What Does the Future Hold for Southwest Airlines After the Great Holiday Debacle of 2022?
Southwest, which for years has been regarded as the “gold standard” for customer service in the airline industry, has had nothing less than a systemic meltdown this holiday season? How can the airline recover strategically? Here’s 5 ideas for the carrier moving forward.
Overview: The Great Southwest Meltdown of 2022
As a strategic management consultant and professor, certainly Southwest Airlines is always - always - one of the first firms - if not the first - that students will mention when we discuss which companies provide excellent customer service. And that has not just been the case this year, or for the past few years, but literally, for the past decade or two, even as the airline has expanded and grown… and grown…and grown.
Southwest has come a long, long way from when the airline’s founder, Herb Kelleher, drew out the simple business plan to fly between Dallas, Houston, and San Antonio on a cocktail napkin in a bar in the 1960’s. Overcoming long odds and many legal obstacles in a highly-regulated air carrier marketplace in its first decade-plus of existence, Southwest has basically been on a roll for decades, building an airline that has risen to being the second largest in the U.S. (by market share) in the United States (See Figure 1: U.S. Airline Market Share, 2021 below) and the world’s largest airline (in terms of seat capacity) last year!
Figure 1: U.S. Airline Market Share, 2021
Source: Zippia, "20 Southwest Airlines Statistics : Passengers, Revenue, and Facts," November 2022 (Used with permission)
Not only is Southwest “big,” but perhaps more importantly, it has built what is arguably the best brand in the American airline industry. On survey after survey after survey, Southwest has consistently placed at or near the top of airline rankings as a consumer favorite, with a unique corporate culture that has produced superior customer service and generated a brand loyalty among consumers that has - up till now - been second to none among U.S. airlines.
Now however, as 2023 begins, Southwest faces perhaps its greatest operational - and yes, marketing - challenge in their airline’s history. A “perfect storm” hit Southwest around the holiday season in late December 2022. Some of this perfect storm can be attributed to a real storm, a winter “bomb cyclone” that impacted much of the United States at the worst possible time for airline operations, namely the busiest air travel season around Christmastime! However, Southwest’s
problems, which may have started with weather, seemed to only cascade as the hours and days ticked by after Christmas. Systems problems, logistical problems, and yes, customer relations “issues”
that only seemed to worsen with time, as the airline seemed to have what has been deemed a complete “meltdown” in its ability to operate. And as Southwest’s crisis of late 2022 wore on, the airline trended all
over social media, this time for all the wrong reasons. Indeed, as happens in our modern world today, videos of stranded - and very unhappy - passengers quickly went viral. This included Southwest passengers being threatened with arrest for being in a customer service line to attempt to rebook their flights in Nashville’s airport,…
being evicted from Phoenix’s airport and told there would be no flights for them for at least 4 days!
And, of course, Southwest passengers displayed a whole range of human emotions, from joy…
to sadness and to anger,...
bringing out both the best…
… and the worst of humanity at airports all across the U.S.!
And it was not just Southwest passengers, but Southwest employees as well, who vented their frustrations with the airline and its management,…
… and of course, Management 101 is that it is never, never, never good when a company’s “dirty laundry” is aired out in public!
It was nothing less than an operational debacle - and a PR nightmare, and yes, the “meltdown” label was a very appropriate way of characterizing just what happened!
Now there are a whole range of issues that Southwest’s top management team will need to address - and address quickly - to not just resuscitate the airline back to life in the short-term, but to make certain that this type of debacle does not happen again. These center around the airline’s information technology, its employee relations, and maybe even how it routes its aircraft differently than almost all other major airlines today (using “point-to-point” routing of its planes, rather than the predominant “hub-and-spoke” system). The carrier will also need to address not just traveler concerns, but investor concerns as well. Indeed, the “holiday meltdown of 2022” has taken a short-term toll on Southwest’s stock
price (see Figure 2: Southwest [LUV] Stock Price, December 2022), as it has declined by almost 20% off its monthly high on December 5th to the last trading day of the month and the year (December 30th)!
