Southwest Airlines chief Herb Kelleher is to step down despite increasing concern over a US economic downturn, with the airline, the world's most successful low fares carrier, saying it remains in growth mode and will ride out any slump.

Kelleher, 70, will quit the helm of Southwest on 19 June, a day after the 30th anniversary of his founding the airline. James Parker, 54, currently the airline's general counsel, will take over as chief executive and vice chairman.

Colleen Barrett, executive vice president, customers, is promoted to president (another of Kelleher's roles), but will report to Parker, as will Southwest's chief financial officer, Gary Kelly, who becomes an executive vice president.

Airline legend Kelleher will stay on as chairman until 2003. He will be a tough act to follow for Parker, who faces several major challenges.

Southwest has suffered a slide in its on-time performance (dropping from first to fifth in a ranking of the top 10 US carriers), with Kelly attributing this to a 5-10% rise in load factors that has put its already-tight turnaround times under further pressure.

Southwest could also face tougher competition following the current round of airline consolidation among US majors, while its growth strategy could run into trouble should fuel costs fail to fall further and the US economy suffer a major downturn.

The airline nevertheless plans to continue adding capacity and will look for new growth opportunities - having seen net profit rise to $625 million last year from $474 million in 1999, with passenger numbers up from 57.5 million to 63.7 million - targeting annual growth in capacity and earnings of 8-10%.

"We're still very much in growth mode," says Kelly, who contends that the airline's low fare structure insulates it - to an extent - from the impact of a downturn. "We should see even stronger cash flows in 2001 and beyond," he says.

Southwest added 25 new Boeing 737-700s last year, taking its fleet to 344. It has another 450 737-700s on order, option and commitment and will retire 100 older aircraft by 2012, including its 33 remaining 737-200s, which will go over the next four years, keeping its average fleet age at a low 8.2 years.

Source: Flight International