Unsolicited Advice: How Southwest Airlines lost its way

Summary

---

Fixable – "Unsolicited Advice: How Southwest Airlines Lost its Way"

Podcast Date: April 20, 2026
Hosts: Frances Frei (Harvard Business Professor), Anne Morriss (CEO & Author)

---

Episode Overview

In this episode, best-selling leadership coaches and spouses Frances Frei and Anne Morriss turn their attention to Southwest Airlines—a company once celebrated by business schools and beloved by customers, now struggling through a period of operational and strategic decline. The duo dissect Southwest’s historic strengths, the root causes of its present troubles, and outline courageous steps its leadership can take to fix what’s broken.

---

Key Discussion Points & Insights

1. Remembering Southwest’s Glory Days

• Operational Excellence:

  • Southwest’s unique system made it a case study icon—one type of airplane for simplicity, fast gate turnarounds, and union contracts that broke the industry mold.
  • Quote:

    “It was pristine. It was gorgeous. They were interlocking parts. Everyone won. Customers, employees, shareholders. Oh my gosh. They even were playful with the announcements. They turned buckling your seatbelt into performance art.” — Frances Frei (02:22)

• Courageous Simplicity:

  • Southwest intentionally said “no” to tempting add-ons (meals, premium cabins), focusing instead on speed and cost.
  • Quote:

    “When you understand the integrated system, it means you have to say no to a lot of seemingly great ideas. And that takes courage.” — Frances Frei (09:13)

• Innovative Labor Contracts:

  • Unique “and everything else” clause empowered all employees—even pilots—to help with tasks like bag handling (08:34).

[04:43–09:41]

Exploration of how Southwest’s operating system created outstanding, consistent profitability in an otherwise volatile industry.

---

2. The Slow Unraveling Under New Leadership

• Gary Kelly’s Tenure (2004–2021):

  • Grade: C. Revenue continued rising, but profit growth stalled.
  • Made fateful acquisition of AirTran—abandoning single-aircraft simplicity, inheriting complexity and reliability issues.
  • Quote:

    “He succumbed to what almost every CEO succumbs to. When you’re not getting credit in the market…you go acquire someone else.” — Frances Frei (14:14)

  • Underinvested in critical systems and software, despite record profits and warnings from employees.

• Bob Jordan’s Inheritance (2022–present):

  • Holiday 2022 operational meltdown revealed hidden weaknesses; pilots and crew stranded for days due to outmoded scheduling software.
  • Quote:

    “It was as if high school kids built a system and then tried to run it under real world.” — Frances Frei (18:45)

[13:36–19:24]

A walk-through of leadership transition missteps and underinvestment culminating in crisis.

---

3. Compounding Problems: External Pressure & Strategic Drift

• Activist Investors and “Self-Inflicted” Wounds:

  • Headcount bloat and loss of discipline in the home office.
  • Push for layoffs—first time in Southwest history—breaking employee trust and the famous “team late & everything else” contract spirit.

• Erosion of Core Promise:

  • Investors force bag fees and premium seating, breaking age-old customer contracts.
  • Quote:

    “They broke the contract with the employees with layoffs, they broke the contract with customers with charging for fees and they broke the contract with fast turnaround by clogging up the aisles. And then they now no longer have open seating.” — Frances Frei (22:11)

• Declining Customer Satisfaction:

  • American Customer Satisfaction Index numbers are falling, suggesting that the “improvements” are alienating the core customer.
  • Share buybacks being pursued for short-term stock gains instead of essential operational investments.

[19:24–25:46]

How activist investors and a fear-driven drift from core discipline have eroded both employee and customer contracts.

---

4. Lessons for Leaders Everywhere

• Differentiation as Strategy:

  • True, sustainable success comes from being different and resisting the lure of copying competitors—e.g., Costco’s deliberate oddities to create value.
  • Quote:

    “If you want to win, differentiation is the cleanest way to do it. Be different than your competitors and you can win…once you choose differentiation, you now have to be a little tone deaf to all of that.” — Frances Frei (27:02)

• Consistency, Bravery, & Clear Decision Filters:

  • The importance of not just making a different set of choices, but aligning every decision—large and small—with a clear principle.
  • Profitability alone is an insufficient compass; operational integrity (e.g., “fast turnarounds”) should be the guiding star.

• Transparency and Internal Communication:

  • Make decision logic explicit for everyone with discretion in the system.

[26:46–31:10]

Broader business lessons about differentiation, courage, and the risk of losing your way in pursuit of mainstream appeal.

---

5. Unsolicited Advice for Southwest’s Boardroom

• Return to “Simple Elegance”:

  • Reaffirm and update core principles for 2026, unapologetically serve the cost-sensitive market with operational excellence.
  • Quote:

    “The lowest cost airline is the simplest airline—and if all of the complexity that we added, is there any reason to believe that we can handle complexity better than the other airlines? ... Hell no.” — Frances Frei (33:55)

• Don’t Chase the Competition:

  • Southwest cannot out-premium Delta or United; own the non-premium game.
  • Repair customer relationships through transparency, accountability, and renewed adherence to core values.