Figure 2: Southwest (LUV) Stock Price, December 2022
In this article, we will focus on the marketing challenge that lies ahead for Southwest in the days, weeks, months, and indeed, years ahead postbellum. As a strategic management consultant and professor, I can safely say that the damage to the Southwest Airlines brand has been significant. The real question then - for Southwest management, employees, customers, and yes, investors - is just how significant - and lasting the damage will be - and just how much it will cost, and how long it will take, the carrier to “repair the breach” that has occurred in the brand trust equation.
Analysis: The Turbulent Skies Ahead for Southwest Airlines
Let’s start with this proposition: All of this is going to be costly - very costly - for Southwest Airlines. With hundreds of thousands - perhaps even more than a million - passengers having been impacted by the week-plus long severe disruptions in Southwest’s flight operations, early estimates are that the direct financial hit to Southwest’s bottom-line could well be in the hundreds of millions of dollars (a similar, but not nearly as long-lasting or extensive, systemic problem that Southwest experienced cost the carrier $75 million in October 2021). This most recent, almost complete shutdown of the airline occurred just after new federal regulations went into place providing significantly more compensation for airline passengers if their flights were delayed or canceled and/or if their luggage was lost or delayed in delivery by the airline. And with intense pressure on the airline from elected officials, regulatory agencies, and consumer protection advocates, and quite directly from Transportation Secretary Pete Buttigieg (who himself is coming under scrutiny for the Southwest debacle), Southwest will likely be called upon to go “above and beyond” what compensation the airline’s policies and federal regulations require in the contract of carriage. In fact, Secretary Buttigieg has pledged an “extraordinary effort” to make certain that the many, many passengers impacted by the Southwest implosion are fairly compensated for their troubles…
But beyond the hundred of millions - maybe even a billion dollars or more - this incident will directly cost the company, the far bigger hit to Southwest Airlines will be to its brand! There has already been significant damage to the Southwest brand image in the minds of consumers - and it can get even worse if the company doesn’t take immediate steps - and the right steps - to help build back the trust of the flying public. Otherwise, the airline risks losing even more of both its standing in the marketplace and its goodwill amongst consumers. Some analysts, such as CBS News senior travel adviser, Peter Greenberg, think that the damage to Southwest will be short-term and relatively minor. As for myself, I take a contrary position, as I see big risks for the airline moving forward, unless it undertakes a series of specific actions - quickly.
Most importantly, Southwest’s leadership needs to realize that it is in a true existential corporate crisis. This is not a drill! It is not just a systems issue. It is not just a labor issue. It is not just an “Act of God” with a severe winter storm. No, what the airline is facing is a survival issue. Now the crisis may not be so severe that the company faces immediate concerns about it literally surviving the crisis intact (in management speak, as a “going concern”). However, there is precedent for this happening - and it is one that the Southwest executives should know well - and that is the case of ValuJet.
ValuJet Airlines was a fast-rising, low cost carrier in the 1990’s, but it had a series of safety concerns and incidents, which culminated in the crash of a DC-9 in the Florida Everglades in May 1996. This was an especially gruesome crash, as all 110 souls onboard died and yes, ValuJet Flight 592 crashed into an alligator-nesting ground in the Everglades. Even worse - if that’s possible - the crash was caused by negligence in how the airline and its maintenance provider had handled a load of highly volatile oxygen containers shipped on that flight. The ValuJet crash did lead to important changes in safety regulations and aircraft design that helped protect future air travelers, but the damage to the ValuJet brand was irreparable. In the end, after the airline being entirely grounded for months, ValuJet bought a much smaller airline, AirTran Airways, and rebranded itself as AirTran, in large part to extinguish their tarnished name - a move that Time said was one of the "Top 10 Worst Corporate Name Changes" - ever! The company operated for over a decade with some success until it was acquired and absorbed by, checks notes, Southwest in 2011.
