Thread by @PIAlmanack

Amidst the #JetAirwaysCrisis that we are in today, some timely wisdom from Herb Kelleher (co-founder at Southwest Airlines) on debt, profitability, market share, and running an airline.

Southwest Airlines has never had a loss for a full year since 1972 and never furloughed an employee when the rest of the industry up until now has probably furloughed about a million-and-a-half employees throughout the world.

"Basically we looked at history and said this is a very dicey business to be in. So we may be flamboyant from the marketing standpoint but we're going to be very conservative from the fiscal standpoint" - Herb Kelleher

"I established a rule of thumb that we're going to pay 80% of the cost of all of our new airplanes from internally generated funds and actually wound up paying 100% for most of our airplanes" - Herb Kelleher

What does it mean?
"It mean you're not taking on #debt. When you do that and when you get in the bad times you're not threatened by the debt payments which is what puts carriers into bankruptcy and out of bankruptcy and back into bankruptcy you know for 35 years" - Herb Kelleher

When asked the secret behind why giant players from the past like Pan AM and TWA went bankrupt while Southwest keeps growing:

"We just did things differently. Like I told anybody that they mention market-share and I punch him in the nose because here all these big companies fighting over their market share and losing money and furloughing employees." - Herb Kelleher

"So I say lets focus on profitability and if we have 4% of the market and we're profitable then that's better than having 90% of the market and being unprofitable" - Herb Kelleher

Fortune magazine once called him perhaps the best CEO in America. The lessons here are not just limited to the airline industry but valid for businesses in general. Herb is the reason why we have profitable LCCs today.
Herb died in January this year.

one.npr.org/?sharedMediaId…