Tag Archives: Gary Kelly

Airline Execs: Pretty Scary Stuff

It’s Halloween. BOO!

For at least two airlines — that means it is time to get scary.

Especially for some of the airlines’ top executives.

Friday over on Denton Drive here in Dallas, it appears that Southwest Airlines‘ former Chairman and CEO Herb Kelleher decided to go with the Willie Nelson/Biker combo look, while current Chairman, President and CEO Gary Kelly pranced down the Yellow Brick Road as Dorothy.

I don’t know what it is with Gary and his cross-dressing tendencies, but ever since he turned out as Edna Turnblad a couple of years ago — we’re almost afraid to look. (Last year Gary and two associates were attired as ZZ Top.) Early betting this year had Gary dressing as Julia Child.


But here’s the one that got me. Anyone know who that is?

That’s US Airways’ COO Robert Isom. I tell you what — that boy has the Barry Gibb thing going, doesn’t he? I hear he hit some pretty high notes Friday as well — as the US Airways’ executive team, aka the Bee Gees, entertained airline employees at the airline’s headquarters in Tempe.

Gotta love that hair.


Vacation Coming To An End….Sigh

Thanks to all of you who have been attempting to get me to comment this week on any number of goings-on in the airline industry.

But, I am happy to say — I resisted.

Until today.

No, I said, I am on vacation, and damn it, I am going to stay offline. Until Tuesday.

Until today.

And what got me to finally break my silence? Something wickedly funny. Of course.

Most of you probably saw the recent YouTube effort in which some enterprising Boeing employee ( I would bet) did a take off on Boeing’s continued delays with the 787. The video used? A now-familiar clip from a recent Hitler made-for-television movie that seems tailor-made for such antics. In fact, there are scores of these parodies now on YouTube, including one dealing with Brett Favre’s sign-up with the Vikings. I know. Just one of those things that seems to be tailor-made for mischief.

This week das Fuhrer has made yet another appearance.

But this time it appears that a Southwest Airlines’ pilot is the one responsible for the sub-titles. And Southwest’s CEO Gary Kelly is the one barking out German invectives to his underlings.

I’ve had more than a handful of you inquire as to whether moi had anything to do with this. I think the reason is because there are some very “inside” management barbs in this new satire. So I guess the assumption is that this was something right up my alley.

But I am here to say — I am completely innocent.

That is not to say that I didn’t chuckle out loud more than once when I watched it, though. (Yeah, you know Business Select takes a hit in here, along with…..”It’s ON!”) But I think I may have laughed the loudest at the “deck party” comment.

Not sure some folks over on Denton Drive are going to be too amused, however. This one hits just a little too close to home. On more than one front.

Serious stuff? Oh of course there has been a lot of serious stuff going on in the industry this past week — including headline-grabbing FAA interventions with both American Airlines and Southwest Airlines. I mean, if this continues, the FAA should just move their headquarters to Dallas, don’t you think?

And yes, Southwest, when not feverishly repairing aircraft this week, also announced a new “fee” for passengers. I’ll be talking about this news this next week, along with a whole lot more. When my vacation finally ends on Tuesday.


Enjoy your Labor Day weekend everyone. Tennis in the greatest city in the world, college football at a stadium near you, and cooler temps almost everywhere.

Life simply doesn’t get any better than this. Get out there and enjoy it.

Happy Friday: Gary Kelly’s Financial Stewardship Dinged By Chief Executive Magazine

Yours truly is in the midst of my usual two week holiday hiatus from publishing PlaneBusiness Banter this week — and in fact I’m not at either the main Worldwide Headquarters in the swamp or at the branch office in Dallas.

Today I find myself in the lovely confines of Tucson, Arizona. The sun is out — but it was a bit chilly here this morning. 33 degrees to be exact. Yes, we are on the back end of the same storm that dumped the almost four inches of snow on Las Vegas this week. The same storm that is now making life in much of the rest of the country more than miserable.

My condolences to those of you trying to fly out or into Chicago today — but for those of you on the East Coast — it’s coming your way later today. Oh, boy. Just what our friends, the things with wings, need to contend with on the weekend before Christmas.

But enough of my frigid travel travails. Let’s talk about some news of note involving the things with wings. Southwest Airlines to be precise.

Chief Executive Magazine Cites Southwest’s CEO for “Wealth Destruction”


Chief Executive magazine used its end-of-year issue to note those CEOs who they think are both doing the best and worst jobs at creating value at their respective companies.

In its first annual Chief Executive/Applied Finance Group Wealth Creation Rankings — the magazine partnered with Applied Finance Group — creators of the Economic Margin (EM) value metric and Drew Morris, CEO of Great Numbers!

