Southwest CEO maps out a recovery after holiday meltdown: ‘We have work to do’

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  • Southwest said it had canceled about 16,700 flights between Dec. 21 and Dec. 31.
  • The airline estimates that the collapse will result in losses and hit pre-tax profits of up to $825 million.
  • CEO Bob Jordan is focused on making amends for affected customers and preventing a similar crisis from happening again.

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Southwest CEO Bob Jordan’s message after the holiday crash derailed the travel plans of millions is clear: “I can’t say that enough. We screwed up.”

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Now his focus is on ensuring that such a crisis never happens again. The airline hired consulting firm Oliver Wyman to review its processes, interview employees and union members, determine what went wrong and determine how to avoid it in the future. The budget airline operates from General Electric to improve the capabilities of the software that helps Southwest with crew redeployment. The airline’s board has set up an operations review committee to help managers deal with such events.

The development has irritated many travelers accustomed to Southwest’s customer service, which includes rules such as free checked baggage, a rarity for US domestic travel. Lawmakers and Transportation Secretary Pete Buttigieg said they want to take a deeper look at the disruptions.

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After less than a year at the airline’s top job, after a travel chaos he hasn’t seen in his more than three decades at Southwest, Jordan is now tasked with building relationships with passengers and employees.

“We took the good from the bank. We know that,” Jordan said in an interview earlier this month. “We have a lot of work to do to restore trust, but our customers are very loyal and we see that loyalty.”

Southwest said it offered bonus pay to flight attendants and $45 million in “thank you” payments to pilots due to the accident. Both groups have been warning about the inadequacy of technology and planning for years.

The carrier also gave away 25,000 Rapid Rewards points each, worth approximately $300, according to Jordan, to approximately 2 million people who had flights booked during the chaotic holiday period, Jordan said.

He said the recent fare sale was a success and that many customers are redeeming frequent flyer points for Southwest flights.

Southwest said the chaos is likely to see its pre-tax results drop by between $725 million and $825 million and a rare quarterly loss. Executives will face questions from analysts and journalists when the airline reports the results, scheduled for Thursday morning.

Cascading Undoes

Southwest said it had canceled about 16,700 flights between Dec. 21 and Dec. 31. recover from severe winter weather that hampered travel across the country, and stabilized after a few days. Airline executives expected this to be the busiest period since the start of the Covid-19 pandemic.

The hydraulic fluid became so thick in the bitter cold that the jet bridges could not move. Snow and strong winds have suspended airport operations across the country. Aircraft engines iced up.

Most airlines had largely recovered from the bad weather by Christmas, but Southwest’s problems were exacerbated when crews had to call to get new assignments or hotel rooms, causing a back-up.

Aircraft and carrier crews were misplaced and at the mercy of crew planning systems that were designed to handle current or future flight disruptions rather than piling up past flight changes.

“We needed a larger response to reset the network,” Jordan said. “It essentially shortened the schedule.”

In the days following Christmas, Southwest was only a third of its scheduled schedule to get crews and planes where they needed to be.

“The GE Digital tool integrated into Southwest’s systems worked by design throughout the event, and we’re working with them to define new features as they improve their ability to change crew schedules,” a GE spokesperson said Tuesday.

However, planning for chaos after bad weather is nothing new to the aviation industry. JetBlueThe collapse of the company in February 2007 cost CEO David Nieleman, founder of JetBlue, his job. (He has since opened a new US airline called Breeze Airways.)

In October 2021, Southwest itself experienced a small cascade of flight disruptions that cost the company an estimated $75 million. months earlier, Spirit Airlines sustained $50 million in damage from massive disruptions.

“Every airline has its downfall, and after that they rise with new perspectives,” said Samuel Engel, senior vice president at consulting firm ICF. “An airline reaches a certain level of sophistication and they have a failure of such magnitude that it forces them to look deep inside.”

Both Spirit and Southwest use so-called point-to-point networks, which don’t rely on hubs like major airlines do, but instead use planes that ply around the country. This model generally works and helps keep costs down, but can exacerbate disruptions during extreme events.

Jordan defended the model and said the network is usually easier to rebuild because travelers don’t have to rely on connections to get to their destination.

“The problem here was not the network, but how many places were affected by the weather and how many cancellations happened, basically continuously,” he said.

compensation for damage

According to ICF’s Engel, even those travelers who have been hit by airlines in an event like this face few alternatives when booking flights and are often focused on price and schedule.

Southwest, United, Delta and American controls more than three-quarters of the US market.

“Customers are just constantly selecting flights based on fare and schedule,” he said. “When they experience a bad trip, they say ‘never again’ and they do it.”

Mark Ahasik, an aviation consultant who worked with JetBlue during the 2007 crash, said the airline’s reputation “has taken a hit, but it hasn’t destroyed the brand.”

Southwest needs to address the issues that caused vacation issues and make amends with customers, but many travelers, especially those at airports where Southwest has a strong foothold, usually have multiple airline choices, Ahasik said.

Southwest is nearly done processing customer refunds and is working on a more complex reimbursement challenge that Jordan says includes everything from food to petting fees. Some travelers who have had to pay high fares for scarce seats on other airlines are still waiting for their money back.

Cody Smith, a 28-year-old artist based in Los Angeles, paid $578.60 for a Delta flight back to Los Angeles from his mother’s home in St. Louis after Southwest canceled part of his return flight after Christmas. Southwest offered Smith an alternative flight on New Year’s Eve, but Smith said he had multiple sclerosis and needed to get back to Los Angeles as soon as possible to get his medication.

“I just didn’t know what could happen,” Smith said.

Southwest reimbursed Smith for part of his trip on the airline flight, but last week did not refund him what he spent on the Delta flight. He said Southwest sent him four in-flight drink coupons.

“Why should I use booze coupons when you owe me $600?” he said. “I really just want that money back.”

Cameron Brainard, a country music voice-over and radio host, said he paid over $1,000 to get back to New York from Nashville, Tennessee, including a car rental in Louisville, Kentucky. Southwest offered him $540.02, noting in a January 19 email Brainard shared with CNBC that he had not yet requested a refund.

“Remember to claim this payment before it expires” in July, the email said. “This payment constitutes the full and final settlement of your claim with Southwest Airlines.”

Brainard said he flies frequently to the Southwest and has no plans to leave the airline after the flight is cancelled, although he will “think about it” depending on how his compensation pans out.

“I hope this will make their airline better,” he said.

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