A Boy and His Airline
No kid ever had more fun with his favorite toy than Herb Kelleher has in running Southwest Airlines.
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Who is this man who took a crazy idea and transformed Texas? Kelleher was born on March 12, 1931, in Camden, New Jersey. He grew up in nearby Haddon Heights, a middle-class suburb of Philadelphia, where his father was a manager of the Campbell Soup Company. His mother, Ruth, was 38 years old when Herb was born and already had three older children, two boys and a girl. “I always assumed I was a slipup,” Kelleher says. When Herb was only 12, his father died of a heart attack. By the time he was an adolescent, one of his brothers had been killed in the war and his other siblings had moved away. Suddenly Herb was his mother’s only child, and like many successful men, he credits her as his strongest influence. “She never coddled me,” says Kelleher. “She always encouraged me to be independent.” He worked six summers at the Campbell Soup factory, and he played sports, both basketball and football, well into dark most evenings.
When Kelleher was eighteen years old, he played a basketball game that established his lifelong leadership style. He was the president of his class at Haddon Heights High and a well-known basketball star. On this particular night Kelleher had managed to score 29 points just before the end of the game and was within one shot of becoming Haddon Heights’ all-time scoring champion. There he stood in the center of the court, dribbling the ball aimlessly. The coach called time-out. “What’s the matter, Herb?” he demanded. Herb said he was refusing to shoot because he didn’t want to separate himself from the rest of the team. The next thing he knew, Herb was surrounded by teammates urging him to go for the shot. Herb wanted to be drafted by his peers for a place of preeminence. Once he was, he didn’t choke. He left the huddle, took the shot, and made the needed two points. At a crucial time in Southwest’s history, he would play out a corporate version of the game.
Herb went off to college at Wesleyan University in Middletown, Connecticut, where he majored in philosophy and literature. Had he not agreed to go on a blind date with Joan Negley, a socially correct San Antonio girl who was attending Connecticut College, Herb might never have set foot in Texas. They met at a basketball game. “I had heard what a great basketball star he was,” says Joan, “but that night he sat on the bench the whole game. I think the coach let him play the last minute and a half.” After the game, they went out for hamburgers, and Joan had to pay the check. Herb had no money. He called her ”J.P.,” after the late financier J.P. Morgan, a nickname that stuck.
They were married in 1955 in San Antonio. Kelleher, eager to pursue a career that would give him financial independence, attended law school at New York University, where he made law review and graduated with honors in 1956. He clerked for the Supreme Court of New Jersey and then joined the largest law firm in the state. By then, he and Joan had two children and Kelleher was well on his way to becoming a successful corporate lawyer. On vacations they would come to San Antonio and to Joan’s family ranch near Big Bend. Slowly, Texas became part of Kelleher’s imagination. Joan never asked him to move to San Antonio for fear he would say yes and later feel he had been pressured. “One day I was walking in the snowy muck in Newark, and I thought to myself, ‘I could be in Texas,’” he says, explaining their 1961 move.
Joan has the languid, well-mannered demeanor of a woman who has known comfort and privilege all her life and feels no compulsion to flaunt it. Her family’s fortune is derived from ranching and insurance interests. It is entirely possible that the reason Joan never asked Herb to move to San Antonio is that she enjoyed being away from the society in which she was raised. Since her return, she has worked for various civic causes, such as historic preservation, but mainly she has raised her family.
Kelleher has had little time for the conventions of domesticity. “He changed a diaper one time and threw up,” says Joan. The couple have four children: Julie, 31, works with animals at Sea World; Michael, 29, has a retail software store; Ruth, 27, is a lawyer who works for the Texas Senate; and David, 25, is bartender at a San Antonio restaurant. The Kellehers’ marriage may have run according to fifties rules, but now has an eighties twist: He lives in a University Park townhouse in Dallas, and she lives in their home in Olmos Park. Neither of them regards their commuter marriage as strange. “I knew what kind of man I was marrying before I married him,” says Joan.
When Kelleher first arrived in San Antonio, Joan’s family moved quickly to get him established. Her stepfather, John Catto, a wealthy insurance broker, took him downtown to meet Wilbur Matthews, the starched sultan of the local legal community and the head of the firm of Matthews and Branscomb. Kelleher sat passively as the two men arranged for him to join Matthews’ firm. The subject of compensation never came up.