As the magazine noted in its introduction to its rankings,

As we have seen with the recent meltdown in financial markets, value isn’t always what it appears to be. And traditional accounting measures do not count what really counts. Earnings per share (EPS) and price/earnings (P/E) ratios are based on accounting profit, which is prone to distortion and has no real relationship to wealth creation. Trying to grow earnings or EPS in the belief that the stock market will reward you with a higher share price no longer works, as investors really seek to understand the company’s underlying economic performance.

To state the obvious, navigating with instruments that mislead is dangerous. CEOs need to look at their businesses with the same wealth-creation measures that, for example, private equity and institutional investors use. Investors want to know how good a company and its leaders are at preserving and growing their capital.

Many companies have moved from accounting to economic approaches to measuring this. A few, such as EVA, are good because they reckon with the true cost of capital, but none are perfect. Our rankings rely on Economic Margin, a measure with which executives can readily manage wealth creation, and which is applicable at all levels of a company. EM is calculated as the difference between operating cash flow and an appropriate capital charge, all divided by invested capital. EM is suitable for both private and public companies and useful for making comparisons with competitors, as it’s an economic-profitability percentage, not a monetary amount.

The ranking method we used also considers management’s demonstrated ability to protect shareholder wealth and create truly valuable assets. Our intent is to advance the art, science and practice of creating wealth for a company’s owners and the associated results creation skills of its executive team.”

So who were the top ten best “wealth creators” according to this methodology?

10 Best Wealth Creators



1. J. Christopher Donahue

Federated Investors

2. Jeffrey P. Bezos


3. Robert W. Selander


4. Mark Donegan

Precision Castparts

5. Hugh Grant


6. John W. Rowe


7. John C. Martin, Ph.D.

Gilead Sciences

8. Daniel P. Amos


9. Andrea Jung


10. Clayton M. Jones

Rockwell Collins

And which CEOs were the best “wealth destroyers?”

10 Best Wealth Destroyers



1. James R. Tobin

Boston Scientific

2. Robert J. Coury


3. Gary C. Kelly

Southwest Airlines

4. Herb M. Allison, Jr.

Fannie Mae

5. Eli Harari, Ph.D.


6. Glen F. Post, III


7. Larry L. Weyers

Integrys Energy

8. Steven R. Appleton

Micron Technology

9. John A. Luke, Jr.


10. Lynn Laverty Elsenhans


Clearly, for our purposes here in PlaneBuzz, the only CEO of interest to us in all of this was Southwest’s Gary Kelly. Particularly because when Kelly was named as CEO of the airline, the bulk of the scuttlebutt around the announcement dealt with the fact that because he had been such an excellent CFO of the airline — that he would help shore up the airline’s financial side — and most importantly to stockholders — its stock price.

According to Chief Executive’s metric, however, Gary hasn’t fared too well over the last three years. Here is what the magazine said about Southwest.

“Gary Kelly, Southwest Airlines
Score: 6

Southwest’s low score may come as a surprise considering it’s arguably among the best-managed airlines. But it’s an airline; the only one in the S&P 500. That means planes, airport fees and lots of competition. The market is far from wild about the value of its assets. In the EM sector rankings, Southwest was grouped with other transportation companies, all of which performed better. Southwest’s EM ranged between -.5 percent (-.005) and -0.9 percent (almost -1 percent) over the 2005-07 period. While its SEC filings show a profit during this time, when Southwest’s off-balance sheet leases and other adjustments are accounted for, the picture reverses. For example, applying those adjustments to Southwest’s 2007 results increases its invested capital by $5.9 billion, or 35 percent. The $1.7 billion capital charge on this amount exceeded its $1.5 billion operating cash flow, resulting in a negative Economic Margin.”

The article is a very interesting read. Well worth it. And not just for its rather low opinion of Mr. Kelly’s ability to create and/or protect shareholder wealth at Southwest Airlines. You can access the entire article here.

Did Holly Break Into Gary Kelly’s Email?

New York_317.jpg

Well, well, well.

Longtime readers of PlaneBusiness Banter know that I have, more than once, knocked Southwest Airlines’ and their efforts to court business travelers — if the airline was not going to have a presence in New York City.

Not too long ago, I was listening to three businessmen on their way to Dallas lament about the fact that yes, they would fly the airline more if they just flew to New York. But as it was, they were “stuck” with flying American because they had no choice.

Yes, well, my point exactly. Corporate travel managers found it hard to take the airline seriously as well, if they couldn’t send their employees to New York.

