Kelleher leaving Southwest nest: Airline founder, 76, to step down as chief; president following suit

Jul. 20--Herb Kelleher, the charismatic leader who provided the public face of Southwest Airlines for more than two decades, will step down as chairman of the Dallas airline next May, 41 years after he helped found the company.

Leaving with Mr. Kelleher is his longtime associate, Colleen Barrett, who started out as his legal secretary and worked her way up to president of one of the nation's largest airlines. Ms. Barrett will leave Southwest's board as well in May and relinquish her president's job in July 2008.

The changes, announced Thursday, come as chief executive Gary Kelly and his management team are trying to remake the low-fare pioneer to attract more revenue without losing its low-fare focus.

Mr. Kelleher, 76, said his decision was made easier by his complete confidence in the remaining management team, but his and Ms. Barrett's departures will mark an unavoidably symbolic break with the past for the company.

For decades, the image of Southwest and Mr. Kelleher were inseparable. He became known as the airline executive who dressed up as Elvis for magazine covers, jumped out of overhead bins, rode a motorcycle given him by his pilots, and donned leprechaun outfits and Easter bunny suits.

Many stories about Mr. Kelleher were told, and most of them were true. A group of pilots really did "borrow" his luxury car while he was in a restaurant and had glow tubes installed on the car's underside. He never gave up smoking, even after a bout with prostate cancer, and retains a legendary fondness for Wild Turkey whiskey.

Asked Thursday about his legacy, Mr. Kelleher suggested that it would be that "I consumed more Wild Turkey and cigarettes than anyone in the history of the industry. That would be my guess."

Not completely gone

In its announcement, the carrier said Mr. Kelleher and Ms. Barrett would remain full-time employees at Southwest's Dallas headquarters for five years after they leave their current positions.

Southwest also said its board gave CEO Kelly a new contract that goes to Feb. 1, 2011.

The carrier did not name replacements for Mr. Kelleher and Ms. Barrett, although Mr. Kelly probably would take over one or both of those jobs after the pair's departure from management.

"It was a very easy thing to do for us," Mr. Kelleher said, "because we have such confidence in Gary and the other leadership of Southwest Airlines. And maybe we do need a little relaxation after 40 years."

Mr. Kelleher was part of Southwest Airlines from its beginning, serving as attorney to San Antonio businessman Rollin King as the two men developed the idea of a Texas airline connecting San Antonio, Dallas and Houston.

After Braniff and other carriers fought Southwest's application to fly inside Texas, Mr. Kelleher headed the legal battle that finally resulted in the tiny airline's launch on June 18, 1971, with just three airplanes.

He has remained on the airline's board since 1967, except for an eight-month period in 1975-76 when he resigned as a director before being re-elected.

After CEO Lamar Muse was pushed out in March 1978 in a boardroom battle with Mr. King, Mr. Kelleher was named chairman, and the airline brought in Howard Putnam from United Airlines as CEO and president.

But Mr. Putnam jumped to Braniff three years later, and Mr. Kelleher picked up the two other titles as well -- temporarily in September 1981, and then permanently in February 1982.

Under his guidance, Southwest grew from a scrappy intrastate carrier into a national leader that caused no end of grief to older, bigger carriers that lacked the lower costs and managerial agility to compete effectively with Southwest.

The airline, which had only 13 airplanes and flew only to Texas cities when Mr. Kelleher became chairman, now has 500 airplanes and flies to 63 cities in 32 states. It has more than 33,000 employees and annual revenue of more than $9 billion. It has made money every year since 1973; its last quarterly loss was more than 16 years ago.

Southwest stock has made multimillionaires out of Mr. Kelleher, Ms. Barrett and many other longtime employees throughout the company. The shares, which have been relatively stagnant for years, rose 68 cents Thursday to $16.40.

Elvis, but armed?

Industry consultant Michael Boyd, head of The Boyd Group of Evergreen, Colo., said Thursday that Mr. Kelleher's renowned sense of humor could mask his toughness and dead-on managerial instincts.

"If you screwed up, you got hurt. He did wear an Elvis suit, but he had a gun in the pocket. He'll laugh, he'll joke with you, but if the job wasn't done, you were finished," Mr. Boyd said. "The Elvis suit, the motorcycle, the cigarettes notwithstanding, he was a highly focused businessman who worked on one thing -- quality of product."

Another industry consultant, Darryl Jenkins of Marshall, Va., said Thursday's move indicates Mr. Kelleher's degree of confidence with the younger executives now taking over the carrier.

"I just think it's time to pass the baton," Mr. Jenkins said. "I think that Herb is so strong that if he was worried about Southwest's future, he would not step aside. There must be some comfort zone that he's feeling that's letting him do this. I see this as a strong vote of confidence for Gary Kelly."

Mr. Kelleher had announced plans to slow down in 2001 when he gave up the jobs of CEO and president to longtime executive Jim Parker and Ms. Barrett. But the executive changes occurred shortly before the Sept. 11, 2001, terrorist attacks, which devastated the airline industry.

"That radically changed the picture for me and the airline industry as a whole," he said Thursday. "It became 'all hands on deck.' It was a matter of survival."

Mr. Kelleher became the airline industry's point man on developing new security rules, and he led Southwest's push for changes in the federal law that restricted flights out of Dallas Love Field to protect Dallas/Fort Worth International Airport.

Except for those issues, Mr. Kelleher had largely disappeared from sight. Mr. Kelly and Ms. Barrett would lead news conferences, and Mr. Kelly and chief financial officer Laura Wright would talk to investment analysts. Mr. Kelleher didn't make an appearance in November when the airline had a large group of analysts and reporters at its Dallas headquarters.

"I actually have not been the face of Southwest Airlines for the past six years," Mr. Kelleher said. "Gary and Colleen have been, and they have been most successful at that."

'My joy and my love'

Mr. Kelly, 52, a certified public accountant by profession, joined Southwest in 1986 as controller, moved to chief financial officer and vice president of finance in 1989 and executive vice president and chief financial officer in 2001. He also was given the title of vice chairman when he became CEO in 2004.

Ms. Barrett, 62, became Southwest's corporate secretary in 1978, its vice president of administration in 1986, its executive vice president for customers in 1990, and president in 2001.

Mr. Kelleher called Southwest "my pride, my joy and my love," and Ms. Barrett called Southwest's employees "the most caring, most altruistic and most giving people that anyone has ever been fortunate enough to meet."

Explaining her reasons for leaving, Ms. Barrett said, "My heart tells me it is time to allow the next generation of SWA leaders their day to lead. I have always thought that one of the best traits of a leader is to know when to follow."

She said she would keep working on customer service issues at Southwest, although her formal title hasn't been set, and she wants to do more volunteer and community work.

"I am looking forward to saying 'yes' to a lot of things that I've said 'no' to over the past five years," Ms. Barrett said.

Herb Kelleher's Career Highlights

Title: Chairman, Southwest Airlines Co.

Born: March 12, 1931, in Haddon Heights, N.J.

College: Bachelor of arts, major in English, minor in philosophy, Wesleyan University, Middletown, Conn.; law degree, New York University, New York City

Private practice: Joined a San Antonio law firm in 1962, took a permanent leave of absence when he moved to Dallas in 1981

Southwest Airlines: Helped found the company in 1967 and has remained on its board since, with the exception of the period from Aug. 5, 1975, when he resigned from the board, until April 27, 1976, when he was re-elected to the board.

Southwest chairman: March 1978 to present

President and CEO: September 1981 to June 2001

2006 compensation: $1.4 million

Market value of Mr. Kelleher's Southwest shares $59 million

Family: Wife Joan of San Antonio and four grown children

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