Southwest Airlines has hired an outside firm to figure out what it needs to prevent another cancellation meltdown like the one over the holidays and “everything that we need to do to mitigate risk is on the table,” CEO Bob Jordan said Thursday.
Jordan and Southwest’s leadership team is under pressure to reassure weary passengers and skeptical investors that it won’t break again with bad weather or other operational challenges the way it did last month when 16,700 flights were canceled.
But Jordan, who has been CEO for just under a year after more than 30 years at the company, pushed back at accusations that the company has ignored technology shortfalls after years of neglect.
“There’s been a little misconception that we have unique or archaic tools or something like that and we don’t,” Jordan said Thursday in an interview with The Dallas Moring News. “Now we’re going to learn things that we need to do to make the technology better to make the processes better.”
Jordan said there are no immediate plans to scrap and replace the maligned crew scheduling system that one company official described as being “overmatched” by winter storms hitting two key airports in Denver and Chicago and that the company has already made updates to prevent the biggest issues that hampered efforts to recover during the Christmas weekend when it lost the ability to keep up with reassigning pilots and flight attendants.
“We’re actually working on a release with them right now,” Jordan said about the GE Crew Optimization program, sometimes called SkySolver, that Southwest uses for scheduling pilots and flight attendants. “That would automatically solve those old problems quickly.”
Jordan said the company is on a “current release” of the Crew Optimization software after doing eight updates in the last year.
Analysts and aviation experts have questioned the very tenants of Southwest philosophies that helped it become the largest domestic carrier in the world, including whether its low-cost philosophy caused it to skimp on technology upgrades and whether the point-to-point network it operates makes it too difficult to recover from breakdowns.
Jordan said the company spends $1 billion a year on technology and has made major upgrades to reservations and maintenance systems since 2017.
Unions for flight attendants and pilots have lambasted Southwest’s crew scheduling systems for years, saying it has added stress and uncertainty to trips and can break even under minor and isolated events. During the worst of this recent cancellation wave, Southwest lost track of many of its flight attendants and pilots while crew members waited on hold for hours trying to get reassigned and start flying again.
In October 2021, after storms and air traffic control constraints in Florida, Southwest had to cancel about 2,000 flights over four days when its crew scheduling system was overmatched. That breakdown cost the company about $75 million in lost revenue.
Southwest has estimated this fiasco will cost it $725 million to $825 million, including lost revenue, reimbursements, refunds and goodwill gestures of frequent flyer points for impacted customers and company store points for employees. The holiday meltdown will also likely swing the company to a fourth-quarter loss after expecting a profit during the last three months of the year.
The company has hired management consulting firm Oliver Wyman for a “top to bottom” review of the circumstances around the December crisis and the company’s board of directors has formed an “operation review committee” to examine what happened, Jordan said.
“That’ll be done here very swiftly,” Jordan said. “It will not take us months to get that work done.”
“I’m sure we will learn things that we need to invest more in and need to change,” he said. “We need to maybe change priorities.”
Southwest’s chief operating officer Andrew Watterson spent 12 years as an aviation consultant at Oliver Wyman, which is based in New York.
While other airlines recovered within a day or two of winter weather dissipating in places such as Chicago and Denver where Southwest has crew bases, Southwest continued to cancel more flights into Christmas Eve and Christmas. By Dec. 26, company executives decided they needed to shut down as much of the airline as possible to “reset” its crews and airplanes and start fresh.
Southwest canceled more than 2,900 flights that day, nearly 75% of its schedule, according to FlightAware.com. Chicago-based United Airlines, which also has hubs in Chicago and Denver, only canceled 147 that day, or 6.1% of its flights.
Again, Jordan said the severity of the winter storm and its impact on key Chicago and Denver airports were the main culprits behind Southwest’s cancellations Dec. 21 through 23.
Jordan said there have been discussions about Southwest’s flight network design of flying “point-to-point” between its 120 destinations rather than flying back and forth between smaller cities and hubs, and then getting passengers to their final destination on connecting flights. A “hub and spoke” network can help airlines isolate the effect of cancellations due to regional obstacles such as weather.
Unlike most other major airlines in the U.S., Southwest planes fly in a circuit between four or five cities, crisscrossing the country before, if ever, returning to the airport of origin. The same goes for pilots and flight attendants.
“Do I think there’ll be big changes to our network? No, I doubt it,” Jordan said. “But if there are things that come out of the study that are tweaks? Absolutely.”
Less than two weeks after recovering from the holiday meltdown, Southwest was thrown another operational challenge when a key FAA safety notification system went down Tuesday night and resulted in a nationwide ground stop for about 90 minutes Wednesday morning.
Southwest opted to delay most of its flights by about two hours and catch up throughout the day, while activating a team of 100 headquarters workers to help manually reschedule crew members as it did in late December. The carrier delayed 50% of its flights Wednesday and canceled 429, about 10% of its schedule, according to Flightaware. That was roughly on track with other airlines, including Fort Worth-based American.
But Southwest had recovered by Thursday with only 13% of its flights delayed and less than 1% of flights canceled, far below Southwest and industry standards.
“We deal with irregular operations all the time, but we don’t deal with events like a two-hour ground stop,” Jordan said. “So yeah, it was absolutely a test. We put a lot of near-term things in place coming off of Christmas disruption. It worked really well.”
But while Jordan said the late December storms were a unique event that targeted key points of Southwest’s network, he’s still focused on making sure another operational struggle doesn’t happen again.
“I guarantee there’ll be changes to our plan to put even more focus on operations because, I can’t say it enough, it just can’t happen again,” Jordan said. “We have a lot of goodwill in the bank with our customers, but we have no intention of using that up.”