No surprise then that when three of us media types were asked at the recent Southwest Airlines’ Halloween celebration in their “Are You Smarter Than A Fifth Grader?” skit what city we’d like to see Southwest fly to — I wrote down LGA.

Ask CrankyFlier . He saw it.

CEO Gary Kelly, who was standing right behind me in his ZZ Top garb must have thought I’d been eavesdropping on his communications. One thing for sure — he certainly got quiet. (After helping me out on the five Great Lakes question.)

Today — the airline announced that it has agreed to pay $7.5 million for bankrupt ATA Airlines’ landing slots at New York’s LaGuardia Airport.

Southwest would get 14 slots in the deal, enough to operate seven takeoffs and seven landings per day at LaGuardia.

The deal is dependent on approval by U.S. bankruptcy court. If approved, Southwest expects to begin flying to LaGuardia next year.

Follow-Up on Southwest Pilots Case of “Codeshare Blues”


Earlier this week I talked about how I had been rather inundated with emails from Southwest Airlines’ pilots (and other employees) concerning the airline’s announced codeshare agreement with Mexican carrier Volaris.

Since that time, the email bag has continued to fill up.

Now, not only am I hearing from pissed off Southwest pilots, I’m hearing from other Southwest pilots who tell me, “Well, if you have the highest paid pilot group in the country, what do you expect Gary Kelly to do?” One Southwest pilot wrote me, “You can’t have it both ways. We are blessed with the contract that we have and have had. But reality is what it is. And if the airline can fly shorter-haul routes more cheaply using pilots from other airlines — guess what the airline is going to do.”

So both sides of the argument are making their voices heard.

But even one Southwest Airlines‘ pilot who talked about how the pilots should not be surprised, given their current compensation level also acknowledged that “Gary blew it.” A lot of the comments coming into me this week have talked about how after negotiating an agreement as part of the continuing negotiations between the airline and the pilots on a new contract that would allow codesharing — that Gary apparently then went back to the union again wanting to renegotiate the deal — and this is where things have now begun to unravel. Meanwhile, the airline stepped up and announced the codeshare with WestJet this summer.

And then there are pilots from other airlines. The notes from you folks tend to go something along these lines, “It’s about time the guys at Southwest joined the rest of us. Welcome to the club.”

As for the pilot union at Southwest, SWAPA president Carl Kuwitsky said in a letter issued Wednesday,

“While this announcement is yet another step in previously announced plans by the Company to form multiple codeshare alliances, it leaves a very unsettled feeling with many in our pilot group including your SWAPA leadership. In fact, it is very problematic for me personally and as a leader of our pilot group. Codeshare has the potential to severely affect the career of all pilots on our seniority list. At a time when our Company has stated publically that we are not planning to grow in 2009, we have embraced yet another codeshare partner who will benefit significantly from the codeshare partnership by experiencing double digit growth while our pilot group experiences negative growth with the capacity reduction in January. I cannot support these efforts and the cost to our pilots. Our Company needs to be committed to growing Southwest Airlines, not codeshare partners.

Volaris is mostly an unknown to our pilot group and your leadership. It is a two year old carrier with 19 Airbus 319/320 aircraft. They serve 23 cities in Mexico focusing on smaller satellite airports. One very troubling aspect to this announcement is that our Company is risking brand dilution by association with an unknown carrier. Our Company’s experience with ATA via a codeshare agreement resulted in numerous customer service and operational problems that reflected poorly on Southwest Airlines which adversely affected our brand. Additionally, when ATA went out of business, thousands of customers were holding itineraries sold by Southwest that could not be completed. Clearly the association with ATA reflected poorly on our Company. While Volaris may turn out fine, it does nothing to satisfy membership angst over potential brand dilution due to poor customer service or operational issues, especially when we could do some transborder flying and completely control our brand image. As employees all of us have worked very hard to build what we know as Southwest Airlines. We take great pride in our Company and what we have built. Our Company has a great responsibility to maintain that positive brand image. I must say that I am dismayed that the Company would risk its image by associating with such a young, unknown carrier.”

This contract should have been wrapped up way before now. But it has now dragged on so long that the airline is looking at simultaneously trying to negotiate three major employee contracts at the same time. While the airline is now watching previously agreed upon sections of the pilot contract apparently go poof!, the TWU, which has been negotiating a new contract for ground workers at the airline, just asked, along with the airline, for the National Meditation Board to help in those stalled talks.

Then there are the flight attendants. Negotiations continue between TWU 556 and the company on a new contract there. Not much progress has been made as far as we can tell. According to the union’s website, “…it is clear that we are still far apart on our Economic Proposals….”