32 years of LUV

Partnership between Southwest and Boeing 'outrageously' successful

BY ELIZABETH DAVIS


For Herb Kelleher, chairman of Southwest Airlines, there's a story behind every explanation.

Take his recent comments at a Boeing-sponsored conference. Kelleher told a tale about dog food. Trademark cigarette in hand and gesturing to make his point, he spun a yarn about a company that won all sorts of awards for branding, packaging and advertising the latest and greatest dog food.

Yet, after months of abysmal sales and sagging profits, the company was going broke. The CEO called a meeting and asked for an explanation. He and his staff could not understand why the dog food wasn't flying off store shelves.

Finally someone from the back of the room spoke up. "No one asked the damned dogs!"

Positively outrageous service

Southwest has always been one to listen to "the damned dogs," and anecdotes such as this get to the heart of Southwest Airlines' culture.

"By focusing on employees first and providing 'Positively Outrageous Service' to its customers, Southwest sets itself apart from its competitors," said Dara Schmidt, Boeing sales director for Southwest Airlines. "That the airline combines a uniquely audacious sense of style and an attention to detail directly ties in to its profitability."

Boeing and Southwest have a long-standing partnership, and both companies appreciate the importance of customer relationships, understanding each other's business, trust and working together to achieve solutions.

Each company's beginnings define its culture. Just as Boeing began in a little red barn, Southwest's first business plan was sketched on the back of a cocktail napkin—not your typical Harvard Business School procedure. But maybe not too surprising, considering Southwest is the company where the flight attendants' first uniforms included orange hot pants and lace-up go-go boots.

This is the company that's been known to have job applicants change into—and interview in—company-issue Bermuda shorts.

This is the company with employees who regularly support the endeavors of the Ronald McDonald House and have raised to art forms chili cook-offs and Halloween parties.

"Creativity, individuality and a sense of humor are part of the Southwest ethos," said Southwest President and Chief Operating Officer Colleen Barrett.

The well-known Southwest Spirit has given rise to the notion of "Positively Outrageous Service"—that is "service feats, legends and near miracles" in the line of duty and beyond. A company that really pays attention to customer feedback, Southwest hires as much for attitude as aptitude.

Return on investment

Southwest Airlines believes that if the company treats its employees well, in turn the employees will treat customers well, and customers will treat shareholders well. This belief has paid off.

Southwest Airlines CEO and Vice Chairman Jim Parker attributes the company's success—not just survival—during the current industry downturn to its people.

"We have the most dedicated, resilient and finest group of employees in the airline industry," Parker said. "Their unity and long-term vision allows us to produce great results in good times so that we can survive even in the worst of times."

In April, the company marked its 48th consecutive quarter of profitability. Net income in 2002 was U.S. $241 million and profits were up 14 percent in the first quarter of 2003. With no history of furloughs, positive union relationships and 26 percent annual returns, the Southwest formula appears to be working. With 63 million passengers flying Southwest Airlines a year, the business model must be sound.

Boeing partners with 'maverick upstart'

Southwest Airlines took to the skies in 1971 as a maverick upstart—and they retain this spirit today.

Southwest and Boeing have been partners since the company's inception, when Boeing helped Southwest begin operations with three 737-200s. Since then, Southwest has faithfully remained an all-Boeing fleet.

"In 1971, Boeing made three white-tails available to a pissant little airline trying to start service in Texas," Parker said. "We remember those favors, and we have never flown anything but Boeing since."

In fact, the airline has been instrumental in defining the 737 family for Boeing.

On Jan. 19, 1994, the Dallas-based carrier signed a contract with Boeing to become the launch customer for the 737-700. Boeing delivered the first airplanes in December 1997. More than any other airline, Southwest was the impetus behind the newer 737 family.

Southwest contributed to the design of the airplane, and obviously the 737 has served Southwest Airlines well.

Consider this: a 737 takes off every six seconds. The Southwest fleet includes more than 350 737s, and the airline is scheduled to take delivery of its 144th 737-700 this summer. With the eighth-largest fleet in the world—larger than British Airways, Air France and Lufthansa—Southwest is adding 17 airplanes in 2003.

With U.S. coast-to-coast service from 58 cities in 30 states, imagine how many of those takeoffs are by a Southwest airplane, the largest customer for the world's most popular jetliner.

The 737-700 has enabled Southwest to expand to new cities and grow a low-fare business model in both the long- and short-haul markets. With high reliability and low turn times, the 737 is the ideal carrier for a low-fare operator.

And if imitation is the sincerest form of flattery, then Southwest has set the standard for the low-fare, single-model, all-Boeing-fleet carrier around the world. Just look at Ryanair, Virgin Blue, WestJet and GOL: all have replicated the Southwest approach, operating exclusively Boeing 737s.

"Our relationship with Southwest is about more than just delivering great airplanes," said Carolyn Corvi, vice president and general manager of the Boeing 737/757 Programs. "It's about understanding their business, trusting each other and working together to achieve solutions. We know that while they have a lot of fun and play hard, they also run a business model that the entire industry emulates and admires. We are delighted and honored to have such a wonderful partner."

Partnership in action

Clearly, strong relationships are at the root of all kinds of successes.

"One example of how Southwest demonstrates its partnership and dedication to the 737 program is through its role as the co-chair of the 737 Fleet Team Resolution Process," said 737 Fleet Chief David Reed.

The Fleet Team Resolution Process streamlines the delivery of engineering support to Boeing operators. It enables customers to access a Web-based bulletin board where they can participate in determining which fleet issues receive priority attention and improves Boeing-sponsored conferences and reports.

Southwest Airlines' task is to help other airlines determine the priority and best approach to resolve in-service fleet issues.

In addition to participating on the Fleet Team Resolution Process, Southwest also serves as the lead airline for the 737 program. Following the Air Transport Association processes to inform the fleet and solicit input surrounding potential airworthiness concerns, the lead airline and the ATA collaborate with Boeing to review issues and work toward successful resolutions.

Southwest has been a vital force in dealing with maintenance-related airworthiness directives. Although there have been fleet-specific issues, the Fleet Team Resolution Process, Southwest and other operators have focused on resolving problems and maintaining a positive, working-together relationship.

Feel the LUV

With a proven track record of success and a 30-plus year history of partnership, Southwest has been—and continues to be—an integral contributor, industry advisor, issue-resolution counselor and an all-around leader for the 737 program.

"We love Southwest Airlines and we're proud to be their partner," said Alan Mulally, Boeing Commercial Airplanes president and chief executive officer. "The nearly 32-year Southwest-Boeing connection is a great combination—one of the world's most successful airlines and the 737, the world's most popular airplane. We look forward to continuing our partnership for many years to come."

elizabeth.s.davis@boeing.com