this video is brought to you by privacy.com. It's a great service I've been using that lets you buy things online using virtual cards instead of real ones. It protects your identity and bank information. There's a lot of benefits. For a limited time, my viewers will even get five dollars to spend on your first purchase. All you have to do is go to privacy.com/companyman to sign up. [Music] Southwest has always stood out from the other airlines in a good way. They have actually used those differences to grow into one of the biggest airlines in North America in terms of market share. There are four of them that are noticeably higher than the others. They combine for something like two-thirds of the market, and Southwest is, of course, among those four. I am talking about well over 100 million people are in the air on Southwest flights each year. And how about this? None of those other airlines can say that they've recorded 47 consecutive years of profits. The start of it was in their first full year of operation in 1972, and the end of

It was sadly in 2020 with the pandemic, which was hard to avoid. So for today, I want to touch on seven separate reasons behind that success while talking about the growth and evolution of Southwest Airlines. I should say that parts of these will overlap, but I'm going to start off by talking about customer satisfaction. I know it's a basic principle that most companies tend to talk about, but it is important, especially with airlines. That is an industry that hasn't had the best reputation. I'm guessing most of the people watching this have had a negative experience with an airline, but maybe not with Southwest. According to the American Customer Satisfaction Index, who assigns scores based on surveys, Southwest Airlines is not only consistently above the benchmark; they are typically the highest-rated of all the major airlines. Contributing to that score would be all of these customer-friendly policies. I'm talking about how you can check two bags for free or cancel your reservation just minutes before the scheduled departure time. There are going to be more things on my list that tie

into this, but for right now, I want to move on from customer satisfaction to employee satisfaction. Maybe you've had a different experience, but Southwest has a reputation for having friendlier and happier employees when compared to the competitors, and that's generally because they are happy to be there. There are over 60,000 people that work for Southwest, 83% of which are represented by labor unions. They are generally some of the highest paid in the industry. They have never had a strike, and as a result, they tend to be pleasant to be around and help contribute to that high customer satisfaction score. Alright, my third reason is a bit of an excuse to go deeper into this. Herb Kelleher, he was their co-founder and long-time chairman of the board and CEO. He's the person most responsible for establishing their business model and an overall just entertaining person. I'm a soft sale guy, and if I catch you on another airline, I'll kill you. In 1967, Herb Kelleher and two other guys named Rolling King and

Lamar Muse wanted to start an airline in Texas. It was a smart idea. The premise was that they would provide flights between Dallas, Houston, and San Antonio. Those cities are positioned in a triangular shape, and each of the three sides of the triangle would use its own plane to make the trips. It's also important to mention that at the time, the industry was still heavily regulated by the US government. They were the ones who determined the routes and pricing and everything else for flights between states, so they were pretty much confined to Texas if they wanted to be profitable, and this triangle idea seemed like it had high potential. But it was an unbelievably slow start. It gets a little complicated, but they were granted the rights to fly those routes, but lawsuits from competing airlines prevented anything from happening for over three years. Luckily for Southwest Airlines, Herb Kelleher was already a practicing lawyer and fought those cases all the way to the Texas Supreme Court, where they finally had a favorable ruling at the end of 1970. The following year, they raised

over one million dollars selling promissory notes and basically financed three 737 jet planes from Boeing. In 1971, they started operations by offering round-trip flights between Dallas and San Antonio and between Dallas and Houston. By the end of their first year, they were also offering flights between San Antonio and Houston, which meant that they had turned their concept into a reality. They were already standing out from the others. I guess you could say that they were kind of an edgy airline—two words that you don't often hear together. They were based out of Love Field Airport in Dallas, which was a convenient name for them because they took that word love and ran away with it as their theme. They still have it to this day with their heart logo, and their stock symbol is LUV. But maybe today it's on a lesser scale. In the 1970s, the flight attendants for Southwest would wear these trendy revealing uniforms. The peanuts they served were called love bites. The drinks they served were

called love potions. It was mostly meant for businessmen flying between those cities, and the whole thing just seemed wild. Lawsuits involving hiring practices and petitions regarding the uniforms helped put an end to that crazy vibe by the early 1980s, and really, a lot of things changed around that time. See, in the 1970s, Herb Kelleher wasn't actually yet leading the company. It was one of their other founders, Lamar Muse. He left the company in 1978. Kelleher replaced him as chairman and a bit later became CEO as well. And a quick side note about Muse: he went on to start a competing airline called Muse Air that was ironically bought by Southwest in 1985, renamed, and shut down a couple of years later. All right, there's a lot happening here, the biggest of which was when Jimmy Carter signed the Airline Deregulation Act in 1978. Southwest had grown to a fleet of 13 737 planes that were flying different routes around Texas and