• Stand for Principles, Not People-Pleasing:

  • Urging current CEO Bob Jordan to channel Herb Kelleher, stand by first principles, and lead with clarity and moral courage—even against boardroom or Wall Street pressure.
  • Quote:

    “Your goal is not to people please the boardroom, and it’s not to people please the private equity people. You have to stand for principles.” — Frances Frei (38:27)

[33:20–39:43]

Final segment includes strategic do’s and don’ts for leadership and an encouraging note for the future.

---

Notable Quotes & Moments

• On the heartbreak of a fallen hero:

  “You know, it feels a little bit like when you have a hero and then they let you down.” — Frances Frei (03:58)

• On the importance of system building:

  “It’s so hard to build a sustainably awesome organization. How long does it take to ruin one? Not very long.” — Frances Frei (25:53)

• On the lasting impact of Southwest’s best eras:

  “Southwest has been an inspiration to so many successful organizations. And even it can lose its way is a super humbling message.” — Frances Frei (26:23)

• On what it takes to stay different:

  “Differentiation is the most difficult way to compete because you have to commit to being different every day. Easy in good times, hard in bad times.” — Frances Frei (28:47)

---

Takeaways for All Leaders

• Define and Protect Your Core: Sustainable success comes from explicit, courageous differentiation, not mimicking the competition when times get tough.
• Resist Short-Term Pressures: Avoid sacrificing long-term operational investments for superficial metric gains.
• Be Transparent Internally & Externally: Clarity about values and decision logic is essential for staff and customers.
• Don’t Underestimate Repair Power: Companies that own mistakes and authentically recommit to customers can recover—and even strengthen—loyalty.

---

Suggested Listening Segments

• [02:22] Frances’s love letter to classic Southwest’s operational system
• [08:34] The “and everything else” labor clause game-changer
• [14:14] The critique of Gary Kelly’s era and the AirTran misstep
• [18:45] Frances’s raw comparison of the meltdown system to “high school kids”
• [22:11] The domino effect of broken employee and customer contracts
• [27:02] Key lesson on differentiation as a leadership anchor
• [33:55] Advice for reconstructing Southwest’s post-meltdown identity
• [38:27] Frances’s pep talk for courageous, principle-driven leadership

---

Tone and Style

Rich in concrete business wisdom, personal affection for the case, and lively banter. Frances’s deep knowledge and Anne’s empathy give the episode both critical bite and a hopeful, collaborative spirit.

---

Recommended for:
Leaders facing strategic crosswinds, anyone interested in how beloved brands lose their way—and how they might find it again.

Transcript

[Unidentified Narrator/Advertiser]

We're lost. It feels like we're going round in circles.

[Frances Frey]

I'm gonna ask that man for directions.

[Unidentified Narrator/Advertiser]

Hi there. We're trying to get to the state fairgrounds.

[Unidentified Advertiser Voice]

Well, you're gonna take a left at the old oak tree at this here road. Nah, I'm just kidding. Let me get my phone out.

[Anne Morris]

How is there signal out here?

[Unidentified Advertiser Voice]

T Mobile and US Cellular are coming together so the network out here is huge. We get the same great signal as the city, so saving a boatload with benefits. And there's a five year price guarantee too. Okay, here's the turn.

[Anne Morris]

Actually, can you pull up the way to a T mobile store?

[Unidentified Advertiser Voice]

America's best network just got bigger. Switch to T mobile today and get built in benefits the other guys leave out. Plus our five year price guarantee. And now T mobile is available at US Cellular stores in hermiston. Best mobile network Based on analysis by Ooklo Speed test intelligence data. Second half of 2025 bigger network. The combination of T Mobile's and US Cellular's network footprints will enhance the T mobile network's coverage price guarantee on talk text and data exclusions like taxes and fees. Fees apply CT mobile.com for details.

[Anne Morris]

This episode is brought to you by Apple Card. Apple card users get 2% daily cash back on purchases made in store and online, whether it's for big ticket items or everyday purchases. When they use their Apple card with Apple Pay now that's a benefit that's just too good to pass up. You could be earning 2% daily cash back when you use your Apple card with Apple pay to buy turmeric for your signature curry, 2% back on flights to visit the family in Tucson and even 2% back on your kid's new tuba. You might even be able to to get 2% back on a tuba tutor, not an Apple card customer. You can apply in the wallet app on iPhone subject to credit approval. Apple card issued by Goldman Sachs Bank USA Salt Lake City branch terms and more at Apple co benefits. Frances, I need to tell you something and I need you to hear it with an open heart.

[Frances Frey]

This is like a very bad way to start a sentence.

[Anne Morris]

We are talking about Southwest Airlines today.

[Frances Frey]

Oh boy.

[Anne Morris]

I know, I know, I know. This hurts a little bit.

[Frances Frey]

They had such a beautiful run as a company. I have loved Southwest Airlines since I wrote a case on them decades ago. And I mean really love.

[Anne Morris]

I know, I know. The love is real. It is shared by so many loyal customers who were loyal for so long and by so many operations professors across

[Frances Frey]

the land and I like to think I had a little bit to do with the contagiousness in the operations professors. And it's because the Southwest system, it worked so well. It was pristine. It was gorgeous. They were interlocking parts. Everyone won. Customers, employees, shareholders. Oh, my gosh. They even were playful with the announcements. They turned buckling your seatbelt into performance art. It was just a thing of beauty.

