Southwest Airlines has cleared a lot of hurdles since its December 2022 holiday meltdown.
That failure, which left tens of thousands of passengers stranded during the Christmas season, exposed a lot of the company's deeper problems.
The airline, which had a long history of seemingly positive relations with its employees, was blasted by its pilots' union. Instead of staying quiet or even showing support, the Southwest Airlines Pilots Association, blasted the airline on multiple occasions.
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"How did we get here? How did we go from the most stable and profitable airline in history to the greatest meltdown in airline history? As with most organizations, the answer can be distilled down to one word: Leadership. Actually, in our case, it’s three words: Lack of leadership," the association said.
Swapa also made clear that Southwest Airlines (LUV) pilots saw the meltdown coming and believed it was preventable.
The union's president, Capt. Casey Murray, was not shy about expressing his frustration even after the airline committed to invest $1.3 billion in technology, infrastructure and people.
"Yes, $1.3 billion does need to be spent,” Murray said in a July interview. “With the focus on dividends and buybacks over the last decade, there has been a lack of investment in infrastructure and IT, and that does have to be done.
"But none of that is going to solve the process problems of connecting pilots and airplanes. ... [There] has to be a refocusing on efficiency."
Image source: Paul Hennessy/SOPA Images/LightRocket via Getty Images
Southwest Air overcame multiple problems
While it seemed impossible for Southwest to win back customer trust, it has done so relatively quickly. The airline has moved from questions about its viability to setting records.
"Our network is in a healthy place, and it shows in our operational improvement. In fact, we improved in nearly every operational metric," Chief Executive Bob Jordan said during the airline's fourth-quarter-earnings call. "Our completion factor performance, in particular, was fantastic at 99% for the full year with fourth quarter being our best quarterly performance in more than a decade at 99.6%."
The results were good not just in performance but also in revenue.
"We saw close-in performance strengthened in November and December for both leisure and corporate travel. This led the fourth quarter 2023 to be yet another record at just over $6.8 billion in operating revenue, and we are seeing that strength continue into 2024," he shared.
Jordan also noted that the airline had made peace with the pilots union and its other unions. "We also made significant progress on our labor agreements, including the ratification earlier this week of an agreement that secures industry-leading pay for our best-in-class pilots," he added.
Southwest does have a problem it can't control
Southwest has initiated a hiring freeze and plans to cut overall hiring by 50% in 2024. That's because the airline does not expect to receive all the planes it had hoped to from Boeing (BA) .
"This is not business as usual. We are being very aggressive in controlling what we can control," Jordan said during a presentation at the JPMorgan Industrials Conference, Travel Weekly reported.
Southwest expects the delay in deliveries to cost it 1% to 1.5% of its planned 2024 capacity.
Boeing has told Southwest to expect 46 of the 58 737 Max 8 airplanes it expected to take delivery of in 2024. Jordan made clear in his remarks that Southwest thinks the airplane maker may well fall short of that number.
"We need Boeing to be strong five years from now, 10 years from now. That takes precedent over delivery delays," Jordan said.
Southwest's entire fleet consists of Boeing planes. Boeing has been dealing with quality issues that have led to delays in delivering its 737 Max 7 planes.
The airline also had planned to receive 21 737 Max 7 airplanes in 2024, but it has removed those planes from its plans for the year.