now they were finally able to expand out of the state. California became their biggest target. They started adding routes from Texas, then other places, eventually entirely within the state itself, and quickly became one of the biggest airlines serving that area. Okay, let me get back to my list because it's going to help put a lot of this into perspective. Another reason behind their success that you don't see from many other major airlines is the fact that they use one type of plane, with some small exceptions at times. This has been their strategy from the very beginning. You've already heard me say how they started by financing three Boeing 737s and how they had grown to 13 of them over the next few years. But you may be surprised to hear that today they own over 700 of that type of plane and no others. To say that again in the most confusing way possible, in 2019 they owned 747 737s. The advantage of this is that it saves money because it just makes everything simple. The pilots are flying the same planes.

they don't to be trained on other ones, and the same goes for the mechanics. It simplifies scheduling, maintenance, and just makes everything cheaper and easier. My next reason is what they call a point-to-point service. See, most major airlines use what they call a hub-and-spoke model, meaning they use certain airports as central hubs. So, if you want to go from one spoke to another, you have to go through that center. That's why there's so many connecting flights of use most other airlines, but Southwest is different. They go directly from one city to the other. There are very few connecting flights. In fact, in 2019, 77% of all their customers flew directly between cities non-stop. The customers tend to be happy about that. Plus, this method allows better use of smaller secondary airports that are lesser used by the other airlines. Because they are lesser used, they also tend to be less crowded, which is not only favorable to many customers, it also allows for more efficient scheduling and overall lower wait times. My next reason is probably the biggest. It's what all of

this has been leading up to. I'm talking about low prices. They use all of these unique methods to reduce their costs and pass those savings onto the customer. From the very beginning, it's been a small margin, high volume model, so it only works if they attract a bunch of customers. And for the last 50 years or so, that's what they've been doing. It's founded on the theory that you charge the lowest possible fare to develop the greatest possible volume. Whenever they've entered a new market, they've basically undercut the existing competitors. I would go so far as to say that air travel today may be significantly pricier if it wasn't for Southwest. A great example of this would be back in the 1980s when they were pushing to enter that California market. They offered a flight from Oakland to Los Angeles for $19, and of course, nobody was going to compete with that. My final reason behind the success of Southwest Airlines is their fun image. We have already seen a lot of wacky stuff coming from

southwest as far as their edginess early on their love theme and pretty much anything from herb kelleher is pretty wacky in my opinion. These are not words that are typically used to describe an airline, so it separates them from the others. A couple of other examples that are fun to talk about. In 1973, when they were still confined to Texas, a competitor, Braniff, started offering flights from Dallas to Houston for the outrageously low price of 13. The response of Southwest was to not only lower their price to 13 as well, but they also offered a choice where the customer could instead pay twice as much but receive a free bottle of liquor. I mean, that is an airline promotion that I would not expect to see replicated anytime soon. Another one was in 1988 when a law was passed where certain flights couldn't allow smoking. Southwest started serving everybody lollipops instead. That same year, in a promotion with SeaWorld of Texas, they painted one of their planes to look like a killer whale.

and called it Shamu 1. But possibly the best example of this would be an arm wrestling match in 1992. This one really seems made up. At the time, Southwest was using a slogan just plain smart, but you know plane was spelled in a very clever way. Well, this other company claimed that they were using it first. They said they had the copyright on it, so Southwest should stop using it. It led to this dispute between the two companies that somehow led to this insane arm wrestling match between Herb Kelleher and the other CEO. The event was called Malice in Dallas, and it really had this professional wrestling vibe to it. I recommend watching the whole thing because it is embarrassingly entertaining. Not necessarily the way you would expect a big-time CEO to settle a legal matter, but that's what makes them so unique. So, to summarize all of this, I think you'll agree by this point that Southwest is unlike any other major airline. Most of the things that they do differently are designed to either

Attract customers directly or to save money, which indirectly allows them to lower costs and therefore attract customers. It has allowed them to grow into a consistently profitable leader of their industry. Let me know in the comments what you think about Southwest Airlines. Have you been a customer of theirs, and has your experience aligned with the way they've been represented in this video? Or maybe after having watched this video, do you see them differently now? Finally, what do you think of my list? Does it do a good job in explaining why they've been successful, or do you think there's more to it? Any other thoughts you have about Southwest Airlines or anything else I talked about in this video, leave them in the comments. I'd like to hear what you have to say. Today's sponsor is privacy.com, and you're really going to want to hear about this. You go to the website, create an account, link it to your debit card, and from there, you can create virtual cards that generate virtual numbers. Doing that masks your bank information.

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Southwest Airlines - Why They're Successful

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