[Anne Morris]

I get it. And we are going to dwell on their glorious past, but we also have to discuss the elephant in the room, which is that the company seems to have lost its way.

[Frances Frey]

Yeah, I'm listening.

[Anne Morris]

Welcome to Fixable. This is a show where we take the problems at work that feel unfixable and find our way together to real solutions. I'm Ann Morris.

[Frances Frey]

And I'm Frances Frey. I'm a professor at the Harvard Business School. And I'm Anne's wife.

[Anne Morris]

You can think of us like your weekly MBA coaches, helping you fix tough problems and be a more effective leader. And speaking of MBAs, today we're talking about a company that comes up all the time in the MBA classroom. Southwest Airlines. If you've been following airline news, the industry has hit some serious turbulence. Southwest's response has been to turn its back on the things that made it operationally excellent in the first place. Free checked bags, open seating, no red eye flights, no premium cabin. In a push to become more competitive, they've started to say yes to all the things they had strategically said no to in the past.

[Frances Frey]

You know, it feels a little bit like when you have a hero and then they let you down. That's a little bit what it's like to my people this period in Southwest's history.

[Anne Morris]

I know, I know. So today, we're gonna do something that genuinely pains us, but we think there's some relief at the end. We're gonna walk through what made Southwest great, why the current strategy feels like such a departure from the past, and what we think company leaders should do about it now.

[Frances Frey]

And for the record, we are totally rooting for them.

[Anne Morris]

You can think of this episode as a lesson in courage and how to sustain it when you hit some inevitable turbulence. See what I did there, Francis?

[Frances Frey]

I totally did.

[Anne Morris]

All right, Francis. So let's start with this glorious piece past and some of these beautiful interlocking parts. What, from your perspective, made this company so successful in the past?

[Frances Frey]

Well, I want to just take a moment and describe the success, because it really is awe inspiring. Their founder and CEO, who was at

[Anne Morris]

the helm for 40 years, the iconic Herb Kelleher.

[Frances Frey]

The iconic Herb Kelleher. Every single year, he made more money than the last. Every single year, he had more revenue than the last. Customers loved him. Employees loved him, shareholders loved him. And this was amidst a brutal industry. And the industry, some years it would make money. Some years it would lose money. Some years make money, lose money. Not Southwest. Steady, systematic, linear improvement. A thing of beauty. So that's the. I think that's what its success was. A thing that drew us. And then when you went and looked at how did it do it? It did it with a system of success.

[Anne Morris]

Tell us your favorite parts of the interlocking system.

[Frances Frey]

Oh, well, it's really hard to narrow it down. But one plane type, which means that you only have to train people on one plane. You only need spare parts for one plane. You know exactly how many people it can pick up and deliver. So scheduling is easier for people. For planes, training is easier. And so they took simplicity to an art form. So that's one part of it that's just gorgeous.

[Anne Morris]

And let me test my own understanding of the story. So one of the reasons that Southwest was able to make money in conditions that others weren't included the fact that they really were competing on speed, and in particular the speed of gate turnaround, so that they could get these high flying, expensive assets into the air faster and get more use out of them than their competitors. And these interlocking parts, a lot of them solved for this, this faster turnaround. Is that accurate? That's exactly right.

[Frances Frey]

So it was known as a low cost carrier, and it was. But it was really optimized for fast turnaround. And it's why I loved the single plane. Because if you are only ever working on one plane type, you'll be like a formula one race car. Like, you will be able to change the tires, as it were, and turn it around. And they were able to turn it around 30 minutes faster than the competition, which is an astonishing feat. An astonishing feat.

[Anne Morris]

When you add up all of those design choices, they're 30 minutes faster than all of these other airlines in getting those planes back into the air.

[Frances Frey]

Yeah. So some other decisions they made, all in the spirit of this, is that they were able to negotiate contracts with the unions, same unions that all the other airlines had. In fact, they had a higher percentage of their employees unionized. Same unions, different clauses. They were able to negotiate two, I think, really important things into their contracts. One was a team late performance metric. Team Late meant that they were able to give variable pay when the team turned the plane around. On time. That was not permitted in contracts for other airlines. And then the one that I think was even more powerful was that in everybody's job description, in everybody's job description, they were able to tack on three words at the end of them. End everything else. So the pilot does all of this and all of this and all of this. End everything else.

[Anne Morris]

Which we see sometimes outside of this industry. But it was unheard of to get that clause into a contract in the airline industry.

[Frances Frey]

Still unheard of today, except for Southwest, which is why you will see pilots helping to take bags out, clean up in the planes. Why? Because everyone was rowing in the same direction. This thing was just a ballet of operational excellence.

[Anne Morris]

And we teed up at the top of the episode. This idea that it took courage to make many of these choices. So talk to me about the courage of this.

[Frances Frey]

Everybody has ideas to improve things all day, every day. So when you understand the integrated system, it means you have to say no to a lot of seemingly great ideas. And that takes courage. Like, oh my gosh, people are cold, let's give them warm meals. Sounds great. Until you understand that if you have catering, there's no way you can turn the plane around you 30 minutes faster.

