Herb's Big Mistake

Several years after leaving Southwest, our old CEO, Lamar Muse, set up another airline, Muse Air, to compete directly with us. It was called Revenge Air in the financial community, and I suppose one of its purposes was to take Southwest Airlines down. By 1985 it was on the verge of collapse. We wound up buying it, renamed it TranStar, and operated it as an independent airline. But I made one miscalculation: Frank Lorenzo [the notorious CEO of Texas Air]. He was operating out of Intercontinental Airport in Houston, and we were operating out of Hobby Airport, also in Houston. He took out after TranStar like you wouldn't believe. It turned into probably the most severe fare battle in the history of the airline industry. People talk about the fare wars that have raged in the industry, and I've seen plenty of them. I've seen carriers offering green stamps, Polaroid cameras--all sorts of things--if you flew on them. But this got to the point where Frank was offering free roundtrips to Polynesia. When we put in service between New Orleans and San Diego and had a flight that was, say, at 8:15, then Frank would put in one that was at 7:45 and one at 8:30. I said, "Well, that's it--we're not putting in any more money to fight this war." So we wound up selling the company's assets to Frank Lorenzo.

In CEO years I was kind of young then--but one thing I knew was that when something turns into a financial mistake, just stop it. You have to look at things the way a scientist would: This experiment didn't work out; it's over. You can't get emotional about it. That's the key as far as I'm concerned: There's no ego involved. You can't keep something on life support for years and years because you've let your self-esteem get tied up in things.