The first flight Gary Kelly ever took, to anywhere, was on Southwest Airlines in 1972. He was heading to Houston to visit Rice University, which was recruiting him for its football team. As you might imagine, the six-foot-three quarterback of San Antonio’s Churchill High School took considerable notice of the all-female crew of flight attendants, then called hostesses, who were outfitted in fire-orange hot pants. But, years later, he also recalled that on that Saturday-morning flight, “There were two other people on the plane besides me. So, I thought, this company isn’t going to be around very long.”
Kelly didn’t play for Rice. Instead he got an accounting degree from the University of Texas at Austin. He ended up going to work for Southwest in 1986, as its controller. Three years later, he was chief financial officer, and since 2004 he’s led the airline that he once figured didn’t stand much of chance. He announced on Wednesday that he’s stepping down as CEO next February, when executive vice president Robert Jordan will take on the job. (Kelly will then become executive chairman of the company’s board.)
The question of who should be considered the most successful chief executive in Southwest’s history might seem to be an easy one. It’s Herb Kelleher, who, along with Rollin King and Lamar Muse, laid the groundwork for the airline to take flight fifty years ago this month. Kelleher is a legend. A maverick. An icon, often as celebrated for his outsized personality—chain-smoking, Wild Turkey–swilling—as for his business acumen.
But to say that Kelleher was Southwest’s most successful CEO is arguably the wrong answer. Arguably, the right answer is Kelly, the high school quarterback turned accountant with the Texas twang.
To be sure, it’s a tough argument to make. Kelleher was a guru of a movement to put employees first—the notion that if a company empowers them to make decisions and cares about them as human beings, the workers will take care of the rest. He was also one of the most compelling corporate leaders of any time. By the numbers, too, he was far more successful in spurring Southwest’s growth than Kelly has been. In Kelleher’s twenty years, Southwest’s net income rose more than 1,700 percent. Under Kelly (not counting 2020’s pandemic-affected numbers), the airline’s profits are up a measly 580 percent.
So saying Kelly was a more successful CEO is a bit like saying Steve Young was a more successful quarterback than Joe Montana (which some have done), though Young won one title as the San Francisco 49ers’ starter and Montana won four. But Montana didn’t have to face off against Jimmy Johnson’s Dallas Cowboys in the playoffs. Young did.
Similarly, while Kelleher is rightly in corporate America’s pantheon, for most of his tenure as CEO, Southwest didn’t have to face the type of competition that Kelly’s Southwest did. Much of the airline industry had adapted to Southwest’s business model by 2004. Some competitors, like Jet Blue, which launched in 1998, even one-upped Southwest by offering not just low fares but on-board amenities such as live TV. Given that, it is astounding that Southwest’s profits are up by almost 600 percent in the past seventeen years, that its fleet and employee count have both doubled in size, and that in pre-pandemic 2019 it carried more domestic U.S. passengers than any other airline.
Still, the numbers don’t tell the whole story. Kelly’s primary achievement might be in leading Southwest to adapt—rather than stick to strategies that had served the carrier very well since its launch. “We’ve transformed the airline over the last ten to fifteen years,” Kelly told me this past spring. “We made choices starting in the mid-2000s that were very different than what we would have done in my first twenty-five years here.” (Among other things, Kelly once told me, he and Kelleher had different approaches to their Halloween costumes. “Herb has dressed up as Klinger [from M*A*S*H],” he said, “but I’ve dressed up as Gene Simmons.”)
The choice that perhaps best illustrates what Kelly has done at Southwest was the decision to end the company’s notorious “cattle call” boarding process. Until then, boarding a Southwest flight had been first come, first seated. By 2006, analysts were suggesting that wouldn’t, well, fly as Southwest moved into bigger airports and competed more directly with the industry’s bigger carriers, including American, Delta, and United. Southwest made the same assumption: that its flyers wanted assigned seats. Problem was, it couldn’t deliver those because it lacked the technology and the internal coordination among its departments to do so. But a survey of customers led to a big surprise. Most actually liked the airline’s open seating. What they didn’t like was jockeying for position in the boarding line. And thus began the “A, B, C” boarding system used at Southwest today.
“We have to be very blunt and acknowledge that things aren’t the same here,” Kelly once told me. “We don’t dress the same as we did in 1971 when the company was founded. It is a significantly different world that we live in, and it is also a dramatically different airline industry.”
That’s why Kelly led Southwest to acquire the assets of ATA Airlines when it went into bankruptcy and then, more dramatically, to acquire AirTran in 2011. That purchase gave Southwest thousands of new employees and its first international routes—something that would have been inconceivable at any other point in the company’s history.
Indeed, Kelly may have been the most aggressive CEO Southwest has ever had. Though Kelleher famously once arm-wrestled a rival, Kelly went on a stunning expansion spree during a pandemic. Southwest announced seventeen new destinations last year, the largest single-year expansion in the company’s history.
Look back over Kelly’s 35 years at the airline, and you’ll see he’s been an agent of significant change all along. His promotion to CFO back in 1989 was in part a result of his leading the company’s first technological overhaul. The effort swapped in modern ticketing systems for what Southwest, as part of its branding as “the love airline,” had dubbed “love machines”—cash registers that dispensed receipts that doubled as boarding passes.
Later he helped develop the airline’s fuel-hedging program, committing to fuel purchases at a fixed price far in advance. It was a move that saved Southwest from the financial spiral the rest of the industry suffered in the aftermath of September 11, 2001, when fuel prices spiked.
Though the airline stayed profitable, the tenure of James Parker, who had first succeeded Kelleher as CEO, was turbulent. There was significant labor strife during Parker’s three years in charge. So in July 2004, Parker suggested he should step down. Kelleher and the board chose Kelly to succeed him. (Kelleher once told me that Kelly was “exceptional” at connecting with Southwest’s employees.) The news of his hire came as a surprise to Kelly, who didn’t realize he was even in the running for the post. “Becoming CEO wasn’t an aspiration that I had early on,” Kelly told me. “I guess everybody gets lucky once in a while.”
Of course, it hasn’t been a smooth flight the entire way. Kelly has endured his share of labor strife, too, as well as technical outages that left thousands of passengers stranded, and the company’s first-ever in-flight fatality. In 2014, the Wall Street Journal declared that Southwest “is growing up—and running into many of the same problems that have debilitated mature airlines and maddened customers in the past.”
Kelly has routinely acknowledged the airline’s problems and has admitted that some of its significant changes have not been to the liking of employees and customers. But the soft-spoken outgoing CEO always does so with the zen attitude of a pilot making one of those folksy in-flight announcements. “I believe,” he has said, “that whether you’re trying to play golf or throw darts or run an airline, you’ve just got to stay loose, and you can’t get uptight.”