[Anne Morris]

Hence the hearts of operations professors soaring around the world just want everybody to do.

[Frances Frey]

Remember,

[Anne Morris]

listeners, it's the sound of Francis's heart. I love it. Support for today's episode comes from Square, the easy way for business owners to take payments, book appointments, manage staff, and keep everything running in one place. Whether you're running a cafe, a salon or a mobile service business, Square helps you focus on what matters without running yourself into the ground. I can always tell when a business is using Square because checkout is quick, receipts hit my inbox instantly, and their seamless loyalty program actually makes me come back. Everything just feels polished and smooth. And from the business side, you can track sales, manage inventory, and access reports in real time. Whether you're in the shop on the go or running things all on your own.

[Frances Frey]

With Square, you get all the tools

[Anne Morris]

to run your business with none of the contracts or complexity. And why wait? Right now, you can get up to $200 off square hardware at square.com that's S Q U-A-R-E dot com. Go fixable, run your business smarter with Square and get started today. This episode is powered by AT&T Business. I was thinking recently about those early days of building something of your own. It's not just the little things. You're building the whole plane as you fly it Think of those mornings you might find yourself sitting in a crowded coffee shop or the back of a library, hunched over a laptop and just hoping the public WI fi would hold long enough to upload a pitch. It's a stressful way to start a day, and an even harder way to build a legacy. You're working from wherever you can, piecing things together, hoping everything holds. And it's funny. Connectivity is one of those things you don't really think about until it becomes a problem. And when it does, it can throw everything off. The last thing you want is to be worrying about whether things are going to work when you need them to. That's why AT&T business is a reliable provider for small business owners. For Small Business Month, we celebrate small businesses by helping them run better. This means reliable uptime, easy switching, smart communications powered by AT&T business built to work get [e-mail] this podcast is supported

[Unidentified Narrator/Advertiser]

in part by Bill, the intelligent finance platform that helps businesses and accounting firms scale with proven results. We often talk about the habits and systems that help people do their best work. For many leaders, that might include building processes that reduce friction and create clarity. That is exactly why so many finance leaders turn to Bill. With AI powered automation, Bill isn't just moving money. They're simplifying financial operations for nearly half a million customers. They're even trusted by over 90 of the top 100 US accounting firms to get it right. That trust is built on scale. Bill has securely processed over a trillion dollars in real transactions, supporting teams in handling payables, receivables and expenses. When financial tasks are organized and visible, it can free up time and energy to focus on what matters most, whether that's your team, your your mission, or your community. Visit bill.comproven and get a $250 gift card as a thank you after Speaking with a bill expert. That's bill.com proven. Terms and conditions apply. See Offer page for details.

[Anne Morris]

Okay, so Herb has this glorious run and then he's spending lots of time reinforcing this throughout the system and putting this all in a form that's accessible to people. So he's a beautiful example of all the things we talk about on this show. What happens next?

[Frances Frey]

The real change came when Gary Kelly became the CEO in 2004.

[Anne Morris]

Francis, give Gary a grade on his performance.

[Frances Frey]

C C. And this is going to surprise people because the world because you're a Harvard professor. Well, first of all, because we usually inflate grades, but all of the problems that they have Today occurred on Gary's watch.

[Anne Morris]

Convince me.

[Frances Frey]

Okay, so Gary takes over and he is continuing the march of incremental improvement. But what stops is that the profit doesn't go up a little bit every year. So he has the steady increase of revenue, but not the corresponding increase in profit. But then the market cap is stubbornly tracking profit, not revenue. But then he's not getting credit for it in the market. And he succumbed to what almost every CEO succumbs to. When you're not getting credit in the market, what do you do? You go acquire someone else. You're going to get the appearance of bigger. And he went and acquired AirTran. AirTran, also a low cost carrier, but that is where the similarities ended. Everybody loved Southwest. Everybody proudly hated AirTran. Southwest had amazing safety and reliability. AirTran had the opposite of that. And probably most importantly, it flew different planes. See my number one thing that was important under herbs.

[Anne Morris]

So this system's starting to unravel.

[Frances Frey]

If you do this, you must think that the benefits outweigh the costs. But please explain because, wow, this doesn't make sense. Now after they buy AirTran and they realize, ooh, two planes is hard. They then unravel and they lease the planes to another airline who can use them. So they unravel that. And then, and this is why everybody gives Gary a really big grade. After they overcome the bumpiness of it, they then revenue on his watch continued the climb that it did under Herb Kelleher. So now we're like at the highest level. It's just so good. And profits started to go up like a few years after the AirTran. So there is a five year period where steady improvement of revenue and profit started improving. And we know that the market for Southwest rewards profit. There's like five glorious years. And then Covid, not his fault, not his fault. And so then everything just the air comes out of the balloon. But what we learn from that and then from some things that happen soon after is that during that glorious march of revenue and profit, he under invested in systems. So behind the scenes, he was not investing in the scheduling software that people were complaining about all the time.

[Anne Morris]

Yeah, that's the sin that we see, like the lack of responsiveness when internal stakeholders start throwing flags.

