3 Execs Leave as Southwest Airlines Faces Challenging Year

Several high-level executives have left Southwest Airlines in recent months as the carrier struggles to remain profitable amid punishing fuel costs and rapid growth.

The executives' exodus comes amid what some analysts call a slow shift in Southwest's culture and strategy under Chief Executive Officer Gary Kelly, who took the top job in mid-2004.

The new Southwest is more aggressive, takes greater competitive risks and is no longer quite the folksy underdog that built a reputation for charming partners and rivals alike.

"There is a slow cultural change going on over there," said airline consultant Stuart Klaskin of KKC Aviation Consulting in Coral Gables, Fla.

"There may be a realization that the company is entering a new era," he said, which may be spurring some executives to consider leaving "while they're at the top of their game."

The departures include:

Jim Wimberly, executive vice president of aircraft operations, who retired at the end of 2005 at age 53 after 20 years at Dallas-based Southwest. He remains under contract as a consultant.

Dave Ridley, senior vice president for people and leadership development, who left the airline last week at age 53 after 18 years to focus on missionary work. Ridley also has the option of continuing to work as a consultant.

Beverly Carmichael, vice president of labor and employee relations, began a new job this month at Rockwell Collins in Cedar Rapids, Iowa, after 10 years with Southwest. Carmichael was the airline's lead labor negotiator.

All three were considered top officers, and all were among the 13 members of Southwest's executive planning committee, according to the company's most recent annual report. Wimberly was one of only two executive vice presidents listed in the report, and Ridley was one of eight senior vice presidents.

Carmichael was also listed among the airline's 29 top officers in the annual report.

The three leave as the airline defends its position as the nation's most successful carrier and may have to re-evaluate some longtime business practices, said consultant Mike Boyd of the Boyd Group of Evergreen, Colo.

"If they don't, they won't survive," he said.

Kelly said the timing of the departures was coincidental.

"Almost every year, we have an officer leave," he said. "There's nothing extraordinary about it."

But he acknowledged that 2006 will be a challenging time.

Southwest is struggling to grow profit by 15 percent even as it becomes more vulnerable to the high fuel costs that have devastated the rest of the industry.

"We're a bigger company with more competition and more intense challenges," he said.

"That demands better teamwork and more communications between our executives."

Kelly also said he has revamped the management structure since he took over, striving for more efficiency.

"It's very different today in terms of the structure and the assignments," he said. "Things need to change, and circumstances change."

And Kelly is taking on more responsibilities as Herb Kelleher, the airline's co-founder and chairman, focuses on high-profile initiatives like lobbying for the repeal of the Wright Amendment.

"Herb is uninvolved in the day-to-day operations," Kelly said.

This year, Kelly will represent Southwest on the board of the Air Transport Association, an industry trade group, a seat that Kelleher previously held.

Kelleher remains "significantly involved" in high-level strategic decisions as well, such as new cities and routes, Kelly said.

Kelly, who came from the airline's finance department, has taken Southwest into uncertain territory with expansions into major cities like Denver, Philadelphia and Pittsburgh.

He also changed the airline's long-standing neutrality on the Wright Amendment.

One Southwest executive who asked not to be named for this story said life under Kelly is more numbers-oriented and less freewheeling.

"The culture here has changed significantly," the executive said. "It's not the same company it was a year ago, and that's why you see a lot of these people leaving."

Wimberly, Ridley and Carmichael did not respond to phone messages and e-mails requesting comments for this story.

Regardless of why the executives departed, it's clear that Southwest is in a time of transition. The airline posted its 33rd annual profit this month with earnings of $548 million for 2005.

But Kelly warns that the airline faces as much as $600 million in increased fuel costs as hedging contracts expire this year.

And Kelly says the company will need double-digit revenue growth to meet its goal of boosting profit by 15 percent.

Southwest today faces many of the same challenges as traditional hub airlines, consultant Klaskin said. That includes higher labor costs with an older work force and a less-flexible corporate structure that has been built over decades.

"Southwest isn't JetBlue," he said. "They have a lot of the same issues American has."

Boyd said Southwest's management team is keenly aware that the next several years will be difficult.

"You hear all of this glowing press about how great Southwest is doing," he said. "Make no mistake about it, Kelly and his folks don't believe a word of it."

In coming years, Boyd predicted, Southwest will be forced to re-evaluate long-standing practices like not assigning seats and using a single airplane type in its fleet.

Linda Rutherford, the airline's vice president of public relations, acknowledged that Southwest's management style has slowly evolved since 2001, when Kelleher stepped down as president and chief executive.

"For the longest time, we had just one man running everything, and now it's a little more inclusive," she said. "And that was an adjustment."

Under Kelly, previously the chief financial officer, Southwest's longtime drive to contain costs has gotten even stronger, she said.

"Everyone knew that coming from his position as CFO, there was going to be a lot of cost discipline and operations discipline there," she said. "But I think he's done great adjusting to the other parts of his role as CEO."

Kelly said that he works hard to make the airline an attractive place for top executives and that he's aware that rivals would love to snare his top officers.

"We have a hard-work culture, but it's still a place where we like to have fun, where it's very informal," he said, noting that he was wearing jeans and boots that day, as he often does.

He also added that the airline has no shortage of experienced executives to replace anyone who leaves. Southwest has hired just one outside executive in recent years -- Joe Harris, a labor lawyer with a long history of representing Southwest. He has been selected to fill Carmichael's position.

Wimberly's job is being taken by Mike Van de Ven, a 12-year veteran who was most recently senior vice president of planning.

Ridley's position will be taken by Jeff Lamb, who formerly reported to him as a senior director in Southwest's learning and development group.

Given the challenges that are in store, a change in some management positions could be a positive, Boyd said.

"This is why if you're an airline, the most dangerous competitor in the country is Southwest," he said.

Klaskin adds that Southwest is well-positioned to ride out the storm.

"The thing you have to remember about Southwest is they have tremendous bench strength," he said.

Rutherford agreed.

"Things here are a lot like a family, where you're not going to just pick up and move on to something else unless there is someone ready to move into your leadership position," Rutherford said. "And that's the case now."

Fort Worth Star Telegram

Knight Ridder content Copyright 2005 provided via The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

News stories provided by third parties are not edited by "Site Publication" staff. For suggestions and comments, please click the Contact link at the bottom of this page.