For Southwest Airlines, $825 million may be just the beginning
Holiday meltdown may cost millions more
Watch a video version of this story and the conversation with Henry Harteveldt here.
What a contrast! Delta Airlines CEO ED Bastian was at one of the coolest industry shows in the world. He sat down at the big technology show, CES, in Las Vegas to announce that his airline is going to offer free wi-fi on all its aircraft. That means texting, browsing, and chatting all for free. That is cutting edge technology for free.
At the same time, one of Delta’s competitors was talking about losses and problems with its technology- not in the air, but on the ground.
In the middle of a brutally cold winter storm over the holidays there was a meltdown, the Southwest Airlines meltdown. The Dallas-based airline’s operations nearly collapsed. For a couple of days only one-third of its scheduled flights were operating as passengers tried to get home of the holidays.
Southwest canceled 16,700 flights between December 21 and December 31. In its latest financial filing the airline said the cost for its struggles during that week and a half will be between $725 million and $825 million. Half of that is due to lost revenue. The rest is the cost of refunds, reimbursement for passengers who were stuck and had to book hotels, and overtime for workers.
The airline first blamed the weather, but other airlines were able to deal with the strong storms. Southwest’s pilots, flight attendants, and observers say the real culprit was software, a lack of information technology (IT) to communicate with crews and conduct flight operations.
As Southwest was canceling flights, the head of the flight attendants union tweeted, “the many years of failure by management, despite many unions’ demands to modernize, has left flight attendants fatigued, stranded, hungry and cold - on Christmas! This impacts lives and threatens safety for all.”
Lyn Montgomery and her colleagues at the pilot’s union have been complaining that Southwest has put off critical investments. She told NPR that both unions have been telling the airline, “we need to invest in our IT infrastructure, that the systems we have in place cannot handle the operation that we utilize today. And eventually, we're going to have a system failure so grave that something of this magnitude could happen. And today, we have this situation.”
Montgomery’s flight attendants were walking informational pickets complaining about the company’s IT back in the fall. Montgomery told Yahoo Finance in September, “we have been just the victims, along with our passengers, of horrific technological failures.”
It’s a problem aviation analysts have been watching for years. “Southwest unfortunately has a bad reputation of under-investing in technology for an airline of their size,” aviation consultant Henry Harteveldt of Atmosphere Research told me.
“Airlines are not a high margin industry even in a good year. So anywhere airlines can avoid spending money they do,” Harteveldt said, adding, “technology is just one of the areas where airlines traditionally do what they need to do but don't always do all they have to do.”
Southwest attempted to explain how its operations were hit by the the storm and apologized to customers early in the operational meltdown. In his final update January 5th, CEO Bob Jordan was more revealing, admitting that the airline caused many of the problems. “We disrupted holiday travel for millions when some of our systems and processes became stressed,” he said in a video statement.
The CEO tried to blunt criticism about the airline’s investment in IT, saying, “As a company we spend about $1 billion a year on technology. And we'll continue to upgrade the tools and processes our employees use.”
Harteveldt believes more will be needed. “A billion dollars is a lot of money, don't get me wrong, but for a multibillion dollar corporation like Southwest, it's probably not enough. Southwest has a long history of under-investing in its technology. And this past December, we saw that really bite the airline in its tail.”
Watch a video version of this story and the conversation with Henry Harteveldt here.
Speaking of technology, how about the FAA computer meltdown that caused a nationwide ground stop of flights taking off. These are two examples of the importance of getting that technology right and making it robust enough so passengers can get home for the holidays.
For Southwest Airlines, $825 million may be just the beginning
Another example of allowing the "Bean counters" to overrule experience.
A failure to balance the needs of corporations and Unions. A failure to recognize in the final analysis irs about human beings
Peace and prosperity Through responsibilities