A major snowstorm in December, which was timed to cause maximum disruption just as millions of people were on the road for the holidays, resulted in the cancellation or delay of thousands of flights across the country.
The majority of airlines were able to get back on their feet, clear the snow off their wings, and have operations back up and running within a few days.
That wouldn't be Southwest Airlines.
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The blizzard exposed the fragility of Southwest's investment choices made over the previous several decades, and as a result, the airline's operation came crashing down beneath the weight of the snow. The airline, which is a generally efficient low-cost carrier, attempted to walk a fine line between investing enough in its entire infrastructure to maintain the operation dependable and keeping expenses low enough to remain profitable, continue expanding, and keep fares lower than competitors. However, this proved to be a difficult task as the line became increasingly blurred.
It became abundantly evident that the airline had made a mistake at some point along the route when it left millions of people in the United States stranded as a result of its decision to cancel the majority of its flights for several days after the hurricane had passed.
After six months, the airline has noticed a negative impact on its bottom line as a result of passengers choosing to fly with other carriers. Additionally, it compensated its stranded passengers by paying out hundreds of millions of dollars to cover the costs associated with the collapse.
However, executives at Southwest say that those customers are returning, even though they now publicly accept that the experience was a systemic failure after euphemistically referring to it as an "incident" in the weeks that immediately followed it. They also claim that the airline is attempting to demonstrate that it is making the required modifications to avert another incident that is comparable to the last one.
TPG had the opportunity to speak with three of the most senior executives at Southwest Airlines, including CEO Bob Jordan, during an exclusive interview that took place early this spring aboard a chartered Southwest flight from Long Beach, California, to Honolulu, on the airline's new Hawaii-themed 737 MAX. We talked about the airline's reaction to the disaster, its efforts to stop it from happening again, and its strategies for regaining the faith of its consumers.
avoiding the occurrence of another collapse
In recent months, Southwest has provided a comprehensive overview of its efforts to avoid a similar incident from occurring again. These measures have been presented at investor events, during congressional hearings, and during earnings calls.
According to the chief operating officer of the airline, Andrew Watterson, who spoke with TPG, the company is investing in new tools for the department that is in charge of managing its crew member schedules to address one of the most significant points of failure from the winter. As a result of flights being delayed or canceled over the holiday period, many pilots and flight attendants were unable to contact crew scheduling for many hours, which made it impossible for them to be moved to a different aircraft. As a result, they were left stranded and out of position.
CEO Bob Jordan stated that the lack of adequate staffing in the crew scheduling department was not the primary factor that led to the communication breakdown.
According to Jordan, "You could never be staffed to that level [to manage a crisis of this scale by phone]," we needed to set up electronic contact and acknowledgment with our crews, and that is what we are doing right now.
In addition to the aforementioned enhancements and automation, the newly improved system, which Watterson stated is still in the process of being finalized and implemented, would allow crew members and schedulers to communicate and organize adjustments electronically.
Jordan went on to say that pilots and flight attendants "shouldn't have to call in the first place" when operational interruptions leave them unable to do their duties.
According to Jordan, the airline has previously implemented many changes to the software that it uses to schedule its staff. One of these upgrades addressed "this specific issue of it being able to technically handle these large-scale problems." According to what he noted, the airline has made additional changes to the phone systems to accommodate odd issues that cannot be resolved electronically.
Jordan acknowledged that "there is work to be done," noting, in particular, the need to collaborate with workers and the unions that represent them to implement the new tools and procedures associated with them.
In the meantime, the executives of the airline are also focusing on resolving other concerns.
Even though the storm was predicted to arrive many days in advance, the airline was unable to assemble sufficient personnel and equipment for de-icing to keep planes in the air, particularly in its Denver target city. During the holiday season, a few of the workers took note of the chilly weather and phoned in sick, which added a little but noticeable burden to an already major problem with staffing.
Jordan stated that the airline was purchasing new equipment and creating infrastructure to better manage winter storms. This was in addition to employing and training additional deicers.
"Having enough deicing trucks, deicing pads, the appropriate deicing software that provides holdover times, and in some cases, the right level of deicing personnel" is a crucial priority, he added. "This is the primary area in which we lacked personnel."
"Overall, we're very well staffed," he noted later on in the conversation. "We have the most employees per aircraft that we've ever had," he added. "This is a record for us."
Southwest has stated that it intends to invest $1.3 billion this year in repairs to its infrastructure, and Jordan has verified this amount. He also mentioned that while the airline might ordinarily spend close to that amount on enhancements and system maintenance in a given year, the spending this year is entirely focused on operational reliability. He said that this is because operational reliability is the most important thing to the airline right now.
regaining lost trust while also engaging in commercial activity
Despite Southwest's plans to increase its fleet, replace outdated planes, and completely reconstruct its network to its pre-pandemic state, the company's primary priority for this year is on ensuring that its business continues to function effectively.
Jordan commented that when there is a problem such as December, it is going to take a very long time for that memory to fade away. "Our business has to run extremely smoothly. We must have a successful winter in 2023-2024.
In addition to maintaining the reliability of its operations, the airline intends to continue its efforts to keep consumers apprised of any relevant developments.
Although the airline is not exactly attempting to draw ongoing attention to the meltdown — a bolstered social media presence is evident, along with sales, events, and marketing campaigns — it plans to keep a landing webpage that acknowledges the incident and describes its goals to rectify problems. This is even though the airline is not exactly trying to draw ongoing attention to the disaster.
