Kelleher set the blueprint for low cost air travel

Herb Kelleher.

Last week the founder of Southwest Airlines - Herb Kelleher - passed away at the ripe age of 87.

His life, especially as an entrepreneur, warrants study by any aspiring wealth creator but his profound impact on commercial air travel is what should be celebrated first.

I was thinking about him before Christmas when the head of a pilot union in Germany was quoted saying that airfares had got too low and needed to increase in Europe.

His logic was that very low fares were unsustainable and, in some ways, were a risk to the safety of air travel because it could lead to corner-cutting by management teams.

The unsaid message, however, was that the incumbent airlines in the German market were not a bit happy about intense price competition veering their way courtesy of competition from the low-cost carriers Wizz Air and Ryanair.

Both of these airlines carry the spirit of Herb Kelleher.

Both are fervent believers in the power of competition as a means of driving demand for air travel.

They employ business models designed specifically to supply ultra-low fares into any marketplace while generating sustainable profits.

In this regard, they echo the disruptive impulse that Southwest brought to the US airline market during the early 1970s.

At that time the US airline industry was a stitch-up between the large established carriers that ran quasi-monopoly routes with the tacit support of government.

That industry structure facilitated high airfares which helped pay for inefficient airline businesses while confining air travel to those who were well up the income chain.

The exact same culture existed in Europe and was in full flow in Ireland where two airlines - Aer Lingus and British Airways - ran a high fare duopoly over the Irish Sea.

As recently as the 1980s it was impossible for anyone on an average salary to travel regularly by air.

That privilege was kept for high-income earners, employees of airlines and civil servants.

This set sustained an industry ran by the few for the few.

Mr Kelleher had a visceral reaction to that type of industry structure.

He laid into it with an airline that offered simple fares on single type aircraft working hard within all regulatory rules.

The stunning result was an explosion in demand from people who had theretofore been kept out of air travel.

People on modest incomes could now travel for work or play and, in so doing, achieve more for democracy than many a political party.

The effect on regional economies and smaller airports was equally spectacular.

Mr Kelleher’s Irish roots probably helped.

His Irish Presbyterian father and Irish Catholic mother instilled skills and beliefs that helped nurture a battling persona who deployed his abilities to create wealth while revolutionising air travel.

The template he created has been enthusiastically embraced by other airline models led by Irish executives.

Ryanair is probably the highest profile example but Air Asia, Jetstar, Tiger Airways and Viva Colombia are airlines that used the Kelleher Lodestar as a guiding light in the fiercely competitive airline industry.

Aer Lingus, too, saw the merits of efficiency after 9/11 and is now, under IAG ownership, one of the lowest cost airlines operating across the Atlantic.

Competition in any market is a key to unlocking value for consumers while driving higher levels of efficiency.

Incumbents, often powerful and politically well-connected, will fight tooth and nail to preserve their territory and keep upstarts and disrupters at bay.

It is individuals like Herb Kelleher that remind us competition must be cherished, supported and advocated, not just as a means to create wealth but to energise consumer power too.

Joe Gill is director of corporate booking with Goodbody Stockbrokers. His views are personal.

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