[Frances Frey]

If you didn't have any money, maybe you had to make a hard call. No hard call. Record revenue, Record profit. This should have been not only when we were bulletproofing everything we heard of today, we should have been bulletproofing for tomorrow. Instead we were Doing things that Herb Kelleher never would have done.

[Anne Morris]

So this underinvestment comes back to bite him in 2022. So what happened in 2022?

[Frances Frey]

Well, you know, it's not clear. It came back to bite him because he hands it off to Bob Jordan, the current CEO. And most of the biting happened on Bob Jordan's watch.

[Anne Morris]

So take us through the takedown. Poor Bob Jordan of Bob Jordan.

[Frances Frey]

Poor Bob Jordan, because all the chickens come home to roost on his watch. All of them. So the systems gets called out like a storm of all storms. And so there's scheduling problems, and you gotta get crews from here to there, and it affects all of the airlines.

[Anne Morris]

This was 2022. This was holiday travel crisis meltdown. I mean, the press couldn't come up with more dramatic nouns for this.

[Frances Frey]

And he's been the CEO for five minutes.

[Anne Morris]

Okay?

[Frances Frey]

And so all of the systems were inherited. And this is when you find out how bad the systems are, because the other airlines are able to get their pilots and crews to where they needed. At Southwest, some pilots and crews were on hold for 24 hours. It took them days to get them from wherever they were to where they needed to be to fly. This was of epic proportions. It was as if high school kids built a system and then tried to run it under real world. Like, it showed every flaw and every bit of lack of rigor and robustness, which is so not the Southwest way. It was this, like, I feel your

[Anne Morris]

heart breaking in this story. And the scene, you know, holiday travel, millions of passengers stranded, and the systems collapsed.

[Frances Frey]

Collapsed, and everyone else's system, you know, bumped, but came back. So I got to see relatively how far behind we were. And now I'm looking backward at those record profits, and I'm mad. That's my operations professor. That's where I'm mad. So now I want to go back to a Cuz I'm just mad because he had the money and the foresight to do it and chose not to.

[Anne Morris]

Okay, so bring us to the present tense.

[Frances Frey]

Yeah. So then, so now. Poor Bob. It's just hard for me. My heart aches for Bob Jordan. And they were just brutalized when this happened. Like, customers felt betrayed. I mean, they were like, what the heck? What's going on? All of this is bad. And then you know what happens when you publicly have a meltdown? This is when help is not always helpful. Activist investor came in, and they look around and they're like, wait a minute, hold on. We know how you're not wringing things out. And I'm only emphasizing the plain part of Gary Kelly. But the other thing he did is he had severe headcount creep in the home office. But just we weren't investing here and we were letting like bloat occur here. It was just so undisciplined. And I think that's the part that

[Anne Morris]

joke is was there's now a VP of pretzels.

[Frances Frey]

That's exactly right. That's exactly right. So Bob Jordan systems broken headcount swelling. Revenue is still doing okay, but profits have plummeted.

[Anne Morris]

So the headcount swelling that is on Bob Jordan's watch.

[Frances Frey]

I don't think that the people picked up on the fact that the headcount had swollen until the activists investors came in and they said system's broken headcount swollen.

[Anne Morris]

And that's their diagnosis.

[Frances Frey]

That's their diagnosis. And by the way, the rest of the industry is charging fees for all of these things and you're not participating in that. So they came in with a three prong approach, two of the prongs self inflicted. Got it. And so they come in and say to Bob Jordan, you've got to address the headcount as an example and we're going to tell you how to do it. And you know what they told them to do? Layoff. You know what had never happened in the history of the airline layoffs. You know what has happened at every other airline in ebbs and flows and good times and bads? They just had layoffs. Let's go all the way back to what I said in the beginning. Team late and everything else in the contracts because Southwest never had layoffs. You think there is any chance that they're going to let any positive clauses be in the future kind? They just lost their preferred nation status. The breaking of the contract. Now it was their fault that it happened and then they're taking it out on employees. That just doesn't feel like Southwest. So that's the first thing that they did is the layoffs. But the second thing they did is they're like, look, everyone else is making money charging for bags. And I know you have famously said you're not going to charge for bags, but we want you to famously change your mind. Now this is a double whammy because charging for bags, not only does it break the contract, but you know why we did it.

[Anne Morris]

Yeah, that was like a company motto.

[Frances Frey]

That was the company motto back in the day. Yes. But you know why they were so sure they were going to keep to it? Because when you check bags, I can turn planes around faster. And so that is going to clog and we're going to lose our competitive advantage. So of course we can proudly say it because of course we're never going to reverse it because we're not going to appear as not a fast turnaround, low cost airline. They said you have to start charging for bag fees. And Bob Jordan to his credit was like, people are going to stop checking bags if you do that and we're going to lose. They said, look, I'll show you the comps across the other airlines. This will goose your revenue. And it has goosed the revenue, not the profit, but it has goosed the revenue. And then there are a lot of ways you can check the customer satisfaction of an industry. I like that folks at Michigan, they have a metric that's called ACSI but the American center for Satisfaction Index or something like that. And you can just watch it go up and up and up as it does. And it has been on a multi year decline now. So they broke the contract with the employees with layoffs, they broke the contract with customers with charging for fees and they broke the contract with fast turnaround by clogging up the aisles. And then they now no longer have open seating.

