Expanding on the thoughts in my last post, in her Washington Post column Megan McArdle says that Southwest’s problem is staffing:
How did it come to this? If I had to pick only one factor — one hole in the cheese — it would be staffing. That’s hardly Southwest’s only problem, but it’s probably the one problem that made all the others worse.
The operational efficiency and brand loyalty that made Southwest a case study were built on a foundation of human capital. You can’t run a finely tuned productivity machine with disgruntled, undertrained employees who are phoning it in; you need teams that work together well and solve problems on the fly. Southwest has long been known for its strong corporate culture; as Gary Leff of the indispensable View From the Wing blog told me, “Front-line people, from gate agents to flight attendants, at Southwest Airlines usually seem to like their jobs, which can be a contrast from other carriers.â€
which has some resonance with one of the factors I cited in my post—generational shift. Old employees retired and the newer, younger ones didn’t know Southwest’s procedures and operations as well.
The editors of the Washington Post on the other hand blame Southwest’s management for failing to upgrade the company’s information technology infrastructure:
The core problem is Southwest’s failure to modernize its infrastructure. Casey Murray, president of the Southwest Airlines Pilots Association, told CNN the airline still uses phones and a computing system from three decades ago. While 1990s fashion might be back en vogue for teenagers, that era’s data processors should not be running one of the nation’s largest airlines in 2022. The system was unable to figure out where crews were, making it impossible to match up pilots, flight attendants and planes.
Those two explanations are not unrelated. A more experienced staff might have been compensating for deficits in the company’s IT and the newer staff might have been frustrated with the antiquated programs.
Here’s the “blame” part:
What’s particularly egregious is the fact that Southwest had the money to upgrade its systems but chose to hand it to shareholders instead. The airline recently announced it would pay a dividend again that amounts to $428 million a year. Southwest also received more than $7 billion from the U.S. federal government to shore up its operations during the pandemic. It paid a quarterly dividend for years before the coronavirus struck, signaling to Wall Street that the airline had cash to spare.
In other words, given a choice, Southwest put its investors ahead of its customers and crew. Now, the full ramifications of those decisions are causing massive pain — and what will almost certainly be a collapse of trust from the budget-minded travelers who have consistently ranked it among the best airlines when it comes to customer satisfaction.
I have no way of adjudicating among these explanations. I’m just passing them along.
I would point out that the entire air travel sector is notoriously slow to upgrade its IT. As late as the 1980s the air traffic system being used was one that had been developed in the 1960s, reliant on vacuum tube technology. American and United were still using systems they had developed 20 years previously. Maybe that has changed but I doubt it.
Managing is hard. You have to balance (1) shareholder income, (2) personnel management, (3) competition for business, and (4) technology. I suppose the air planes are obvious, but internal communications and data management aren’t. Especially hardware isn’t.
Successful companies handle all these problems, and get the tradeoffs right. Southwest didn’t. The company really needs a purge of senior management. They are more likely to go belly up.
I agree that going belly up is more likely than a management shakeup but neither is even more likely. Southwest has a niche: low cost fares from underutilized airports. Americans tend to buy anything as long as its cheap. Southwest will survive.
IMO the real lesson is that we are enormously overbuilt on infrastructure of all sorts: airports, roads, bridges, everything and we are strongly predisposed to build more rather than maintain what we have.
In particular we have too many airports. The problem is that everybody wants to go to the same places at the same time. We have a peak load problem. There are perfectly good ways of dealing with that (demand pricing for gates, for example) but they’re too complicated for simple-minded administration.
I’m not sure the US is overbuilt. We have a population of 330 million, and it is growing at about 0.4% per year officially, but more like 1% if you count illegals. That 3 million people per year, about the size of Chicago.
Airplanes are one of the cheapest ways to move people, especially long distances, so I’m not sure we have too many airports. And bear in mind, good engineering practice is that utilities and infrastructure should be designed to meet a peak load, not an average load.
Maintenance is always the big problem. People and Congresses simply will not spend money on maintenance; they insist on spending on new toys. Hence our military is filled with high tech weapons that are only available 30% of the time. Our Navy rusts away, because no one can be bothered to chip and paint. Those duties are no longer part of the swabbies day.
The big scandal coming is solar and wind power. Construction of these facilities is heavily subsidized at numerous levels. But there is no subsidy for maintenance and replacement. Turbines and solar panels likely have useful lives of 5 to 10 year (tops). The landscape/seascape is already littered with broken turbines and panels.
