Business Wars

In Texas in the 1960s, Rollin King had a crazy idea. He wanted to create a no-frills airline service that served San Antonio, Dallas and Houston. All he and his lawyer had to do was convince the Federal Regulations Bureau that they had no jurisdiction on flights that never left Texas. Of course getting Southwest off the ground would have been a lot easier if they had any planes…

Baniff and Southwest battled in court for domination over the skies. Southwest came out on top for a little while, but Baniff pushed back with prices Southwest just couldn't beat. The only way Southwest could fight back was to give the mostly male, mostly businessmen clientele something they couldn't refuse: free booze. For the first time ever, Southwest is in the black. With Baniff tamed, there's more turbulence. This time, it's a national airline. American Airlines is here to play.

The computer age is on the horizon, and American Airlines has a secret weapon: SABRE. Sure, the airline is top of the heap under the current pen-and-paper reservation system — the one where travel agents use a massive phonebook to look up flights, then call individual airlines to book a ticket. But they’re tired of playing phone tag. The American Society of Travel Agents has plans to roll out a new electronic system, one that could force American to lose its unofficial preferred status. The company has to get its system to market first — and its leaders have to convince the travel agencies to get onboard.

As deregulation dawns, Southwest Airlines’ founder and CEO are locked in a power struggle. In the middle is Herb Kelleher, Southwest’s corporate attorney. And after 18 months serving as a punching bag for the company’s top brass, he’s had enough. But as Southwest deals with a succession crisis, American Airlines is facing another emergency. It needs money, fast. The company is cash-poor after investing in its proprietary online reservation system, SABRE. The situation is so dire CEO Al Casey turns to a drastic option — moving the company’s headquarters from its homebase in New York City to Dallas. Just as American is getting a financial lift, Southwest takes a nosedive. Deregulation has the company eyeing expansion routes, but the powers that be will do anything to stop it.

Everyone loves Herb Kelleher—even FAA regulators. The onetime corporate counsel-turned-CEO is coming into his own at the helm of Southwest. But his latest challenge is coming up with a way to skirt the FAA’s pesky “slot” system, designed to limit air traffic by rationing takeoffs and landings. Kelleher has a business to run. So he embarks on a crazy plan to snag a few extra slots for Southwest. It may not work, but one thing’s certain: it will be a whole lot of fun.

Thanks to deregulation, no-frills knock offs of Southwest take to the skies like crows. About 120 airlines have gone out of business or filed for bankruptcy since the industry was deregulated in 1978. American’s SABRE system optimizes...everything. It manages ticket pricing so flights are always full, and American is building new hubs and terminals. Meanwhile, Southwest company culture is shifting from sex appeal to backyard barbecue vibe. Is it enough to attract families to fly?

Host David Brown chats with freelance journalist and series writer Joseph Guinto about the 22 years he’s spent covering Southwest Airlines… including his memories meeting and interviewing Southwest’s major players, from Rollin King to Herb Kelleher himself. Plus, the famous part of Southwest’s history that didn’t quite happen the way the company says — it’s all on this episode of Southwest vs. American Airlines, on Business Wars.