Southwest Airlines wants to stay out of the news. After its disastrous winter, any publicity comes off as bad publicity.
Even when the airline handles a situation well, as it did with its April issue where a firewall problem grounded some of its flights, the news narrative becomes "Southwest had another problem."
DON'T MISS: Delta Follows American, JetBlue Airlines In Making Unpopular Move
During the carrier's first-quarter-earnings call, Southwest Airlines (LUV) Chief Operating Officer Andrew Watterson explained how the company handled its most recent technical problem.
"On April 18th, we experienced a double firewall failure that resulted in an unexpected loss of connection to some operational data," he said.
"While our technology teams worked quickly to resolve the issue that morning, out of an abundance of caution, we temporarily ground-stopped the airline. It was a pretty quick fix by the Southwest team and a little more than an hour, we lifted the ground stop more back to safely operating flights."
Basically, the airline's software identified a problem and the airline quickly corrected it. Only 22 flights were canceled that day, 95% of the airline's flights departed within two hours of their scheduled times, and no flights the next day were affected.
"While we don't like those delays, this represents an [admirable] recovery by our people, all things considered," Watterson said.
Watterson isn't rationalizing. He's right. Southwest had a problem -- as every airline does from time to time -- and fixed it quickly.
The problem the airline faces after its holiday meltdown is that passengers are on edge, and every delay will be heavily scrutinized.
Now, even as it has carefully managed its business, Southwest had to admit during the earnings call that later this year it will trade one problem for another.
Image source: Paul Hennessy/Anadolu Agency via Getty Images
Southwest Airlines Has a New Problem
Coming out of the covid pandemic shutdowns, Southwest had to deal with a shortage of pilots. That has been a problem for rivals including JetBlue (JBLU), Delta Air Lines (DAL), and United Airlines (UAL), which have cut their schedules this summer, at least partly due to staffing issues.
Southwest, however, has been aggressive in adding pilots and the airline had expected to essentially catch up later this year. But CEO Bob Jordan explained during the earnings call that while Southwest's pilot hiring is on track, the airline will soon not have enough planes for them to fly.
"A lot of -- a lot of carriers are dealing with this, and that was going to true up roughly at the end of the year," he said.
"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, is -- will definitely be earlier. It will be post-summer, late third quarter, early fourth quarter. We'll flip to aircraft-constrained from pilot-constrained."
Boeing Has Fallen Behind On Orders
Boeing (BA) has fallen behind on its deliveries to Southwest as well as to other airlines. The manufacturer underdelivered to Southwest by 46 airplanes last year and expects to deliver only 70 of the 90 planes the airline expected in 2023.
That shortage will force Southwest to slow its growth plans. Jordan made clear that some changes will be needed.
"We have the opportunity to go back, work with Boeing, reflow the order book. 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, and I think that will help us with wring out this pre-hiring, advanced hiring to prepare for growth as well and regain efficiencies as we move through the rest of the year," he said.
The changes will involve limited cuts to the airline's early fall schedule, which has already been published. Cuts will also be made to Southwest's winter schedule, but those flights had not yet been published, so the public impact should be minimal.
Get investment guidance from trusted portfolio managers without the management fees. Sign up for Action Alerts PLUS now.
