Southwest Airlines Keeps Its People After 9/11

The story

On the morning of September 11, 2001, terrorists hijacked four passenger jets. Within hours the U.S. government ordered every civilian airplane in the country to land, and for several days nothing flew. For airlines, this was a nightmare. Planes sat parked, money stopped coming in, and many people were afraid to fly once the skies reopened.

Southwest Airlines, based in Dallas, was in a strange position. Its longtime leader, Herb Kelleher, had handed the chief executive job to Jim Parker, the company's lawyer, only three months earlier, in June 2001. Southwest had a reputation as a fun, low-fare airline, but it also had a quieter habit that mattered more that week: it was careful with money. According to the company's own report to shareholders, it had about $1 billion in cash on September 11, and much less debt than most of its rivals.

Southwest's leaders say they decided on the very first morning that they would do everything in their power to avoid layoffs. Kelleher's advice to the finance team was short: get cash. On September 12 the company drew on its bank credit line, eventually borrowing about $1.1 billion, so it could keep paying its bills while planes were grounded. Parker then told every employee that their jobs were safe and their paychecks would keep coming.

Other airlines went the opposite way. Within about a week of the attacks, rival carriers announced job cuts in the thousands. Southwest's 2002 report to shareholders states that it gave its people "100 percent job security," with no layoffs, furloughs, unpaid leaves, or cuts to pay or benefits. The top leaders went further: Kelleher, Parker and company president Colleen Barrett gave up their own salaries for the last three months of 2001. Southwest also went ahead and paid about $197.5 million into employee profit-sharing and savings plans, even though the money would have been handy to keep.

Southwest returned to the air on September 14 and kept a planned new service to Norfolk, Virginia, that fall. Employees worked very long days to rebuild schedules and set up new security rules. For 2001 as a whole, the airline reported a profit of about $511 million, its 29th profitable year in a row. To be fair and complete, part of that profit came from a federal emergency grant that all airlines received after the attacks; without the grant and some special charges, Southwest's profit would have been about $413 million. Still, it was the only major U.S. airline that stayed profitable.

Why could Southwest do this when others could not? The main reason was choices made long before the crisis. For years it had kept a strong balance sheet, meaning more savings and less borrowing than its competitors. That cushion gave leaders room to choose loyalty over quick cost-cutting. They also believed that employees who feel safe give better service, and that the trust built in a hard moment lasts for years.

The story is not a fairy tale with no problems afterward. Parker's time as CEO also saw tense negotiations with the flight attendants' union, and he stepped down in 2004. But the decision after 9/11 is still one of the most cited examples of a company protecting its people in a crisis.