DALLAS -- "I don't smoke with my prostate."
response to a plucky shareholder who wondered if doctors had suggested that the chain-smoking exec kick the habit, in light of his recent treatment for prostate cancer. (Herb says, by the way, that the radiation treatment has been completely successful.)
Not every revelation at the airline's recent annual meeting was such a show-stopper, but the CEO -- universally referred to as Herb -- was similarly unabashed when commenting on life, the universe, and, oh yes, Southwest's challenges, strategies and successes.
He was quick to dole out the good news, reminding investors, for example, that a 1,000-share investment in LUV on Dec. 31, 1989, at 24, was worth $245,000 at the end of last year -- a return of 920%.
Not bad for an airline stock. Not bad for any stock.
In fact, in terms of overall return to shareholders on a long-term basis, only
gives Southwest a run for its money in the airline industry.
The chronically colorful Kelleher did pause from extolling the strength of the company's stock to lament the recent fire at the
distillery in Kentucky, a blaze that destroyed an entire warehouse of his favorite bourbon. "I still haven't come to closure," Herb said, his eyes downcast, his voice lowered.
Quickly recovering, Kelleher pointed out that Southwest accounts for approximately 80% of all the low-fare service in the U.S., and that the airline is now the fourth-largest airline in the country, in terms of U.S. originating passengers.
When asked about the still-debated
737 rudder situation that has been blamed for two air crashes, Kelleher said unequivocally that Southwest -- the largest operator of 737s -- "had never experienced a problem with the 737 rudder mechanism."
Another shareholder asked if the airline could provide the equivalent of same-store retail figures for its yearly results. In other words, show revenue including the new cities that were added last year, as well as without?
Quicker than you could say "same-store comparison," CFO Gary Kelly informed the standing-room-only crowd that the base city structure -- without the new cities added last year -- posted an 11.6% increase in operating revenue for 1999. For the entire system -- including the new cities -- operating revenue was up 13.5%.
But there are tough realities as well. Over the past year, Southwest has fallen to the middle of the pack among the 10 major airlines in on-time performance. That's a tough position for an airline that has often been No. 1.
When I asked if Southwest's heavier route schedule in the eastern U.S. was proving to be a big part of the problem, I got an unexpected answer.
Kelleher said Southwest was surprised to find that the two biggest problem markets have been Phoenix and Los Angeles. In addition, Fridays in general seem to be a real problem for the airline -- given Southwest's extremely high load factors.
While any airline could improve its on-time performance by merely changing its schedules and estimated flight times, Kelleher said Southwest won't rewrite the rules to win the game. "We are not going to do
that," he said.
On-time is not just a matter of appearances, it's also a question of efficiency, which cuts right to the bottom line. Southwest, which was legendary for being able to turn planes around at the gate in 20 minutes, has seen that time expand to 25 minutes.
So in Dallas and Austin, Texas, the airline is experimenting with a dual boarding bridge system that lets outbound passengers board through the front door, while incoming passengers exit through the rear door.
Kelleher said the airline would probably keep the dual boarding system and expand it to other cities and other gates "if the price proves reasonable, and if the system proves its reliability." If nothing else, he said, the system has attracted a lot of attention from other airline folks "snooping" around and looking at the operation. "A lot of industrial espionage, you might say," he said with a mock twinkle in his eye.
Southwest is also looking at ways to get planes to the gates faster in the mornings.
In some markets, Kelleher said, Southwest aircraft spend the night parked clear across an airport from where the planes need to be in the morning. Getting the aircraft to the gates quickly in the morning can be a problem.
As a result, the airline is now looking at all overnight aircraft placements to try to improve that part of the operation.
And finally, no, there was no juice or sweet rolls at this year's annual meeting. Just coffee.
The goodies were yet another victim of the airline's continual attempts to keep costs under control.
I don't think the shareholders minded one bit.
Holly Hegeman, based in Barrington, Rhode Island, pilots the Wing Tips column for TheStreet.com. At time of publication, Hegeman held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. You can usually find Hegeman, publisher of PlaneBusiness Banter, buzzing around her airline industry Web site at
www.planebusiness.com. While she cannot provide investment advice or recommendations, she welcomes your feedback at