The death this week of Herb Kelleher, the co-founder and CEO of Southwest Airlines, sent me back into the FutureOfCapitalism archives for my review of The Declaration of Independents: How Libertarian Politics Can Fix What's Wrong With America, by Nick Gillespie and Matt Welch. I observed:
The book is worth buying simply for the excellent account of the Airline Deregulation Act of 1978 and of Southwest Airlines CEO Herb Kelleher's challenge to a Civil Aeronautics Board that had, between 1950 and 1974, denied all 79 applications it had received from firms wishing to enter the interstate air transport industry. The same four airlines — United, Eastern, American, and TWA — had dominated American passenger aviation for the 40 years since the 1938 Civil Aeronautics Act. After deregulation, there were more flights, they cost less, more Americans flew, and there was no adverse effect on safety.
The Gillespie-Welch book is really fine on all this. It quotes Kelleher, about the CAB's reasoning in denying the applications: "Their thesis was that if a new airline was gonna take one passenger — one, that's what they said— one passenger away from an existing airline, it can't be certificated."
Even when Southwest tried to get around the CAB by starting an airline just to fly within Texas, and thereby not be subject to the CAB's rules, Kelleher faced a four-year-long legal battle against incumbents. Eventually, the CAB was eliminated, airlines were deregulated, and Southwest grew into a significant U.S. carrier.
I've written about this elsewhere on the site in connection with Stephen Breyer, the aide to Senator Edward Kennedy who was later appointed to the U.S. Supreme Court, and in connection with President Carter. But Kelleher is also a hero of this story. The New York Times obituary estimated his wealth at $2.5 billion. Kelleher and Southwest clearly did a lot of things well besides advocating for market competition rather than government regulation and status quo protection. They are good marketers, and they execute well, and they had a successful low costs - low price strategy. But it's nice to see rewards within capitalism for advocating for competition and deregulation.