Southwest Airlines needs a win. After the airline's holiday meltdown that left tens of thousands of passengers stranded, it has fallen under intense public scrutiny.
That's why its brief grounding of all flights on April 18 seemed like a disaster even though it was arguably a success. The company's firewall detected a problem that caused all flights to be held, but the airline corrected the issue and removed the hold in under 30 minutes.
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In most cases, a brief delay -- even when it involved an airline's entire fleet -- would not even be a news story. But, because of Southwest's (LUV) recent disasters, the airline will likely make the news if it runs out of Diet Coke on a flight.
That may not be fair, but it's reality and now the struggling airline has some more bad news. After a summer where it won't be cutting its flight schedule while JetBlue (JBLU), Delta Airlines (DAL), and United Airlines (UAL) will be slashing flights in certain cities, Southwest Airlines will be making major route cuts in the fall and winter.
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Boeing Causing Southwest's Newest Problem
Southwest planned its summer schedule around its pilot shortage. That's something the airline has been working hard to correct. CEO Bob Jordan talked about that issue and the airline's new problem during its first-quarter earnings call.
"We talked a lot about what’s constraining the airline. And right now, that is pilot hiring. So, we have aircraft effectively that we are not producing capacity out of today because the constraint is just pilots," he said.
Southwest will catch up on its need for trained pilots in the early fall. At that point, the airline will have to deal with Boeing (BA) not delivering all of the planes the airline has ordered.
"Now, with the order book dropping, the deliveries issue dropping from 90 to 70, that’s the point at which the pilot constraint turns into an aircraft constraint," he explained. "It will be post summer, late third quarter, early fourth quarter. We’ll flip to aircraft constrained from pilot constrained."
Boeing only plans to deliver Southwest 70 of the 90 737-8 Max planes Southwest has on order for 2023 delivery. Not getting those planes will cause the airline to cut 6-7% of its planned flights from September through the end of the year.
Boeing Delays Bring Southwest Uncertainty
Jordan made it clear that conversations were ongoing with Boeing and that 70 planes being delivered in 2023 is sort of a best guess. The problems will continue into 2024 and the airline will adjust in other areas (including hiring) accordingly.
"We need to understand what 2024 looks like. I just want to acknowledge today that it’s a significant enough change to the delivery schedule and then therefore, the capacity as well that we are going to go back through our hiring plans, and they will be moderated," he said.
Jordan also provided more details on the Boeing situation.
"Our planned deliveries continue to differ from our contractual order book. In addition to the recent aircraft delivery delays, which are not reflected in our contractual order book, we continue to reflect 46 undelivered 2022 contractual aircraft deliveries as 2023 deliveries in the order book, further outlined in our press release. But to be very clear, we are currently planning our published schedules around the delivery of 70 737-8 aircraft this year, and we intend to solidify our order book with Boeing soon," he shared.
The CEO does want all of the aircraft it has on order, but when it exactly it will take delivery remains a major question.
"Between the 46 aircraft that were undelivered from last year, now you got an additional 20, then 66. that are stacked up forward. We’re not taking 152 aircraft next year. So we have the opportunity to go back, work with Boeing, reflow the order book," he said. "I mean, we want all of the aircraft in the book here because we got a good deal, but reflow the order book in a way that is smooth, it is orderly growth."
