA forced a Southwest passenger to pay a $400,000 alcohol-related fine for bringing their own drink onboard, consuming it in the lavatory, and later sexually assaulting a flight attendant. Allegedly, they had smoked marijuana too.

Earlier in the year, another had physically assaulted a flight attendant, causing her to lose two teeth and suffer other facial injuries.

All the same, Southwest hasn’t reported any alcohol-related incident since returning the drink service, and time will tell if it was indeed a smart move to keep its passengers happy. I can only say that it’s practically impossible to make everyone happy when running a business.

Southwest Pilot Watches Adult Films on Flight

In 2020, Michael Haak, a now-retired captain of a Southwest Airlines flight, watched pornography on a laptop and exposed himself to his female first officer while traveling from Philadelphia to Florida.

He was reported after he retired, which somewhat surprised me because I thought it would have been revealed after they arrived at their destination.

Nonetheless, Haak pleaded guilty to the inappropriate conduct in 2021 and was sentenced to a year of unsupervised probation. He was also commanded to pay a $5,000 fine.

Consequently, Southwest discontinued his retirement benefits.

Notably, Haak expressed great remorse for his lewd behavior. He added that it started as a consensual prank between him and the other female pilot, which could explain why the incident wasn’t reported immediately.

However, the co-pilot confessed the whole episode traumatized her.

From where I’m standing, Haak’s actions were incredibly irresponsible and unprofessional, as they could also have easily caused an accident.

“Too Fat to Fly”

In 2012, Kenlie Tiggeman sued Southwest for “discriminatory actions.”

Tiggerman blogs on herrefuge.com, where she shares her weight-loss journey and discusses other health and lifestyle topics.

In her lawsuit, she accused Southwest employees of failing to follow the airline’s policy and humiliating her in the presence of “airport onlookers.”

Tiggerman said an agent approached her to inquire about her weight and size of clothes. Upon her response, they told her she was “too fat to fly,” and she had to pay for an extra seat.

At the time, Tiggerman’s weight was 240-300 pounds, and she could actually fit in a single seat. However, the agent continued to embarrass her.

Anyway, she wasn’t suing the airline for monetary compensation; she just wanted an industry-standard set for passengers who should buy two seats when traveling by air.

After the demeaning incident, a Southwest executive reached out to apologize, refund her ticket and give her free flight vouchers. But still, another agent called her fat!

So, is this ‘discriminatory behavior’ ingrained in Southwest’s staff? Unfortunately, I’m not in a position to defend them.

Here’s another incident from 2011.

James Fritzen Taylor

In June, James Taylor was a veteran captain working at Southwest Airlines. A recording of him conversing with his first officer was released, and it was filled with slurs directed at homosexual, older, and overweight flight attendants who were unsuitable to “bang.”

The company suspended him temporarily (without pay) and forced him to undergo diversity education before returning to work.

According to Southwest, Taylor apologized for his derogatory comments and accepted responsibility for his actions.

Frequently Asked Questions about the Southwest Business History

Question: Which is Southwest’s biggest hub?

Answer: Southwest recognized Denver International Airport (DIA) as its fastest-growing airport operation in 2020, stating that despite the pandemic, the hub was still vital to the company’s expansion.

Question: Does Southwest have a reward system?

Answer: Yes. Southwest offers the Rapid Rewards program, allowing passengers to earn and redeem points for airfares.

Question: What makes Southwest special?

Answer: Southwest sets itself apart from its competitors by offering innovative logistics solutions, affordable pricing, and a customer-centric business model.

Question: What is Southwest’s golden rule?

Answer: Southwest’s culture and business strategy are based on the golden rule or principle, “Treat others as you would like to be treated,”.

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Jodie Chiffey

As a fellow business owner and business strategist, Jodie shares valuable insight into the strategies and tactics business owners can use to increase their growth.