[Anne Morris]

They do have data to back this up that there is a segment of customers out there that did not like this. There is, I couldn't fly with my family. And then there's this anxious moment of having to fight for a seat.

[Frances Frey]

Look, of course you can find people that don't like it. The question is, what does your target market value? And if their data says the target market asked for this, great. But I think if the target market asks for it, the customer satisfaction index wouldn't be plummeting at the rate that it's plummeting right now. So there are always customers who would have said, I want a warm meal. There are always customers that said that will want things. And this is where that bravery and the courage, it's the courage to say no. And Southwest always had the discipline to optimize on their customers and hear all of the great suggestions. So I am, you know, in 2026, I want Southwest to win. I love the operational heritage. But not only have the helpful PE folks come in and ask them for layoffs and ask them to charge fees, not totally acknowledging, they're like, oh, customers like it. I'd feel better if they said, yeah, we're breaking the contract with customers, but we think the risk reward, but they're pretending they're not Breaking the contract and that makes me sad. And then you know what else they're asking for. And this is the thing that when the activist investors come in, who sometimes are helping, but it's when it's not helpful, they're asking for share buybacks. Now this is its own kettle of fish. But I will just say the long term research on share buybacks are that it does not make the company better, but it does give you a short term boost in stock price that then fades. So if you have a short term interest in the stock price going up because you're going to then sell, this is what you do. But we know everyone who has a long term interest in the company. You do this as a last resort. After you have invested in everything else the airline needs, do you have remaining money? And then maybe you'll do stock buybacks. For sure they haven't invested in everything else. They have systems melting down, they have so many things to invest in. But I believe the activist investor is going to get them to do share

[Anne Morris]

buybacks too, which is a violation to long term owners of the company, who

[Frances Frey]

all of the employees are. So they're breaking contracts everywhere. And I always think, you know, how long does it take to build a sustainably awesome organization? It takes a while. How long does it take to ruin one? Not very long. Not very long. And thus my heart breaks.

[Anne Morris]

I also want to just underscore that a lot of this tough love from you is coming from a place of total devotion to this company and belief in its ability to, to thrive.

[Frances Frey]

I can't express to you how many lessons I teach to the world because of Southwest. Southwest has been an inspiration to so many successful organizations. And even it can lose its way is a super humbling message. And so I would do anything, I would gnaw off a limb to help it get back on track because it has helped so many others get on track.

[Anne Morris]

For people listening who are not in the aviation business, which is most people listening, but what are the lessons from this wild arc that you've just described for us in this company's trajectory as a business?

[Frances Frey]

If you want to win, differentiation is the cleanest way to do it. Be different than your competitors and you can win. The problem is, if you choose differentiation every single day, you're going to be lured back to doing what everyone else does every single day. So once you choose differentiation, you now have to be a little tone deaf to all of that. It is and it's not a one and done.

[Anne Morris]

So for instance, when you say differentiation what do you mean? And what are alternatives to differentiation?

[Frances Frey]

So I can either compete with everyone doing exactly what they do, in which case I have to run faster or be paid less, or I can compete by doing a different set of things. In general, if you can compete by doing a different set of things, you get to live a more glorious life.

[Anne Morris]

And you have a classic example of a differentiation strategy.

[Frances Frey]

Yeah. So every market is going to have something that differentiates.

[Anne Morris]

Costco differentiates versus a traditional grocery store.

[Frances Frey]

Versus a traditional grocery store. And so they make seemingly odd decisions. I have to bring my own bags. I can't buy one. I gotta buy a crate. But because of all of those things, it creates an unbelievable value proposition for customers, unbelievable value proposition for employees, and an unbelievable value proposition for owners. But it's by making an entirely different set of choices. But I bet every day people are giving suggestions of, you know, people don't really want to have to carry a whole case. Why don't you all start selling one at a time, like every day? Costco has to withstand the lure of being like everyone else. But I think they're a pretty beautiful example.

[Anne Morris]

Great example.

[Frances Frey]

Every day, customers, employees, somebody is going to be saying, but look what everyone else is doing. But look what everyone else is doing. Differentiation is the most beautiful way to compete. I actually think it's the most difficult way to compete because you have to commit to being different every day. Easy in good times, hard and bad times. So that, to me is the lesson of, yes, choose differentiation. I love that. But realize how difficult it's going to be and build yourself the integrity of the system so that you can go back and look at what our principles are.

[Anne Morris]

Yeah, I love that. And to make the logic really explicit to everyone who has any discretionary judgment in the system.

[Frances Frey]

Yeah. This is why when the mantra was fast turnaround, every decision just went through that filter. Warm meals can't slow it down. Charge for bag fees can't slow it down. To your point, that logic was the most beautiful decision filter. Profitability is not a good decision filter because it's short term, long term, and it doesn't give us the wisdom to know the difference.

[Anne Morris]

And I feel like this was a beautiful example of a company being very clear about that logic internally, but also being very clear about that logic with customers. It seemed like the value proposition. Listen, we are going to give you very reliable flights. They're going to be low cost, and you are going to have a great fucking time. When you're up in the air with us, we are going to be a good time. This is going to be the egalitarian era. All those other airlines make you feel a little bit bad about yourself. We're going to make you feel great. So here's what we're going to ask for in return, right? You, you're going to have to give up having a warm like three square meals a day with us. You're not going to get that with us. You're going to have to do a

[Frances Frey]

little bit of more work boarding.

