If you follow the news, you’ve probably read the many articles written about Southwest Airlines’ meltdown during the days around Christmas: “Southwest canceled 2,677 flights, or 65% of its scheduled Tuesday departures, according to data from FlightAware. The airline said Monday its
I was in a round about way saying that Southwest has in a way outgrown itself! It’s success actually caused the problem ! If your an employee , trying to get to a destination to start working, most flights are already full! Jump seats are taken! Other airlines have more open seats and more direct flights and Nickel and dime their customers! Not Southwest!
Great article! Lots of excellent points about the operational complexity and vulnerabilities of Southwest's business model. May I add a few more points:
One remarkable aspect of the Southwest story was that they generated outsized returns to their investors while paying extraordinary attention to the well-being of their employees and customers. Way back in 2001, after the 9-11 attack on the World Trade Center shut down many thousands of flights for many weeks, Southwest was the only US airline that did not lay off any employees. In fact, James Parker, CEO at the time, said: “We are willing to suffer some damage, even to our stock price, to protect the jobs of our people.” (Business Week, 8 October 2001.). Herb Kelleher, Southwest's co-founder and longtime chairman and CEO, reportedly held very similar attitudes. Southwest was legendary for building positive attitudes amongst their staff, which helped maintain a great service culture, great service delivery, very satisfied customers, full airplanes, low costs, and high returns to shareholders. After 9-11, Southwest continued to grow and prosper, while a number of the other major US airlines went through bankruptcy.
Since that time, somewhere along the line, Southwest may have lost their laser focus on delivering shareholder value through employee satisfaction driving service excellence and customer satisfaction. One piece of the puzzle may be the tardiness in upgrading their Skysolver software, but it seems that the senior management was out of touch with operational problems that were well known to rank-and-file employees for many years:
From the Wall Street Journal, December 28, 2022, Alison Sider: "Southwest’s pilots union for years complained that SkySolver often spits out fixes that don’t make much sense, sending crews on circuitous journeys around the country as passengers to meet flights, a practice known as 'deadheading.'"
The New York Times piece by Zeynep Tufekci (Dec. 31, 2022), digs deeper and observes that Southwest's employees repeatedly and consistently asked the company to invest more in software upgrades to improve operational effectiveness, while the company seemed to give higher priority to devoting capital to executive compensation and shareholder buybacks. Lacking adequate systems, the company apparently muddled its way through several previous disruptions, but the conditions were ripe for a meltdown when a big enough disruption hit.
The Washington Post article by Ian Duncan and Justin George on December 28, 2022, adds additional insight into the state of management-employee relations, citing a memo to employees from Southwest’s vice president for ground operations, Chris Johnson, "who declared a 'state of operational emergency' because of an 'unusually high number of absences' of Denver-based ramp employees. Johnson wrote that "employees 'alleging illness' needed to provide a doctor’s note on the first day back to work that supported their reason for taking a sick day. Failure to do so could result in their being fired for abuse of sick leave and insubordination."
In addition to the HBR article by Michael Porter, that praises Southwest, there are several other B-School cases on Southwest that have been widely used by myself and others to illustrate high performance service operations management. Sadly, the Southwest case class session (if it is continued to be used at all) will now have a painful postscript.
I was in a round about way saying that Southwest has in a way outgrown itself! It’s success actually caused the problem ! If your an employee , trying to get to a destination to start working, most flights are already full! Jump seats are taken! Other airlines have more open seats and more direct flights and Nickel and dime their customers! Not Southwest!
Gad, I loved reading the article. Appreciate the detailed analysis supported by strong premises. Thanks for sharing..
Great article! Lots of excellent points about the operational complexity and vulnerabilities of Southwest's business model. May I add a few more points:
One remarkable aspect of the Southwest story was that they generated outsized returns to their investors while paying extraordinary attention to the well-being of their employees and customers. Way back in 2001, after the 9-11 attack on the World Trade Center shut down many thousands of flights for many weeks, Southwest was the only US airline that did not lay off any employees. In fact, James Parker, CEO at the time, said: “We are willing to suffer some damage, even to our stock price, to protect the jobs of our people.” (Business Week, 8 October 2001.). Herb Kelleher, Southwest's co-founder and longtime chairman and CEO, reportedly held very similar attitudes. Southwest was legendary for building positive attitudes amongst their staff, which helped maintain a great service culture, great service delivery, very satisfied customers, full airplanes, low costs, and high returns to shareholders. After 9-11, Southwest continued to grow and prosper, while a number of the other major US airlines went through bankruptcy.
Since that time, somewhere along the line, Southwest may have lost their laser focus on delivering shareholder value through employee satisfaction driving service excellence and customer satisfaction. One piece of the puzzle may be the tardiness in upgrading their Skysolver software, but it seems that the senior management was out of touch with operational problems that were well known to rank-and-file employees for many years:
From the Wall Street Journal, December 28, 2022, Alison Sider: "Southwest’s pilots union for years complained that SkySolver often spits out fixes that don’t make much sense, sending crews on circuitous journeys around the country as passengers to meet flights, a practice known as 'deadheading.'"
The New York Times piece by Zeynep Tufekci (Dec. 31, 2022), digs deeper and observes that Southwest's employees repeatedly and consistently asked the company to invest more in software upgrades to improve operational effectiveness, while the company seemed to give higher priority to devoting capital to executive compensation and shareholder buybacks. Lacking adequate systems, the company apparently muddled its way through several previous disruptions, but the conditions were ripe for a meltdown when a big enough disruption hit.
The Washington Post article by Ian Duncan and Justin George on December 28, 2022, adds additional insight into the state of management-employee relations, citing a memo to employees from Southwest’s vice president for ground operations, Chris Johnson, "who declared a 'state of operational emergency' because of an 'unusually high number of absences' of Denver-based ramp employees. Johnson wrote that "employees 'alleging illness' needed to provide a doctor’s note on the first day back to work that supported their reason for taking a sick day. Failure to do so could result in their being fired for abuse of sick leave and insubordination."
In addition to the HBR article by Michael Porter, that praises Southwest, there are several other B-School cases on Southwest that have been widely used by myself and others to illustrate high performance service operations management. Sadly, the Southwest case class session (if it is continued to be used at all) will now have a painful postscript.
Thank you Professor for the insightful article!
Excellent analysis Gad!
Thanks Prof A. Loved it. And reshared - https://alearningaday.blog/2023/01/04/analyzing-the-southwest-meltdown/ :)