Southwest Airlines CEO Speaks Out on Airline Industry
VELSHI: Well, it seems like airlines are always adding surcharges. So our friends at farecompare.com decided to check out surcharges on a non-stop flight from the U.S. to London. Listen to this. They ranged from $270 to $426. That's surcharges. That's before you pay for the ticket. And don't forget about taxes. That will add an additional $120 to the tab. OK, well you knew this already. But it's been a rough go for the airline industry. One airline has avoided making the job cuts, the schedule reductions and adding a lot of the surcharges that the others have. CNN Money's Poppy Harlow is here with more on that -- Poppy.</s>HARLOW: Thanks, Ali. Yes, I'm here today with Gary Kelly. He's the chairman and the CEO of Southwest Airlines. Gary, thank you so much for joining us.</s>GARY KELLY, CHAIRMAN & CEO, SOUTHWEST AIRLINES: Great to be here, Poppy.</s>HARLOW: You know, Ali said it, you're not firing people, you're not tacking on the surcharges, you're not charging people $15 for the first checked bag. A lot of this has to do with the ability to turn a profit in a failing industry. You pay well under $100 for oil per barrel right now, lucky on that one. How long can this last? What happens when your hedge on oil runs out?</s>KELLY: Well, you know, there are just so many great things about Southwest Airlines. Our core strength is our people. We've got the best customer service record. We've got the best on-time performance record. We've got the greatest culture. And the fuel hedge is one element of the great things that our people have put into place. But we're going to have to continue to make adjustments to be able to be profitable in a higher cost environment. And I'm very confident that our people will make that happen.</s>HARLOW: Well, Gary, just for you folks out there who don't understand what a fuel hedge is. What it is, is sometime ago Southwest bet that the price of oil would stay around $51. They bet it would go up. So they hedged 70 percent of their oil at about $51. So right now they're flying for a lot less than the other carriers are paying right now. And one interesting thing is, you're talking about expansion when the industry is really contracting. And the founder, Herb Keller, said to one of our producers about a year ago, you know, we're never going to fly to New York because planes don't make money on the ground. But how can you expand when you're not in the number one market in America?</s>KELLY: You know, this is just such a tough industry, high energy prices. We're very cyclical and subject to swings in the economy. You have to be prepared. And I think that that's one of our greatest strengths, in addition to our people. We've got a very strong balance sheet. We've got $6 billion in cash in the bank. We've got our fuel hedge that takes us out through 2012. And so we are in an environment where we can plan. And part of our plans are taking advantage of opportunities. Other airlines are shrinking. That's leaving passengers on the curb, ready to be carried. And we'll be there to serve those communities.</s>HARLOW: And you're going to carry them and not charge them $2 for a soda on the plane, those kind of things. Do you think that's adding to your strength, is just what you're offering at this time?</s>KELLY: We have a brand promise that we make to our customers that you can trust us. That we're going to be there for you with a low fare and great service. And we don't like gimmicks. Customers hate those added fees. And so we've got a great campaign underway to extol the virtues of Southwest Airlines.</s>HARLOW: All right. So let's get to, why are others failing? What do you say to your competitors right now?</s>KELLY: Well, I don't -- you know, we're busy, obviously, trying to make Southwest Airlines better. And certainly not focused on what our competitors are doing. We're improving the customer experience at Southwest. We've improved our boarding process, offered new products, and providing more choice for our customers. If you're not prepared in this industry, you're definitely going to find yourself losing money and that's where the rest of the industry is.</s>HARLOW: Now there are so many business travelers out there. A lot of them right now at airports around the country watching the CNN airport network. They're wondering, what's the future of airline travelers -- of the airline business for these travelers, these business travelers, that have to travel, people that are traveling for leisure. What's the future? What do you see it becoming?</s>KELLY: Well, I think there's a lot of opportunity as an airline to provide more service in the future. You have to be efficient. You have to have low cost. You have to have great service. All the things that we're so proud of at Southwest. Now costs in our economy are rising. There are inflationary pressures because of higher energy costs. And it's not just air transportation. So fares will be higher, but you can certainly look to carriers like Southwest to keep them as low as possible.</s>HARLOW: Do you think any of the major airlines are going to go under? We've seen a number of the smaller carriers going out of business, filing for Chapter 11. Do you see this happening to an American, or a Delta, or a Northwest?</s>KELLY: I don't know. I think it's definitely that kind of an environment where that could happen. You've seen very dramatic cuts announced by almost every legacy carrier for the fourth quarter and by others. We've had the unprecedented event where we had three or four airline liquidations back in April. So, yes, that could certainly happen. But even if it doesn't, the industry is shrinking and that's why an airline, who is prepared like Southwest, can afford to grow.</s>HARLOW: All right. Well, thank you so much for joining us and helping explain it all to people out there.</s>KELLY: Thanks for having us.</s>HARLOW: Again, that was Gary Kelly, chairman and CEO of Southwest Airlines. We're going to continue this discussion right on our CNNMoney.com set. So check out this site for more just a little later this afternoon. Ali.</s>VELSHI: All right. Excellent discussion. Thank you very much for that, Poppy. And thanks, Gary. A lot of banks are raising their fees. Find out what you can do to avoid those fees. Plus, we're opening up the Help Desk for business. Answers to your e-mail questions. We are all over this on ISSUE #1 right here on CNN. Stay with us.