Now, do I think the Southwest operational meltdown of Christmas is anywhere close to the nightmare that faced ValuJet after the 1996 crash? The answer is no. Buuuuuuuut, one must consider the chief difference between the world of 1996 and the world of 2022-2023. The ValuJet crash occurred well before the world of social media had taken hold, while the Southwest implosion has been trending on every social media outlet and additionally, has been covered endlessly by the news media 24/7. And while there were no deaths directly attributed to Southwest’s corporate major heart attack - that we know of to date, there have certainly been many, many tales of woe from Southwest passengers and their families suffering - really suffering - from the airline’s operational difficulties. Tears and anger make for good video content, and that means these images, which are all over social media and the news today, will linger on the Internet forever. In short, while the Valujet analogy isn’t perfect in this case, it shows that an airline can succumb - or at least be significantly diminished - if it does not make the right moves both in a crisis - and to make sure the crisis either doesn’t happen in the first place, or if a crisis does happen, respond effectively both operationally - and, perhaps even more importantly, effectively in the minds of consumers.
So what should Southwest management do in the short-term and over a longer perspective to gain back the trust of the flying public - and in doing so, help calm investor jitters over the company? Here would be my 5 specific recommendations as a strategic management consultant (and yes, I am available and likely far, far cheaper than the “top shelf” consulting firms you have had advising you!):
1. Messaging: Bench the CEO
First, while the crisis management playbook would say that it’s crucial to get the CEO out front to make public statements about the problems facing the company and what the company plans to go about fixing them, I would strongly recommend that Southwest not put its top leader out there anymore - at least for the next few weeks - and maybe months. As a “seasoned” consultant to companies on matters such as this - though not nearly on this scale - I would say that Southwest’s current chief executive, Robert E. “Bob” Jordan, new to the job in 2022 (but a 34 year veteran of the airline) simply does not perform well on television. He comes across rather cold, technocratic, and the message really doesn’t change,…
- with Jordan endlessly saying: "'I’m sorry'... 'We’re sorry'...," well, it simply isn’t working, as he just doesn’t appear to have the right “affect” for this moment - and likely for the moments to come.
And so my recommendation in this regard would be to “bench” the CEO - at least for a time. Too many apologies in too short a time frame - without corrective actions that really resolved the crisis in a day or two, rather than lasting well over a week, make him look ineffective at best! Southwest should thus find another spokesperson - or multiple spokespeople - to be their media “face," both in the short-term and perhaps, in the long-term. Period. Jordan, who likely has many other qualities that equip him well to run the airline just doesn't seem to have the media skills necessary for this moment - and the many moments to come as the airline recovers from this crisis.
2. Be Radically Transparent in Efforts to Fix Their Systems and Their Employee Relations
Everyone - even the company’s leadership - seems to agree that its antiquated technology systems, especially its crew scheduling system, were a huge part of the mix in what caused Southwest to meltdown in December 2022 (as it apparently was in the October 2021 incident as well). Now, “information technology talk” can be brutally boring, even to IT professionals! But the company needs to find a way - quickly - to update its crew scheduling system and to publicly share information on their progress in an informative - and even perhaps an entertaining way (as Southwest is known for with its advertising!). This is crucial, as history - and The Weather Channel - tells us that there will be other potential service disruptions due to winter weather in the coming months and then summer storms later. The weather-related pressure will certainly not let up on Southwest; It is up to Southwest to move proactively now to fix this system that was a large contributor to the airline’s holiday meltdown of 2022.
Additionally, the airline’s management needs to concomitantly upgrade its customer support systems - both in the human element and on the tech side - to better enable Southwest customers to communicate with the airline and be able to resolve their issues quickly. With Southwest passengers waiting many hours at the airport and/or on the phone looking for help in the recent meltdown, the airline’s management needs to devote significant resources to expand its capacity to serve customers, especially at times of significant service issues. Specifically, they will need to look at adding “on demand” call center capacity - in some form or fashion (in-house or contracted-out) - to be able to assure passengers that they can provide them with timely assistance in times of service disruptions.