[Anne Morris]

You're going to have to, you know, drive a little bit further to these lower cost airports. You're going to have to transfer your own bags.

[Frances Frey]

But we're going to be clear about the payoff.

[Anne Morris]

Yes. And we're going to have this adult to adult relationship.

[Frances Frey]

A great sign of success is that customers know that they don't want to go with you. Some know that they do and some know that they don't.

[Anne Morris]

Yeah, I love it.

[Unidentified Advertiser Voice]

Foreign. Is moving all at once.

[Frances Frey]

Your workforce, your tech stack, your business.

[Unidentified Advertiser Voice]

You don't need more tools.

[Frances Frey]

You need one solution.

[Unidentified Advertiser Voice]

That's why Paylocity built a single platform to connect hr, finance and IT with

[Frances Frey]

AI driven insights and automated workflows that

[Unidentified Advertiser Voice]

simplify the complex and power what's next.

[Frances Frey]

Because when everything comes together in one

[Unidentified Advertiser Voice]

place, growth comes easy experience. One place for all your HCM needs.

[Frances Frey]

Start [e-mail] 1 this episode is brought

[Unidentified Narrator/Advertiser]

to you by Capital One. Capital One's tech team isn't just talking about multi agentic AI. They already deployed one. It's called Chat Concierge and it's simplifying car shopping using self reflection and layered reasoning with live API checks. It doesn't just help buyers find a car they love, it helps schedule a test drive, get pre approved for financing and estimate trade in value, advanced, intuitive and deployed. That's how they stack. That's technology at Capital One. This episode is brought to you by Choiceology, an original podcast from Charles Schwab. Hosted by Katie Milkman, an award winning behavioral scientist and author of best selling book how to Change. Choiceology is a show about the psychology and economics behind our decisions. Hear true stories from Nobel laureates, authors, athletes and everyday people about why we do the things we do. Listen to [e-mail] podcast or wherever you listen.

[Anne Morris]

Okay, I'm feeling bad. I'm feeling bad for all of these, the leaders of this company who have a really hard job. Yes, I should not be on the edge of this company because I'm transferring grandma's Bags for sure. Like the bleeding heart in me is like, yeah, I'll just make an exception for you. Just call me directly. Call me directly and I'll just run down and transfer your bags so you don't want me.

[Frances Frey]

And the plane will wait for you.

[Anne Morris]

We'll hold the plane until it all happens. What is our unsolicited advice for this boardroom? I'm feeling bad for Bob because I feel like he made the decision right too.

[Frances Frey]

And all of it, all of the, all of the bad stuff happened on his watch, but it happened moments afterwards and all the seeds were planted before. I feel very bad for Bob. So here's what I would say and the way I was thinking about it is if Herb Kelleher were reincarnated today, this was my thought experiment of what to do now.

[Anne Morris]

Very exciting proposition.

[Frances Frey]

And I don't believe he would nostalgically go back to the past. It's a different context. We're in 2026. There's a different context. But I think what he would return to is that the lowest cost airline is the simplest airline and that if all of the complexity that we added. Is there any reason to believe that we can handle complexity better than the other airlines? And I think there's a hell no. So I would go back to the roots of what is the simple elegance, what's the slice of the market that we can handle with simple elegance and figure out what that is in 2026 and then be unapologetic, playfully unapologetic about what it is. So that's the first thing I would say. But go ahead.

[Anne Morris]

I was going to ask. So there is a story of this industry right now that the low cost model is dead in the water, that you can only make money with premium customers now and it's a losing game to try to cater to a segment of cost sensitive flyers. What is your response to that?

[Frances Frey]

It would be the first industry in the history of time that there's not a low cost, large swath of the market statement.

[Anne Morris]

But you have a lot of competitors, you know, Delta, United. I just was on a JetBlue flight where they were putting more seats in mint. They were taking seats from the back and redeploying them for their first class cabin. There you do see competitors reconfiguring for, for competition.

[Frances Frey]

And does that make them want to go towards the competitors or go away from the competitors? Southwest is not going to win at the premium.

[Anne Morris]

Southwest is not going to win at the Southwest. Right. So what is somebody's going to win

[Frances Frey]

at the non premium game.

[Anne Morris]

Yes.

[Frances Frey]

And why not be Southwest for that?

[Anne Morris]

They have this asset of a loyalty that we all like. We might be pissed, but if you, all the research shows if you repair the relationship with me, it's not good to repair even harder than I loved you before.

[Frances Frey]

Even harder.

[Anne Morris]

So you know somebody's going to win at this game. Why not Southwest? You have this legacy of an operational advantage, hence the love of the professors. Why not return to your roots and go back and search for those kinds of advantages instead?

[Frances Frey]

You know what I fear we're going to hear in 2027? Somebody's going to make an argument for why we should have a second plane that's more premium suited.

[Anne Morris]

And then you're just, then you're just chasing Delta, United and.

[Frances Frey]

But Delta United have been doing this game for decades. And you think from standing still you're going to keep up. You're not.

