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Southwest CEO maps out a recovery after holiday meltdown

Travelers at Baltimore Washington International Airport cope with Southwest Airlines’ cancellation of greater than 12,000 flights nationwide and in Baltimore, Maryland over the vacation season, December 27, 2022.

Michael McCoy | Reuters

SW CEO Bob Jordan’s message, after the vacation meltdown that thwarted the travel plans of tens of millions, is obvious: “I am unable to say it enough. We blew the case.”

Jordan said in an interview with CNBC that he’ll now give attention to ensuring the same crisis never happens again. The airline hired consulting firm Oliver Wyman to review its processes, interview staff and union members, explain what went improper and determine learn how to avoid it in the long run. The low price airline works with General Electric improve the capabilities of the software that helps Southwest handle crew reassignments. The airline’s management has arrange an operations review committee to assist managers cope with such incidents.

The event was shattering for a lot of travelers accustomed to Southwest’s customer support, which incorporates policies corresponding to free checked-in bags, a rarity for US domestic travel. Lawmakers and transport secretary Pete Buttigieg said they desired to look more closely on the disruption.

The Department of Transportation is within the early stages of an investigation into the airline’s holiday turmoil and can also be “investigating whether Southwest’s management engaged in unrealistic flight scheduling, which is taken into account an unfair and fraudulent practice under federal law,” a spokesman said Wednesday.

Less than a 12 months after taking his top job on the airline, within the wake of the travel chaos he hasn’t seen in greater than three many years at Southwest, Jordan is now tasked with putting things right with passengers and staff.

“We have drawn goodwill from the bank. We know that,” Jordan told CNBC. “We have numerous work to do to rebuild trust, but our customers are very loyal and we see that loyalty.”

Southwest said it had offered flight attendants more pay and a $45 million “gratitude pay” to pilots due to meltdown. Both groups have been warning about inadequate technology and timing for years.

The carrier also gave away 25,000 Rapid Rewards points, which the corporate estimates to be value about $300, to about 2 million individuals who had flights booked throughout the chaotic holiday season, Jordan said.

He said the recent fare sale was successful and that many shoppers were exchanging frequent flyer points for Southwest flights.

Southwest said on Thursday that the chaos amounted to $800 million in pre-tax results and a rare quarterly loss.

A spokeswoman for Southwest told CNBC on Wednesday that the airline’s planned resumption of quarterly dividend payments will happen as scheduled on January 31.

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Southwest said it canceled around 16,700 flights between December 21 and 31, and that number rose after it did not recuperate from the cruel winter weather that paralyzed travel across the country, stabilizing a couple of days later. Airlines executives expected this to be the busiest travel period for the reason that start of the Covid-19 pandemic.

The hydraulic fluid became so thick within the brutal cold that the jet bridges couldn’t move. Snow and robust winds halted operations at airports across the country. Aircraft engines froze.

Most airlines largely recovered from the bad weather ahead of Christmas, but Southwest’s problems worsened as crews needed to call in for brand new assignments or hotel rooms, prompting support.

The carrier’s aircraft and crews were left in place and on the mercy of crew planning systems, which were designed to cope with current or future flight disruptions relatively than the sheer volume of flight changes up to now.

“We needed an even bigger response to reset the network,” Jordan said. “It mainly limited the schedule.”

Southwest flew just a 3rd of its scheduled schedule for several days after Christmas to get crews and planes where they needed to go.

“The GE Digital tool, which is integrated with Southwest’s systems, has worked as designed throughout the event and we’re working with them to define latest features as they improve crew rescheduling capabilities,” a GE spokesperson said on Tuesday.

However, the chaos related to scheduling flights in bad weather is nothing latest within the aviation industry. JetBlueThe February 2007 crash cost CEO David Neeleman, the founding father of JetBlue, the lack of his job. (He has since founded a latest carrier within the US called Breeze Airways.)

Southwest itself had a cascade of smaller-scale flight disruptions in October 2021 that cost it about $75 million. months earlier Spirit Airlines received a $50 million loss on account of massive disruptions.

“Every airline has its downfall and emergence with latest prospects,” said Samuel Engel, senior vice chairman of consulting firm ICF. “The airline reaches a certain point of complexity and has a disruptive event on such a scale that it forces them to look deep inside.”

Both Spirit and Southwest operate so-called point-to-point networks, which don’t depend on hubs just like the larger airlines and as an alternative have planes cruising across the country. The model generally works and helps reduce costs, but it could cause disruption during extreme events.

Jordan defended the model and said the network is generally easier to recuperate because travelers do not have to depend on connections to get to their destinations.

“The problem wasn’t the network, the issue was what number of places were affected by the weather and what number of cancellations it entailed, mainly non-stop,” he said.


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

SW, United, Delta and American controls greater than three-quarters of the US market.

“Customers just consistently select flights based on fare and schedule,” he said. “When they undergo a disrupted journey, they’ll say ‘never again’ – after which they do.”

Mark Ahasic, an aviation consultant who worked with JetBlue throughout the 2007 crash, said the airline’s fame “suffered, nevertheless it didn’t damage the brand.”

Southwest needs to handle the problems which have caused trouble on vacation and redress customers, but many travelers – especially those at airports where Southwest has a robust presence – typically have few airline decisions, Ahasic said.

Southwest has nearly finished processing customer returns and is working on a more complex reimbursement task, which Jordan says includes every part from meals to dog care fees. Some travelers who’ve been forced to pay high fares for limited seats on other airlines are still waiting for a refund.

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

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

Southwest reimbursed Smith for a part of his airline travel, but has not reimbursed him for the Delta flight since last week. He said Southwest sent him 4 in-flight drink vouchers.

“Why would I exploit drink vouchers while you owe me $600?” he said. “I actually just want that a reimbursement.”

Cameron Brainard, a rustic music radio voiceover and host, said he paid over $1,000 to return to New York from Nashville, Tennessee, including a rental automobile from Louisville, Kentucky. Southwest offered him $540.02, noting in a January 19 email that Brainard shared with CNBC that he had not yet requested a refund.

“Be sure to select up this payment before it expires,” the e-mail said in July. “This payment is the complete and final settlement of your Southwest Airlines claim.”

Brainard said he flies southwest regularly and has no plans to quit the airline after a flight is canceled, although he would “guess it again” depending on what his reimbursement looks like.

“Hopefully this may make them a greater airline,” he said.

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