Southwest Airlines has a strong reputation as one of the most customer-centric carriers in the sky. So what happened back in December that tarnished this reputation, canceled nearly 17,000 flights, and left tens of thousands of passengers stranded over the holidays?
There's a technology answer to this question, and a strategy answer.
The Technology Problem
Most airline carriers use a hub and spoke model, with large cities like Los Angeles, Chicago, and New York serving as main hubs that large flights are routed through, and where passengers who are travelling to smaller markets can transfer to smaller planes for the final leg of their journey.
Southwest carved out its niche by choosing to fly directly from city to city, a model that most airlines abandoned after 1978 when the industry was deregulated. This model has served them well over the years, but it is built on the back of an outdated technology system that relies on pilots and air crews getting on the phone with Southwest's call centers to receive their orders during an emergency.
For example, if a storm grounded a flight in Las Vegas, but that crew was supposed to be flying to Indianapolis and operating another flight from there, they would have to phone the call center. The call center would then find another crew in the Indy area that could take on the flight now in need of staff, and so on and so forth.
Right off the bat, it's clear that this is an inefficient and incredibly manual system for this decade. While small businesses like restaurants may operate this way, it's not something a $23B organization with 66,000 staff should be doing, even if it works 99% of the time.
The severe weather in December of 2022 revealed the crack in the foundation that Southwest's flight crews had been complaining about for some time.
In short, because the winter storm was so widespread, it caused too many crews to have to call in, overwhelming their call center. This created a backup--not only of crews, but also of airplanes (since Southwest doesn't rely on hubs, there are few locations that have access to extra airplanes that can be rerouted during widescale outages).
Southwest estimates that the cancellations will cost them upwards of $1B in revenue--a high cost to pay for out of date technology.
The Strategy Problem
Strategy at it's most basic (and most helpful) is just a series of limiting choices that narrow your company's focus into something actionable and aligned. I like to use the following framework: 1. What is success? 2. Where to play? 3. How to Win? 4. What capabilities are needed?
5. What management systems are required?
Most business owners we work with are excited to focus on 1-3, but by the time we get to 4 and 5, the energy is gone from the room. I don't have all of the details about what happened at Southwest, but from the outside, it seems like they ran into the same problem. In their strategic planning, they didn't listen to the complaints of their pilots and air crews, and instead, kept using an out of date system that didn't have the necessary capabilities.
This is a warning to all of us.
Southwest does a lot of things right. This is not a critique of their business model or culture (which is fantastic). Their future is bright, and I will continue to fly Southwest (at least when there aren't any major snowstorms forecasted). But they missed the warning signs on this one. What are you missing?