DALLAS — Not many CEOs dress up as Elvis Presley, settle a business dispute with an arm-wrestling contest or go on TV wearing a paper bag over their head.

Herb Kelleher did all those things. Along the way, the co-founder and longtime leader of Southwest Airlines also revolutionized air travel by practically inventing the low-cost, low-fare airline.

Herb Kelleher, the co-founder of Southwest Airlines, was a wisecracking chain smoker who bragged about his fondness for Wild Turkey bourbon whiskey and showed a flair for wacky marketing antics. Bloomberg photo by Jon Freilich

Kelleher died on Thursday. He was 87. Southwest confirmed his death but did not indicate the cause.

In the late 1960s, the nation’s airlines were a clique of venerable companies that offered onboard dining, movies and other amenities to make flying pleasant but pricey. Fares approved by federal regulators made air travel a luxury that few could afford.

Kelleher was a lawyer in San Antonio when a client, Rollin King, came to him with the idea for a low-fare airline that would fly between San Antonio, Dallas and Houston. Kelleher guided Southwest through a thicket of legal obstacles thrown up by other airlines, and the new carrier began flying in 1971.

Southwest kept costs low. It flew just one kind of plane, the Boeing 737, to make maintenance simpler and cheaper. It gave out peanuts not meals. There were no assigned seats. It operated from less-congested secondary airports to avoid money-burning delays.

Southwest turned a profit in 1973 and hasn’t suffered a money-losing year since – a streak unmatched in the U.S. airline business.

Kelleher became Southwest’s chairman in 1978 and CEO in 1982, as federal regulation of airline prices was disappearing. He guided the company through its period of greatest growth. As Southwest entered new cities, it forced other airlines to match its lower prices. Federal officials dubbed this “the Southwest Effect.”

If Southwest was different, so was its garrulous CEO – a wisecracking chain smoker who bragged about his fondness for Wild Turkey bourbon whiskey.

Kelleher showed a flair for wacky marketing antics. When Braniff tried to drive Southwest out of business by undercutting its fares – prices that ensured both airlines would lose money – Kelleher offered a bottle of liquor to anyone who bought a full-fare Southwest ticket. Kelleher said that business travelers with expense accounts and a thirst for booze made Southwest the biggest liquor distributor in Texas for a time.

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