Southwest Airlines meltdown: 4 business lessons

It took 50 years for Southwest Airlines to establish itself as a trusted brand that treated passengers and employees with kindness and respect. But all it took was a punishing storm during the holidays to unravel that perception and trigger intense scrutiny of the airline’s operations.

The Southwest Airlines meltdown, in which the carrier canceled more than 16,700 flights between December 21 and 29, costing it between $725 million and $825 million in revenues, will be studied for decades.

The debacle stranded thousands of loyal customers at the peak of the holidays and revealed the company’s sluggish crisis response and apparent failure to update its primitive scheduling software.

1. Invest in technology
2. Step up crisis response
3. Pull untimely ads
4. Communicate often and honestly

Southwest Airlines meltdown blamed on outdated tech

During Founder Herb Kelleher’s tenure, Southwest Airlines passengers mostly understood and accepted that you gave up frills like fancy beers, meals, and assigned seating in exchange for cheaper, no-hassle flights that usually landed on time.

Since Kelleher stepped down in 2001, the airline’s approach to thriftiness appears to have intensified, especially at a business level, limiting much-needed modernization of information technology infrastructure.

Southwest wasn’t the only U.S. airline to experience storm-related delays and cancelations during the holidays. And travel headaches continued this year when the Federal Aviation Administration’s Notice to Air Missions or NOTAM system went down, causing more than 6,700 U.S. flight delays and more than 1,000 flight cancellations.

But Southwest did account for more than 85% of holiday flight problems. Unions blamed the company’s lack of investment in scheduling software for its inability to quickly and efficiently recover from the crisis.

“For more than a decade, leadership shortcomings in adapting, innovating, and safeguarding our operations have led to repeated system disruptions, countless disappointed passengers, and millions in lost profits,” Southwest Airlines Pilots Association said.

Experts says executives in companies that aren’t updating IT should sound the alarm bells and use the Southwest example to sell the need for greater investment.

“Avoiding these kinds of things comes down to raising flags internally and saying, ‘look, we’re not able to do our jobs effectively with this technology,’” says Kelly Soderlund, senior director of global public relations for TripActions, a corporate travel and expense management company. “Companies really need to invest in software to optimize how they operate.”

Poor crisis response points to need for better prep

Amid the Southwest Airlines meltdown, executives spent considerable time apologizing while trying to get flights back on track. But they didn’t immediately inform stranded passengers what the airline would do to make things right.

It’s unclear if Southwest was simply overwhelmed or was simply unprepared for a crisis of this magnitude. Either way, experts advise companies to always have a playbook on hand outlining how they will respond when a catastrophe strikes and affects their levels of service.

Southwest did step up efforts to compensate impacted passengers. A spokesperson said it’s processing “tens of thousands” of refunds and reimbursements per day. And it approved a “goodwill gesture” of 25,000 frequent-flier points to customers whose itineraries were disrupted.

Turn off tone-deaf advertising 

When buried in a crisis, it’s often difficult for companies to assess, adapt, or adjust marketing materials, such as advertisements. But smart companies do it.

Southwest, on the other hand, let at least one slip during its holiday meltdown. In the midst of the weather event, it was still running an ad with a smiling pilot.

Promoting top executives in the wake of the crisis also doesn’t help the brand. Southwest’s promotion of several executives, including its VPs for network planning and customer experience, immediately after the meltdown, raised eyebrows of industry observers and the ire of stakeholders.

Communicate quickly, sincerely, and transparently

Southwest told us it prides itself on being open and timely. During the recent “operational challenges,” a spokesperson for the airline said it fielded more than 2,000 media inquiries, let reporters speak to CEO Bob Jordan and other top executives, and posted updates in its newsroom site almost daily. Along the way, executives continually apologized for the crisis and pledged to get back on track.

However, observers note the airline’s words didn’t always mesh with its practices.

What’s more, executives were vague about how they would upgrade IT and long-term policies to prevent similarly severe issues from occurring again.

Their apologies were unreserved, says Mark DiMassimo, founder of DiMassimo Goldstein (DiGo), a positive behavioral change agency. But that needs to be combined with meaningful actions.

“Don’t let your corporation act like a corporation. Act like a person,” he says. “Be transparent. And take that risk of oversharing because there’s often significantly more risk in withholding or delaying what you tell your customers.”

Southwest Airlines, post-meltdown

No doubt, Southwest will survive its holiday meltdown. Even though it faces federal investigations and hefty fines for possible regulatory violations, the airline offers relatively low prices and cheerful flight attendants without annoyances like baggage and change fees – all of which are likely to appeal to forgiving travelers.

But it may not be the same Southwest for a while. Indeed, having been brought down to Earth, it will take time and resolve for the airline to re-ascend to its status as the darling of the U.S. airline industry.

“We expect to see Southwest take a pretty big hit from this in the short run,” DiMassimo says.

“When you piss people off, there’s usually a big short-term cost to growth. However, in an environment where almost all air travel is awful, there’s an opportunity for Southwest to tap into their brand heritage and recover.”