As to EV’s, note that the batteries are typically warranted for 8 years or 100,000 miles (whichever comes first). Depending on make, the replacement battery will cost several thousand dollars; figures as high as $30,000 have been bandied about. That means an EV has no resale value. None. At 100,000 miles, the typical gasoline/diesel car is good for another 100,000 miles.
PS. A belated Merry Christmas to you and yours, and a Happy New Year!
Let’s hope the Cubbies play the Sox in the World Series. Where is Epstein when you need him?
Let’s put it this way. Our airport capacity has exceeded air traffic control’s ability to handle. Also, I’m not so sure about the economy of air travel. I wonder how economical it would be without all of the subsidies? Or, said another way, I suspect that security costs, broadly considered, have rendered air travel a lot less economical than it used to be.
Now that more has come out this seems to be part of the resilience problem we have discussed. Many industries have large variations in their work. These tend to follow patterns. For airlines its holidays and for us it is flu season. You can plan for those and if you are a low cost entity you can do that in a way to maintain low costs. Then you have unexpected emergencies/surges. An unexpected problem occurring while at a busy peak meant they were already using a lot of extra help or were maximally using staff. Then add in a supposedly antiquated system for contacting staff.
It sounds to me like part of the reason they were low cost is that they did not invest in resilience. Consumers got what they paid for, cheap flights the huge majority of time but failure during a crisis. I suspect you are correct that most people will be willing to put with a fairly rare problem in return for the lower costs, excepting probably those who got stranded this time.
Steve
One of the great things about Southwest was that it didn’t have a hub-spoke design – this meant more direct flights without changing aircraft at a hub. I previously thought this made Southwest more resilient to cascading disruptions, but I guess that is not the case.
There are a lot of problems with the air transport system. I see them frequently at Denver International, which is one of the country’s newest airports though not “new.” Originally designed to utilize a high-tech baggage handling system, that system failed, was ripped out, and it still uses the system used everywhere else – a lot of manual labor moving bags.
Then came 9/11. DIA wasn’t designed for post-9/11 security. The terminal is in perpetual reconstruction, and one of the current goals is to make security not such a cluster-fuck. On a recent trip I arrived at 5am to find the security line wrapped around the entire terminal and it took 45 minutes to get through even though they waived the requirements for shoes and laptops and utilized a drug/bomb sniffing dog instead.
” Our airport capacity has exceeded air traffic control’s ability to handle.”
I think that’s sometimes true and sometimes false. There are a lot of times where I’ve sat on the tarmac in the plane while the pilot waits for an open gate.
I think a lot of that problem is a lack of peak capacity at certain times and certain dates.
The system also seems to favor big, centralized airports. For example, the Colorado Springs airport is about the same distance away from me as DIA – and often has shorter travel time because of Denver traffic. But there are few flights out of there, and they are generally more expensive. But I choose them when I can. There are at least a million people who would find the CS airport more convenient simply due to proximity, but instead the vast majority have to drive an hour or more to deal with an overcrowded DIA.
I don’t know the solution, and I’m sure I don’t understand all the problems, but the system seems decidedly not ideal in terms of efficiency, and it certainly sucks for travelers.
That’s the outcome of our bizarre way of allocating gates and that a large number of people fly to/from a relatively small number of destinations and prefer to leave on the hour. Only so many flights can leave DEN at 8:00am for Chicago at the same time.
It’s a nice enough airport. Neither the best nor the worst I’ve ever been to.
My dad flew in/out of Stapleton a couple of times when it was Denver’s airport. I flew in/out of it once. After that I flew in/out of DEN.
I thought this post was an interesting explainer:
https://www.seat31b.com/2022/12/the-great-southwest-meltdown-of-2022/
I think steve gets the tradeoff about right. As Dave pointed out, and as I repeatedly have in the past, most people will tend to buy on price, forgetting that the full price includes things like your lost time or poor service when things run amuck. In another example, Allegient air runs from a nowhere airport in FL to some key cities, dirt cheap…………………except when it doesn’t. Who can put up with the cancellations, Allegient’s target market? Retirees. Business travelers need to look elsewhere. Holiday (read: DFU) flying is not really SWest’s forte.
Still, I would observe that stock buybacks at a business that needs investment is a bad look. If I was a shareholder I would not be happy about risking the franchise.