Southwest CEO charts recovery from holiday crisis: ‘We have work to do’

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Passengers queue at the Southwest Airlines counter at San Francisco International Airport (SFO) in San Francisco, California, United States on Dec. 26, 2022, as Southwest cancels more than 2,800 U.S. flights Monday amid fierce winter storms.

Tayfun Coskun | Anadolu Agency | Getty Images

Southwest CEO Bob Jordan’s message, after a holiday crisis derailed the travel plans of millions, is clear: “I can’t say it enough. We screwed up.”

His focus now is to ensure that a similar crisis never happens again. The airline has hired consulting firm Oliver Wyman to review its processes, interview staff and union members, explain what went wrong and determine how to avoid it in the future. The low-cost airline cooperates with General Electric to improve the capabilities of software that helps Southwest work out crew reshuffles. The airline’s board has established an operational review committee to assist managers in processing such events.

The event shocked many travelers accustomed to Southwest’s customer service, which includes policies such as free checked baggage, a rarity for US domestic travel. Lawmakers and transportation secretary Pete Buttigieg said they want to investigate the disruptions further.

Less than a year into the airline’s top job, in the wake of a travel chaos unlike any he had seen in his more than three decades with Southwest, Jordan must now set things straight with passengers and employees.

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

Southwest said it was offering bounties to flight attendants and $45 million in “gratitude” to pilots because of the meltdown. Both groups have been warning about inadequate technology and planning for years.

The airline also distributed 25,000 Rapid Rewards points each, which the company estimates to be worth about $300, to about 2 million people who booked flights during the chaotic holiday season, Jordan said.

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He said a recent fare sale was successful and many customers are redeeming frequent flyer points for Southwest flights.

Southwest said the chaos is likely to mean a hit of between $725 million and $825 million to pre-tax results and a rare quarterly loss. Executives will face questions from analysts and reporters as the carrier reports its results, scheduled for Thursday morning.

Cascading cancellations

Southwest said it canceled about 16,700 flights between December 21 and December 31, a number that increased after it failed to recovering from the harsh winter weather that crippled travel across the country and stabilized days later. Airline executives had expected it to be the busiest travel period since the start of the Covid-19 pandemic.

Hydraulic fluid became so thick in the unforgiving cold that jet bridges couldn’t move. Snow and strong winds halted operations at airports across the country. Aircraft engines frozen.

Most airlines had largely recovered from the bad weather by Christmas Day, but Southwest’s problems worsened when crews had to call to get new assignments or hotel rooms, creating a backup.

The carrier’s aircraft and crews were out of place and at the mercy of crew scheduling systems designed to accommodate current or future flight disruptions, not an accumulation of past flight changes.

“We needed a bigger response to reset the network,” Jordan said. “That was actually bringing the schedule down.”

Southwest flew around only a third of its scheduled schedule for several days after Christmas to get crews and aircraft where they needed to go.

“The GE Digital tool integrated into Southwest’s systems performed as designed throughout the event, and we are working with them to define new functionality as they improve their crew re-sizing capability,” said a GE representative. spokesperson Tuesday.

Still, planning chaos after bad weather is not new to the airline industry. JetBlueThe collapse of JetBlue in February 2007 cost CEO David Neeleman, the founder of JetBlue, his job. (He has since started a new airline in the US called Breeze Airways.)

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Southwest itself had a small-scale cascade of flight disruptions in October 2021 that cost it about $75 million. months earlier, Spirit airlines took a $50 million hit from massive disruptions.

“Every airline has their downfall, and from there they rise with new perspectives,” said Samuel Engel, a senior vice president at consulting firm ICF. “The airline reaches a certain point of complexity and has a failure event of such magnitude that they look deep inside.”

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

Jordan defended the model, saying the network is usually easier to restore because travelers don’t rely on connections to get to their destination.

“The problem here wasn’t the network, the problem was how many places were affected by the weather and how many cancellations that caused, basically continuously,” he said.

Make up

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

southwest, United, Delta and American control more than three quarters of the US market.

“Customers are just consistently choosing their flights based on fare and schedule,” he said. “While going through a disrupted trip, they say ‘never again’ – and then they do it.”

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

Southwest needs to fix the issues that caused the vacation problems and make amends with customers, but many travelers — especially those at airports where Southwest has a strong foothold — typically have few airline choices, Ahasic said.

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Southwest is almost done processing customer refunds and is working on the more complex task of refunds, which Jordan says includes everything from meals to dog-sitting costs. Some travelers who had to pay high fares for scarce seats on other airlines are still waiting for their money back.

Codi Smith, a 28-year-old artist living in Los Angeles, paid $578.60 for a Delta flight back to LA from his mother’s home in St. Louis after Southwest canceled part of his return trip after Christmas. Southwest offered Smith an alternate flight on New Year’s Eve, but Smith said he has multiple sclerosis and had to get back to Los Angeles early to get his medication.

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

Southwest reimbursed Smith for the portion of his airline trip, but had not reimbursed him what he had spent on the Delta flight since last week. He said Southwest sent him four drink coupons on board.

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

Cameron Brainard, a voiceover artist and country music radio 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, noting in a Jan. 19 email Brainard shared with TUSEN that he has not yet claimed the refund.

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

Brainard said he flies Southwest regularly and has no plans to leave the airline following its cancellation, though he would “guess again” depending on how his compensation plays out.

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

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