Kelleher had been in town less than a month before Alfred Negley, his brother-in-law, introduced him to John Connally, who was running for governor. Connally was sufficiently impressed to put Kelleher in charge of his gubernatorial campaign in northern Bexar County. Connally won the governor’s race in 1962 with a boost from Bexar County. Some people struggle for generations to become a part of the small power circle in San Antonio; Kelleher found himself a complete insider within less than a year.
Next he took his place at Wilbur Matthews’ law frim, which at the time operated at a genteel pace that allowed for the serving of tea in the early afternoon. But Kelleher was constitutionally unsuited for a genteel way of life. He worked well into the night on complicated cases, always writing out his legal briefs on yellow pads in his flowing cursive. But he was chronically disorganized. One night the security guard walked into Kelleher’s office and mistook his mess for signs of a struggle. The guard telephoned police and reported a break-in. “Every day I went to work I felt my shoulders droop a little more,” Kelleher acknowledges.
Then Rollin King entered his life and scribbled the triangle on the napkin, and Kelleher was bored no more. Kelleher took King and his idea for Southwest Airlines with him when he left Matthews’ law firm in 1970 and joined Jesse Oppenheimer and Stanley Rosenberg—two other restless San Antonio lawyers—to form a new firm.
If King was the father of Southwest Airlines, Kelleher was its midwife. His $20,000 made him a founding shareholder. He went to the same men who had given money to Connally’s campaign—John Peace, Robert Strauss, Dolph Briscoe, Curtis Vaughan, and other power brokers—and raised the first $543,000.
On November 27, 1967, Kelleher filed an application with the Texas Aeronautics Commission to launch Southwest Airlines with flights between Dallas, Houston, and San Antonio. The application was approved unanimously, and then the war began. Braniff and Trans-Texas (the forerunner of Frank Lorenzo’s Texas International) challenged the commission’s decision in an Austin district court. At issue was whether Texas travelers were adequately served by existing airlines. The next three years of Kelleher’s life were absorbed in legal battles that went all the way to the U.S. Supreme Court. But Kelleher’s future competitors weren’t content to fight it out in court. Kelleher later showed that executives of Texas International, in a move designed to scare off Southwest investors, had filed numerous complaints against Southwest with the Civil Aeronautics Board. It is hard to imagine what the complaints were in reference to since Southwest had no pilots, planes, or passengers at the time.
“I have often said that if Braniff and Texas International had left us alone and not been so rotten and dirty and tried to sabotage us every step of the way, Southwest Airlines would not be in business today,” says Kelleher. “They were too stupid to realize the psychology of the situation. The more dirty tricks they played, the more resolved I became to beat them.”
But by the summer of 1969 almost everyone but Kelleher was losing resolve. Southwest’s board of directors was ready to give up. The original $543,000 was gone, most of it to legal battles, two of which Kelleher had lost. But he believed he could win on appeal and desperately wanted the chance. Kelleher made an offer to the board: if they would keep going, they wouldn’t have to pay him unless he ultimately won. They accepted his challenge. Kelleher worked like a demon, once going 48 hours straight to prepare for a hearing, then leaving the court to go to a cocktail party to raise money for Southwest. Finally, in December 1970 his gamble paid off. The U.S. Supreme Court declined to hear an appeal by Braniff and Texas International of a case that Kelleher had won before the Texas Supreme Court. Southwest was ready to take off. It had $143 in the bank and $100,000 in past-due bills—most of it owed to Kelleher.
Mr. Inside
For the next few years Kelleher was made Mr. Inside at Southwest Airlines. He was the company’s lawyer, spending his time negotiating contracts with Boeing for the purchase of airplanes, writing stock offerings, and raising money. He also served as a mediator between Rollin King, who became the chief operations officer, and Lamar Muse, a flamboyant airline veteran who came to work as Southwest’s president. King and Muse both had strong, usually conflicting views about what was best for Southwest Airlines; the result was a protracted power struggle.
Early on, Muse tried unsuccessfully to remove King from the board. Then, over the objections of the board, Muse made his son, Michael, an officer of the company. Kelleher tried to make peace between Muse and King but to no avail. In 1978 Muse made another power play. He went to the board and said that either King went or he went. King stayed and the board voted to accept Muse’s resignation. Kelleher was torn between both men and abstained from the vote.
King thought he would be named as the new president, but the board instead turned to Kelleher. “I was surprised,” says Kelleher. “It was not something I sought, but there I was—one minute Lamar was in charge, and the next minute I was.” King remains a member of the board. Just as at the Haddon Heights basketball game, Kelleher was drafted to lead his peers.
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