Ready, Fire, Aim! - Mihail's Public Blog: Southwest Airlines' secret to success

According to this Knowledge Wharton article on Southwest Chairman Kelleher's recent talk on what's allowed Southwest to continue reporting 48 quarters of profits while other airlines like United and American are struggling (“If you had invested $100,000 in 1972, it would have grown to $102 million by 2002.”):

Close attention to costs produced those results, he noted. “Even in the best of times, we kept our costs low and questioned every expenditure. For years, I used to approve every expenditure over $1,000. Why? To encourage a cost-conscious culture. I couldn’t look at all of them, of course. But I would question them selectively, and that kept people paying attention.”

 

Low costs have given Southwest its market niche – and its competitive advantage – of having the nation’s lowest fares. And that, in turn, has created a phenomenon known in the airline industry as the “Southwest effect.” Airports served by Southwest have lower average fares than those that aren’t because other carriers feel compelled to match Southwest’s fares.