Southwest Airlines executives might wanna get away following the company’s terrible, horrible, no good, very bad past couple of weeks. With nearly 17,000 flights canceled, lost luggage piled up in airports throughout the country, and countless passengers told they’d have to wait for days to find flights home from holiday gatherings, some industry analysts have called it the worst service disruption a major U.S. airline has ever endured. In a filing today, the company estimated the cost to its bottom line at between $725 million and $825 million.
The whole debacle might be judged as something of an unforced error, considering that Southwest’s top brass have admitted they knew that the software the company uses to track flight crews and reschedule flights was “behind” the times and could be overmatched in the event of an unusual weather or air traffic event. That system has been cited as one of the major contributing factors to the airline taking much longer than its competitors to recover from the winter storms that affected much of the country heading into the Christmas weekend.
Southwest’s vulnerability on this front had, in fact, been exposed on a smaller scale as recently as Columbus Day weekend in 2021, when storms and a brief Federal Aviation Administration shutdown of airspace in Florida resulted in the cancellation of more than 2,500 flights. (Three months before he took over as CEO, Southwest’s Bob Jordan told me that the Columbus Day outage was “completely unique” and that he “wouldn’t anticipate that happening again.”)
Union leaders have been sounding the alarm about such technological shortcomings for years. Casey Murray, who represents the company’s pilots, told me in 2021 that his colleagues wanted “operational upgrades,” even if those came at the expense of higher salaries. “At the end of the day, you can pay us five hundred dollars an hour,” Murray said. “But if the company is not sustainable, that doesn’t really do us any good.”
So why didn’t Southwest invest in improvements earlier, especially considering that the company has said it spends about $1 billion a year on various forms of tech? That may have to do with a long-standing bias in its corporate culture against relying on technology to solve business problems—at least without a clear return on investment. Such an approach might even seem justified when you consider that Southwest posted 47 consecutive years of profits between 1973 and 2019, avoiding the bankruptcies and mass layoffs that afflicted so many other air carriers during those decades.
During more than one of the multiple interviews I conducted with him during his career, Southwest’s longtime, legendary cofounder and CEO, Herb Kelleher, said that while the airline wouldn’t skimp on the latest tech for its planes, he viewed technology as a “servant, not a master” and believed Southwest didn’t see the need to buy every “shiny new” tech toy on the market—even if other airlines were doing so.
That kind of penny-pinching was rooted in Southwest’s focus on keeping its operations simple. For instance, its first tickets weren’t tickets at all. They were receipts dispensed from what Southwest called “love machines” but were actually just cash registers, like those you’d find at a grocery store. Southwest printed “This Is a Ticket” on the back of those receipts so it wouldn’t have to invest in specialized ticketing machines like other airlines had.
This approach didn’t mean Kelleher was opposed to deploying the right kinds of technology at the right times, though. In one speech after his 2004 retirement, he regaled the audience with an anecdote from the early years of Southwest. A competitor had begun offering a fare that Kelleher wanted to counter. Company executives studied their options and then came back to Kelleher. He recalled one of them saying, “Well, Herb, we can’t do what you want because our computer program will not allow it.” Kelleher replied, “Well, you know, this is kind of a grave crisis at Southwest Airlines. Because I’ve now got to make a decision on whether the computer runs this airline or I do. So let me tell you what my decision is. You go down and tell that little computer that its ass just got fired.”
Whichever machine replaced the “little computer” that got sacked came with its own limitations, and those became glaringly apparent after Southwest acquired another low-fare carrier, AirTran, in 2011. AirTran’s route network included international destinations, which Southwest didn’t then have, and it offered assigned seats, which Southwest still doesn’t.
Up until the AirTran acquisition, Southwest couldn’t have assigned seats even if it wanted to. Its reservation system was then three decades old and incapable of making seat assignments. The system also couldn’t accept payments in foreign currencies. Even more shockingly, it was so rigid that Southwest was locked into offering the same flight schedule six days a week, with just one day of flexibility.
It took until 2014 for Southwest to commit to changing that, through a $500 million reservation-system overhaul that went online three years later. Another $300 million went into new electronic communications and other upgrades for mechanics and ramp agents. Prior to those investments, Southwest employees had communicated about aircraft weight and cargo by filling out paper slips and sending them to one another through pneumatic tubes.
In 2018, then–Southwest president Tom Nealon told me the huge investments in new technology would never have gotten approved if there hadn’t been a case to be made for their yielding more revenue. Indeed, the airline then projected the new reservation system would generate $500 million by 2020—thus paying for itself. (That estimate was made well before the COVID-19 pandemic cratered air travel.)
Southwest has also made recent investments in tech upgrades for ground-crew and maintenance operations, but it now must face the financial penalties of not having improved its crew-scheduling software. The Columbus Day cancellations in 2021 cost the airline $75 million. The more recent cascade of cancellations—starting December 21 and lingering on through January 2—will cost it significantly more, as reflected in the net fourth-quarter loss it projected in today’s filing. The company has already offered thousands of affected passengers the equivalent of more than $300 each in airline points.
It might get costlier still, if Washington has a say. The U.S. Department of Transportation, which regulates the airlines, has said it will investigate Southwest’s “unacceptable rate of cancellations and delays” and will look to ensure Southwest offers proper compensation to those affected. Meanwhile, the chair of the Senate’s powerful Commerce Committee, Maria Cantwell, a Democrat from Washington State, has pledged hearings into the Southwest snafu and said her committee will examine ways to make it easier for fliers to get compensated for cancellations.
That will mean public relations problems for Southwest as its executives are called to the congressional carpet. It could also result in more regulations for all airlines—in terms of both what types of route networks they’re allowed to fly and how much leeway they have to cut back on flights. The irony of all of that: in 1978, back when “This Is a Ticket” was good enough to get on board a Southwest flight, proponents of deregulating the airline industry held up Southwest as an exemplar of how less government interference in the nation’s skies could lower prices and benefit passengers. Now Washington might use Southwest as an example again—this time of why passengers should get more protections.
