Southwest is targeting October to finalize execution of a remediation plan addressing its December operational disruption.
Landing right in the middle of the winter holiday travel period, a cascading sequence of events in late December led to an operational nightmare for Southwest Airlines.
More than 16,700 cancelations drove a $220 million loss in the fourth quarter—and a negative impact of $300-$350 million is projected for the first quarter, related to what the airline terms as “book-away” from its customers as a result of the operational disruption.
- More than $1.3 billion is budgeted for 2023 investments, upgrades and maintenance of IT systems
- A three-part Tactical Action Plan is aimed at boosting operational resiliency
But after an in-depth investigation, management has found no need for a systemic overhaul.
“Are there structural changes needed to the Southwest business model or route network, based on what happened in December? We believe the answer is no,” CEO Bob Jordan told investors at the JP Morgan Industrials Conference on March 14.
The impact this year should be largely isolated to January and February, Jordan added. He indicated that the revenue trends for March were “encouraging” and pointed to several upward-trending engagement metrics that he saw stabilizing. Among the customers affected by the December disruption, the airline has seen booking volumes for future travel grow week by week, he noted.
“It is really encouraging that folks that [were] part of our disruption in December are very willing to fly Southwest again so soon,” Jordan said, characterizing the carrier as being “well underway” with a remediation plan to prevent a winter event of a similar size and magnitude through investments in technology, equipment and cross-team collaboration.
Initial assessments of the December disruption, conducted by Southwest and third-party consultancy Oliver Wyman, are “largely complete,” Jordan said, and identified two main issues. First, the carrier pointed to the severity of Winter Storm Elliot. The storm was more sudden and severe than weather forecasts predicted and had a greater-than-expected impact on station operations. In the second, Southwest said, “outsized impacts” from the storm at two of its largest airports—Denver International and Chicago Midway International—created “waves and waves” of close-in flight cancellations with multiple-day airport shutdowns.
“The cascading, close-in flight cancellations overwhelmed our processes and technology, which led to manual alternatives and efforts that were both tedious and took longer to solve,” Jordan said. “This was the point where the weather-related event turned into a crew-related event for us, and eventually resulted in a three-day reset of our aircraft and crew networks.”
To move forward, the company’s action plan—which Jordan noted is complementary to an existing multiyear operations modernization plan—is separated into three parts: improve winter operations through upgrades to airport infrastructure, equipment and preparedness; enhance cross-team collaboration to improve processes, decision-making, escalation procedures and communication during irregular operations; and accelerate investments in technology and tools that would allow for greater volume and pace during irregular operations. This is planned to include purchasing deicing trucks, deicing pads, engine covers and engine heaters, and securing additional deicing fluid capacity at key network locations.
Southwest is budgeted to spend more than $1.3 billion on investments, upgrades and maintenance of information technology (IT) systems this year.
The carrier has already upgraded its crew optimization software “to address a functional gap that was revealed in December,” Southwest says. It also plans to enhance its electronic crew notification and crew phone systems, as well as upgrade the customer support and services phone system to better handle surges. The airline said it plans to augment winter staffing in certain locations and implement a new weather application to improve deicing holdover times.
“Our existing weather application requires more subjective judgment and, in the case of our Denver operation, produced inferior holdover times for our aircraft, effectively stopping departures for a significant amount of time—in a couple of cases, for days,” Jordan told investors.
The carrier is targeting October to finalize execution of its remediation plan.
Amazon Web Services (AWS) has been contracted to support part of this investment in operational resilience with a multiyear commitment, which Southwest says should help improve its digital solutions and streamline operations through cloud-based technology.
“As our preferred cloud provider, AWS will offer solutions that are critical in our drive to modernize our operation, equip our employees with the tools they need to serve our customers and improve our reliability,” says Lauren Woods, Southwest senior vice president and chief information officer.
Working with AWS, Southwest plans to boost the efficiency of the online fare booking process, upgrade customer service tools and better harness predictive insights through an internal machine learning platform. The cloud-based service should also help optimize applications that support gate assignments, ground operations, flight operations and aircraft maintenance.
“When you build in the cloud you can build up your applications for scale a lot easier,” Shaown Nandi, AWS director for technology, strategic industries and accounts, tells Aviation Week. In addition to better demand predictions and capacity provisions during peak moments, Nandi points to other resilience benefits as well.
“From a tech resiliency perspective, you have to think really carefully about how your capability is designed for worst-case scenarios,” he says. “In the cloud you can design your applications to be running in many places to be highly resilient across our regions, which means you can plan, for relatively reasonable costs . . . for unexpected events at the infrastructure level.”
Southwest also remains focused on restoring its route network by year-end for additional operational resiliency, adding more depth and frequency across the network. It still anticipates bringing Boeing 737-7s on as planned, when certified, with the smallest variant in the 737 MAX family meeting the needs of its short-to-medium-haul market. The airline expects to receive roughly 90 aircraft deliveries this year compared to its previous expectation of 100. With these deliveries, and 27 planned retirements, its fleet would number 833 aircraft by year-end.
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