Southwest CEO charts recovery after holiday meltdown

Passengers line up at the Southwest Airlines office at San Francisco International Airport (SFO) in San Francisco, California, United States on December 26, 2022 as Southwest Airlines canceled more than 2,800 US flights Monday amid severe winter storms.

Tayfun Coskun | Anadolu Agency | Getty Images

Southwest CEO Bob Jordan’s post-holiday message collapse Millions’ travel plans derailed, obviously: “I can’t say it enough. We screwed up.”

His focus now is on ensuring a similar crisis does not happen again. The airline hired consulting firm Oliver Wyman to review its operations, interview employees and union members, identify what went wrong, and decide how to avoid them in the future. The low-cost airline operates with General Electric To improve the capabilities of programs that assist Southwest in performing crew reassignment operations. The airline’s board of directors has created an Operations Review Committee to help managers work through such events.

The event was upsetting to many travelers who are used to Southwest’s customer service, which includes policies such as free checked bags, which is rare for domestic travel in the United States. Lawmakers and Transportation Secretary Pete Buttigieg said they wanted to Look ahead in turmoil.

less than a year At the airline’s top job, in the wake of travel chaos not seen in over three decades at Southwest, Jordan is now tasked with making things right with the passengers and employees.

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

Southwest said it had offered premium salaries to flight attendants and $45 million “gratitude pay” to pilots for the crash. Both groups have been warning about insufficient technology and scheduling for years.

Jordan said the company also handed out 25,000 Express Rewards points each, which the company estimates to be worth roughly $300, to about 2 million people who booked their flights during the chaotic holiday period.

He said the recent fare sale has been a success and many customers frequently redeem traveler points for Southwest flights.

Southwest said chaos would be likely means hit Between $725 million and $825 million for its pre-tax results is scarce quarterly loss. The executives will face questions from analysts and reporters when the company reports results, scheduled for Thursday morning.

consecutive cancellations

Southwest said it canceled about 16,700 flights from Dec. 21 to Dec. 31, a number inflated after it failed to do so. Recovering from the harsh winter weather that hampered cross-country travel, stability after few days. Airline executives predicted it would be the busiest travel period since then COVID-19 pandemic seem.

The hydraulic fluid turned so thick in the freezing cold that the jet bridges could not move. Snow and strong winds suspended operations at airports across the country. Aircraft engines freeze.

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

The company’s aircraft and crews were left out of place and at the mercy of crew scheduling systems that were designed to handle current or future flight disruptions, not the backlog of flight changes in the past.

“We needed a bigger answer to reset the network,” Jordan said. “This was basically cutting down the schedule.”

He flew southwest About a third of her planned schedule is for the days after Christmas to get crews and planes where they need to go.

“GE’s digital tool built into Southwest’s systems implemented as designed throughout the event, and we’re working with them to identify new functionality as they improve their crew rescheduling capabilities,” a GE spokesperson said Tuesday.

However, chaotic scheduling after bad weather is nothing new to the airline industry. Jet BlueThe February 2007 crash cost CEO David Neilman, founder of JetBlue, his job. (He has since started a new carrier In the US, it’s called Breeze Airways.)

The same Southwest experienced a smaller series of flight disruptions in October 2021 that cost it about $75 million. months ago, Spirit Airlines took over Hit $50 million of mass disturbances.

“Every airline has had its downfall and then rise to new heights,” said Samuel Engel, senior vice president at the consulting firm ICF. “The airline reaches a certain point of complexity and they have a disruption event of this magnitude that makes them look deep inside.”

Both Spirit and Southwest operate so-called point-to-point networks that don’t rely on hubs, like the major airlines, and instead have planes that fly around the country. The model generally works and helps keep costs down, but it can compound disruptions during extreme events.

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

“The issue here wasn’t the network, the issue was the number of venues that were affected by the weather and the number of cancellations that were basically performing consistently,” he said.

which modifies

Even those travelers who get burned by an airline in an event like this, ICF’s Engel said, face few alternatives when booking airline tickets and often focus on price and schedule.

Southwest, unitedAnd Delta And American Control over three quarters of the US market.

“Customers constantly choose their flights based on price and schedule,” he said. “As they’re going through a crippling trip, they’ll say ‘never again’ — and then they will.”

Mark Ahacic, an aviation consultant who worked with JetBlue during the 2007 crash, said the airline’s reputation “took a hit, but it didn’t destroy the brand.”

Southwest has to work out the issues that caused the vacation’s woes and adapt to customers, but many travelers — especially those at airports where Southwest has a strong foothold — usually have few options for airlines, Ahacic said.

Southwest is nearly finished processing customer refunds and is working through the more complex task of reimbursement, which Jordan said includes everything from meals to dog sitting fees. Some travelers who have been left paying high fares for scarce seats on other airlines are still waiting for their money back.

Cody Smith, a 28-year-old artist who lives in Los Angeles, paid $578.60 for a Delta Air Lines flight to LA from his mother’s home in St. Louis after Southwest canceled part of the return flight after Christmas. Southwest offered Smith a replacement ride on New Year’s Eve, but Smith said he had multiple sclerosis and needed to get back to Los Angeles sooner to get medication.

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

Southwest refunded Smith for part of his trip on its airline, but as of last week was not reimbursing him for what he spent on the Delta flight. He said Southwest sent him four drink coupons on the plane.

“Why am I using drink tickets when you owe me $600?” He said. “I really just want this money back.”

Cameron Brainard, voiceover artist and country music host, said he paid more than $1,000 to get back to New York from Nashville, Tennessee, including a rental car from Louisville, Kentucky. Southwest offered him $540.02, indicating in a January 19 email, which Brainard shared with CNBC, that he had not yet claimed compensation.

“Make sure to claim this payment before it expires,” reads the email in July. “This payment constitutes a complete and final settlement of your claim with Southwest Airlines.”

Brainard said he flies to Southwest frequently and doesn’t plan to leave the airline after its cancellation, though it may be a “second guess” depending on how he pays off his compensation.

“I hope it makes them a better airline,” he said.

An inside look at how the FAA and airlines deal with bad weather

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