On the other hand, Southwest is pursuing a more direct approach for corporate clients who pay more attention to the day-to-day operations of the airline industry. These customers pay closer attention to the day-to-day operations of the airline industry.
According to statements made by Dave Harvey, the chief sales officer for the airline, to TPG, "some were very upset with us, and rightfully so; therefore, we had to repair brand and trust." "We took a large number of [account managers] on a tour of our operations center and demonstrated how we carry out our daily tasks in front of them at our headquarters. And then it finally clicks for them."
The airline intends to make a concerted effort during the 2023 conference of the Global Business Travel Association, which is scheduled to take place in Dallas in August, to attract corporate travel managers and buyers to visit its headquarters and operations center.
According to Harvey, the simple approach is especially effective when dealing with corporate customers because these consumers are more aware of the subtleties and nuances of how an airline operates than the average consumer is.
"We learned a lot, and yeah, we've got to accelerate things and get ready for the next winter season, and we just own up to that," he added. "We've got a lot of work to do." Let's go walk up to a crew scheduler and chat with them about what's changed before and after using the improved program.
"What we want to do is kind of like a show-and-tell," added Harvey. "We want to share what we have." "For people to be able to kind of see it and connect with it, we are going to intentionally select the aspects that we believe to be the most significant ones. When it comes to some of our most important clients, we've been handling business on what amounts to a one-on-one basis.
Since just before the pandemic, Southwest has made the management of corporate travel one of its primary areas of concentration. In 2019, the airline introduced its Southwest Business team, and the following year, in 2020, it started selling tickets through a variety of global distribution platforms for the very first time.
Even though the airline used to have some business passengers, particularly those coming from smaller and medium-sized businesses, the airline rarely utilized the broader corporate travel pool.
Because of this, one of the repercussions is that although other airlines have seen the demand for business travel stall well below the levels that existed before the epidemic, Southwest still has lots of ability to expand among the larger corporate accounts because it has begun from scratch.
Even though both leisure and business travelers avoided the airline in the first few months of the year and "booked away," things started looking up in March, according to Harvey.
"We're gaining share, and we're gaining new customers," he said. "We're doing well." "I'm still very optimistic about not only getting back to the levels we were at in 2019 but continuing to grow from there," she said.
"We're launching an entirely new groups and meetings product," said Harvey. "We're very excited about it." "That's still pretty hot, particularly for get-togethers ranging from small to medium in size. And if you consider all of the forecasts, it does not appear that this will be resolved at any time shortly.
A more positive response
There are signs that Southwest is making progress in improving the management of its operation, but these signs are not conclusive.
In April, Southwest Airlines was forced to order a nationwide ground stop for about two hours due to an information technology problem that was tied to a firewall that was provided by a third-party vendor.
The breakdown of the IT system was not caused by anything specific to Southwest, even though it came at an inconvenient moment and was badly timed because the holiday problem had just been resolved. On the contrary, it resembled the occasional system problems that every networked firm, including other airlines, is subject to experience.
Because the outage occurred on a busy weekday morning, it had the potential to set off a chain reaction of delays and cancellations. This was especially the case because an increasing number of pilots and flight attendants found themselves either out of position for their schedule or nearing their limit for the number of hours they were allowed to work.
In recent years, Southwest has responded to situations like this one by performing what is known as a "hard reset" of its network. This is characterized by widespread flight cancellations because the airline essentially begins over from the beginning.
Instead, the airline company decided to keep operating normally. Watterson claims that longstanding airline executive Adam DeCaire, who recently took over as the head of the airline's operations center, was able to liaise with staff scheduling and evaluate the network. DeCaire was recently given his new role as the head of the airline's operations center. He was able to conclude that the airline would be able to handle the day's flights with only mild delays and no impact that would carry over into the next day if they made an extra effort.
It was effective. According to the statistics provided by FlightAware, even though nearly 64% of the airline's flights that day (2,640 flights) were delayed for an average of 45 minutes, just 18 were canceled, which is less than half of a percent. By the next day, everything had, for the most part, returned to its usual state.
Jordan expressed his regret by saying, "I wish we hadn't had a ground stop because that's a big deal." And it's a significant news story. Accepting the reality that if we have a problem, people are going to tie it back to December is part of what happened.
Jordan also brought up how the airline dealt with a ground stop earlier this year that was prompted by a system malfunction at the FAA.
"The methods we use to recover, how we think about running the airline, canceling or not canceling flights, moving acres; we have learned a lot from the disruption that occurred in December," he said. "The disruption occurred in December."
"That day [of the IT issue], we got 99.9% of our customers to their destinations and had a 99.6% completion factor," Jordan explained further. "Now, we were running behind schedule, but there is no doubt that we had lessons learned on how to manage large-scale issues, how to think about canceling flights, and how to proactively move crews — the lessons learned in December have been absolutely helpful."
Now that the busiest travel season of the summer has officially begun, many industry analysts anticipate a tumultuous period due to high demand, personnel shortages, and the possibility of occasional bad weather. Therefore, Southwest, just like every other airline, faces adversity in the future. However, because the Thanksgiving debacle is still fresh in everyone's mind, the stakes are arguably higher than they were before.
Time will tell if Southwest can avoid another incident like the one that occurred in December by applying the lessons they learned and making the upgrades that followed. Despite this, it is abundantly evident that the catastrophe that occurred over the previous winter was a watershed event for the airline moving forward.