Similarly, it is abundantly clear that Southwest's festering labor problems were an ingredient, maybe not the cause, but certainly a factor, in the airline’s meltdown. Southwest has had difficult relations with its unions of late, which might surprise many, given the much-heralded Southwest culture and the Southwest flight crews that do things “differently” than the staid environment found on most other airlines, not just in the U.S., but indeed, around the world.
And so just as the airline needs to be very upfront and public about wanting to fix its systems issues, it needs to do the same - and with the same voracity - in looking to “repair the breach” with its pilots, its flight attendants, its mechanics and maintenance workers, and its ground and airport support personnel. This may mean not just settling their lingering union issues, but to do so in a manner that is favorable to its employees more so than to management. However, Southwest is at a critical juncture! And yes, to retain the corporate culture and to enable that culture to be an integral part of their recovery plan, now is the time for Southwest to pay up - and maybe even overpay a bit - and to be very public about doing so!
3. Rethink the Airline’s Advertising and Marketing
Marketing is all about context. You have to view what your marketing message is in light of what has actually happened in a wider context - with your company, in the marketplace, and in the society at large. Southwest now faces a very real dilemma not just in its advertising, but in the way the airline uses its “Wanna Get Away” messaging across almost all of its promotional efforts. If you go to the airline’s website or use its app, the lowest fares are at “Wanna Get Away” prices. If you see a Southwest commercial on television, hear one on radio or streaming media, see a print ad/billboard, or encounter an ad for the airline on social media, the “Wanna Get Away” message is quite clear…
However, coming off a complete meltdown of the airline, with both traditional media and social media were full of images of stranded Southwest Airlines’ passengers who couldn't “get away” to their destinations, that marketing messaging will certainly fall flat - and worse, even be mocked and derided!
And so one of the first challenges, from a marketing perspective, for the airline will be for it to ditch the “Wanna Get Away” theme - which admittedly, has been a core part of Southwest’s branding and brand identity for years - and to ditch it quickly. There will need to be a new branding and advertising message developed for Southwest, likely something that may even be short-term (6-12-18 months in duration) as the air carrier looks to rebuild trust among not just the general flying public, but the very loyal customer base that Southwest has had - at least until now - on the way to what will certainly be a longer-term rebranding.
Whatever the theme may be for its advertising and marketing in the short-term, something that may indeed evolve into a long-term marketing strategy, the thrust of the strategy needs to be built on the theme of rebuilding the trust - and goodwill - that has been key to the airline’s growth and success. Southwest needs to be cognizant of what has happened and create a marketing/advertising/promotional strategy that fits within that context, and which shows that the airline - and its people - are working hard, together, to get its house in order and provide the exceptional level of customer service that Southwest has been known for. It will be a challenge to strike the right “tone” and craft effective messaging in the wake of what has occurred, but this is a key component to Southwest’s recovery, not just operationally, but from a bottom-line perspective!
4. Be Generous in This Moment
As discussed earlier, simply compensating the hundreds of thousands of passengers impacted by the airline’s massive failure to deliver in December 2022 is going to have a huge impact on the firm’s bottom-line in the short term. However, the real impact of all of this will be felt by the airline not just for one quarter, but for years to come. Southwest’s top executives need to go above and beyond what they are legally required to do in compensating the many passengers that were stranded over the holidays, and yes, do so in a very public manner. The 25,000 frequent flyer points that Southwest is currently offering affected travelers as a “gesture of goodwill,” worth about $300 toward a future Southwest flight, is not exactly being well received by either them or the public at large as the opening salvo in what will surely be the airline’s “apology (and compensation) tour.”
You hate to say this, but the airline is going to be out a lot of money anyway. They might as well use this situation - not in an exploitative way, but in a very thoughtful and deliberate way - as an opportunity to be seen as doing so in a proactive manner, rather than as simply a contractual obligation. In the same way, Southwest will need to be generous in showering their frequent flyers with extra perks and points and yes, discounting fares to lure back casual customers to the airline. Again, they should be public in doing so, and why not? Doing so will help Southwest to build back their positive corporate image and defend their place in the ever-increasingly competitive airline marketplace.
