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During the past 20 years, the author has watch China move from being a developing country into an industrial superpower
Money Moves, 5/24: Chocomize Co-Founder Fabian Kaempfer talks with Bloomberg’s Deirdre Bolton about the business of customizing chocolate
The president's campaign has a new rule—no cell phones allowed
In honor of remote control inventor Eugene Polley, we recognize other influential but neglected inventors who have felt the sting of stolen glory
Forget Adderall. Traders now pop chia seeds to stay focused and energized
The Italian automaker and others are adding hybrid technology to elite cars
The storied bridge that links San Francisco and Marin County changed the face of California
Schools cultivate ties with startups before they're big successes
Dave McClure's traveling venture capital show scours the world for promising startups
Get Four
|  | DECEMBER 22, 2003
Herb Kelleher on the Record, Part 1 [Page 2 of 2] Q: Let's flash back to the beginning, when you and your client talked about creating Southwest. In those days, the industry was regulated. The only way to create an airline was [to use] a loophole...to fly intrastate. A: It was a loophole. PSA [Pacific Southwest Airlines] had started as an intrastate in California. We looked at it as a role model. Trans-Texas was a monopoly carrier in small cities, and Braniff was a monopoly carrier in big cities. They had some of the highest fares in the U.S. So we decided, as a fellow from Allstate said -- Allstate was originally going to finance us but dropped out after 3 1/2 years of litigation -- he was asked on the stand: Why did you invest in this company? He said: Because we could see that they were striking at the soft underbelly of the commercial airline industry [laughter]. Q: Even though the legal loophole was there, Braniff and the rest of them fought you tooth and nail. A: They sure did. Q: Tell us about that. A: It turned into a marathon because the incumbent carriers -- Braniff, Trans-Texas, and Continental -- didn't want any competition. I was involved in 31 separate administrative and/or judicial proceedings with those carriers over four or five years. I made three trips to the U.S. Supreme Court, and a judge at the District of Columbia Circuit Court of Appeals said: I have sat on this bench for 30 years, and this is the worst case of business harassment I've ever seen. Q: And there was the controversy over whether you could use [Houston's] Hobby Airport or [Dallas'] Love Field. A: Yes, that became a sore point. We didn't want to move to DFW [Dallas-Fort Worth] Airport, and the new Houston Airport, Intercontinental, had opened. And I said: The people we're carrying, they don't want to fly from Conroe [Intercontinental's location] to Grapevine [where DFW is]. They want to fly from Houston to Dallas. So we're going to stay at the downtown airport [applause]. We got sued by Dallas, Fort Worth, and the DFW airport board. That went to the U.S. Supreme Court. Then a DFW carrier sued us in Austin, and we got the Federal District Court for the Northern District of Texas to enjoin that suit. Went off to the U.S. Supreme Court again. We ran out of money in 1969, and the board of directors said: Let's just shut this down. And I said: I'll pay all the costs out of my own pocket and work for nothing to see if we can get this thing going. And fortunately, it did go. Q: Back in the early '70s, I was a reporter for the Houston Post, and I remember interviewing Braniff CEO Harding Lawrence. I wanted to talk to him about why he was fighting this Southwest threat so hard, and he basically said: It's a nuisance. It's not going to ever amount to anything. Braniff is no longer around, is it? A: Braniff I is no longer around, Braniff II is no longer around, Braniff III is no longer around. But I've got to tell you a story about Harding Lawrence. After we had been battling for probably six or eight years, I was at a reception in Dallas at the Fairmont Hotel, very crowded, and I felt someone jostling me, and it was Harding Lawrence, and there we were, face-to-face, mano-a-mano, and Mary Wells, who was with Harding, says: Now, don't behave like schoolyard bullies! And so [I said:] Hello, Harding. Nice to see you. Q: He was very debonair. A: Absolutely. Q: And she was, of course, the famous Mary Wells, who ran one of the biggest advertising agencies and one of the most successful at the time. A: That's right. Q: And one of the highest-profile women executives at the time. Very successful entrepreneur herself. A: Well, after Harding and I settled the civil antitrust case that followed the criminal antitrust case, Harding said: I'm going to change the atmosphere between the two companies. I was a little dubious. But I called Harding one day and said: I flew into San Antonio last night, and the Braniff skycap said that I shouldn't fly Southwest because it's an unsafe carrier. Harding fired him instantly. We had a plane that went off the runway into the dirt during a storm, and Braniff [employees] came running out of their maintenance hangar to help us unstick it and get it into the air. When deregulation took effect [in 1978] there was a provision that if a carrier had gotten a route from the CAB [Civil Aeronautics Board] but wasn't serving it, another carrier could apply to serve it and get it automatically. I saw that Harding had Hawaii, San Antonio, Houston, and I wanted San Antonio and Houston. So I just forgot about Hawaii and applied for San Antonio, Houston, and New Orleans. Harding called me and said: I'm glad there's another pirate around here. He said: I saw what you did to get that route -- you just lopped off one segment of it. I said: Harding, don't give me that kind of talk because you had two routes you weren't serving [laughter] Tomorrow, Part 2: The stock-option airline
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