[Anne Morris]

I get like a six course meal on Delta.

[Frances Frey]

No, it's ridiculous.

[Anne Morris]

I mean, do they want to play that game? They're welcome to, but they're going to have to do a lot of work.

[Frances Frey]

They're not going to. They're not even, I mean, come on. They're not even welcome to. There's no reason to believe that they are going to win in that game. But is it possible to return to the roots? Yeah. First of all, they did a Super bowl ad this year where they mocked checking bags for free. They mocked their heritage.

[Anne Morris]

It's. Ooh, that's tonally.

[Frances Frey]

It's awkward for you.

[Anne Morris]

These are supposed to be the good. No, you can't have that emotion. In my relationship with Southwest.

[Frances Frey]

No, no, you can't. So I actually think they need to come out with a, just a full on apology and recommit to their employees and to the passengers. And here's the thing that is really important about their heritage. The other airlines are making money now. But you know what I know about the airline industry? It's cyclical. You know who, who withstood the cycles? Southwest. Because they didn't expand as much as they could in the good times because they knew they didn't want to have layoffs in the bad times. So I would go back to sustainable growth. Growth at a pace that we can absorb, complexity that we can absorb, that I would have operational excellence before complexity because we have to have rigorous systems. If they return to that, I think they could be a sustainably fine airline. Would they make as much money as Delta in the good years? No. Will they make more money than Delta in the bad years. Yes. I think that's their lane.

[Anne Morris]

So if Bob were part of this conversation, because now I'm getting my coach on, what would you say to him? What's the pep talk you would give him?

[Frances Frey]

I would say, bob, your goal is not to. To be. Is not to people please in the boardroom, and it's not to people please the private equity people. Do you have to stand for principles? And I would just constantly return to the logic and make the logic transparent, but I would channel Herb in that regard, who always went back to first principles, and I would go back to first principles about what can Southwest win at and what's at the heart and soul of Southwest. And Bob has said every single job in the airline. He knows every nook and cranny. I believe everything I'm saying. He knows. And he was just the guy that was propped up. But now I would say, bob, it's not your fault. You were propped up, but you have the seat now. So now stand for what's right. What a beautiful. Go out swinging. Go out swinging for what's right. That's how I would coach him. And by the way, I think he could land a knockout punch because he could have all the employees behind him and all the. Behind him and some of the most loyal employees and the most loyal customers I have seen, and I even think the shareholders would line up behind him. So that's what I would say is go out swinging for what is noble and what is right.

[Anne Morris]

Yeah, I. I think there's a cool. There's a cool fact pattern here. So he seems like a really good guy.

[Frances Frey]

He seems like a really good guy.

[Anne Morris]

I mean, there's all of these stories where he's cleaning the plane, he's helping

[Frances Frey]

to turn the plane around. He's going to go clean them up.

[Anne Morris]

I think that's the way through this. Yeah. All right, we're going to end it there.

[Frances Frey]

Thank you so much for listening to this episode. Your participation helps us make great episodes. So if you want to help, please follow the show. Share an episode with a friend, leave a review. All of those are free and they totally help support us. If you want to figure out any questions about your workplace problem together, email [e-mail].

[Anne Morris]

Fixable is a podcast from ted.

[Frances Frey]

It's hosted by me, Anne Morris, and me, Frances Fry.

[Anne Morris]

This episode was produced by Rahima Nassa from Pushkin Industries. Our team includes Constanza Gallardo, Banban Chang, Daniela Baloraiso, and Roxanne hi Lash.

[Frances Frey]

And our show was mixed by Louis at Storyyard.

[Unidentified Advertiser Voice]

With no fees or minimums on checking accounts, it's no wonder the Capital One bank guy is so passionate about banking with Capital One. If he were here, he wouldn't just tell you about no fees or minimums. He'd also talk about how most Capital One cafes are open seven days a week to assist with your banking needs. Yep, even on weekends it's pretty much all he talks about in a good way. What's in your wallet terms apply. See capitalone.com bank capital1na member FDIC insurance isn't one size fits all. That's why drivers have enjoyed Progressive's name your price tool for years now. With the Name your price tool, you tell them what you want to pay and they'll show you options that fit your budget. So whether you're picking out your first policy or just looking for something that works better for you and your family, they make it easy to see your options. Visit progressive.com find a rate that works for you with the name your price tool Progressive Casualty Insurance Company and affiliates Price and Coverage match Limited by State law Security program on spreadsheets, New regulations piling up and audit dread it's time for Vanta. Vanta automates security and compliance, brings evidence into one place and cuts audit prep by 82%. Less manual work, clearer visibility, faster deals, zero chaos. Call it compliance or call it compliance. Get it join the 15,000 companies using Vanta to prove trust. Go to vanta.com calm this episode is

[Unidentified Narrator/Advertiser]

brought to you by Choiceology, an original podcast from Charles Schwab. Hosted by Katie Milkman, an award winning behavioral scientist and author of best selling book how to Change, Choiceology is a show about the psychology and economics behind our decisions. Hear true stories from Nobel laureates, authors, athletes and everyday people about why we do the things we do. Listen to [e-mail] podcast or wherever you listen.