5. Reexamine Southwest’s Operating Model
Finally, there’s that old adage that just because everyone else is doing something, that doesn’t mean that you should do it too! That works very well as parenting advice, and many times, it works just as well as management advice, too! Many, many companies - and fortunes - have been built over the years by companies such as Apple, Walmart, Amazon, and yes, Southwest Airlines, by going "against the grain" and pursuing strategies that were unique in the marketplace at the time. Southwest has been really the only major U.S. airline that makes use of a “point-to-point” routing of its planes, rather than the predominant “hub-and-spoke” system. Southwest does have major airports that have many flights “connect” through them, like Houston’s Hobby Airport, Chicago’s Midway International Airport, and Dallas’ Love Field. However, these do not serve as “hubs” for Southwest that are in any way equivalent to the size and scope of operations that one sees at Dallas/Fort Worth International Airport for American Airlines, at Atlanta’s Hartsfield/Jackson International Airport for Delta Air Lines, or at Chicago’s O’Hare International Airport for United Airlines. As operations management experts have begun to weigh in, the point-to-point routing that Southwest uses made it especially susceptible to a cascading failure such as what the airline experienced this past month.
So, as a strategic management consultant, I would say that unlike the four other issues that were previously identified as being immediately “attackable” by Southwest’s management, this final matter is one that will take not just a few years, but more like 5-10 years to first study and then to potentially take action in regard to their basic operating premise. After the airline really has the chance to break down what contributed to the airline’s breakdown in December 2022, they will likely find a confluence of factors, including the weather, the airline’s systems supporting both employees and customers, and yes, management mistakes. But while it may not have been the cause of the airline’s meltdown, the airline’s point-to-point system likely made the situation far worse and far more difficult from which to recover. Southwest may indeed need to seriously study whether they could - or should - shift to the more commonly used hub-and-spoke model used by their major competitors. Pure and simple, having a “hub” concentrates resources - equipment (i.e. planes), pilots, flight attendants, ground and support personnel - that better enable an airline to recover from a major disruption.
Now, Southwest can’t immediately shift to a hub-and-spoke model - and it can’t be done in just a few years either, simply because they can’t overhaul their fleet (perhaps adding more diverse aircraft - larger and smaller - than their current uniform fleet of one model, Boeing 737’s), overhaul their operations, and overhaul their choices of airports and the airline’s size and presence at these facilities (all of which are subject to contracts, negotiations, and yes, availability). This would be a multiyear process, even after any decision to shift totally - or even partially - to the preferred operational model in the airline industry might be made by Southwest’s management. However, one thing is crystal clear to those of us outside of Southwest’s Dallas headquarters and it should be clear to those inside of it as well: The time has come for a shift - or at least a serious consideration of a shift - in the airline’s operating model.
Southwest has pronounced that they are back to “normal” operations here at the start of 2023. However, much as their management would like to say, “Nothing to see here…move along,” that’s not the way it works. Consumers today are savvy, and they have long memories (and if they don’t, social media will remind them of “problems” that companies have had - and Southwest is no exception to this!). So, Southwest’s management team - at least those that survive this crisis - will need to face the reality of the postbellum and take corrective actions - publicly - for the airline to have hopes of recovering its market position, and then perhaps even build upon that in the years ahead. In the end, taking steps in these five areas and responding to the crisis in a proactive - and realistic - manner is the only way forward for what has been one of America’s best airlines.
Being originally from the Dallas area and having been a frequent Southwest customer myself, I must admit that I am a bit biased towards them. But the marketing and operational challenges ahead for them is likely one of the greatest that any U.S. airline has faced in history. Only time will tell if their management is up to the task. But make no mistake, the future of the airline - and its heretofore very respected and even beloved by many brand - in a very competitive marketplace is at stake with what they do over the next few weeks and months.
About David Wyld
David Wyld is a Professor of Strategic Management at Southeastern Louisiana University in Hammond, Louisiana. He is a management consultant, researcher/writer, publisher, executive educator, and experienced expert witness. You can view all of his work at https://authory.com/DavidWyld.
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