The Southwest Airlines Co. The crisis that has stranded thousands of passengers across the United States stems from outdated technology that analysts and its unions have warned about for years.
“People have a right to be really angry and upset,” Cowen Inc. analyst Helane Becker. said Wednesday in an interview with Bloomberg Television. “They should have invested in these systems years ago, but they didn’t.”
Southwest’s voyages are dragging on with more than 2,500 flights canceled on Wednesday and a similarly bleak outlook for Thursday, while its rivals have largely recovered from the arctic blast that swept the nation on Christmas weekend. The airline’s “sincere” apology and CEO Bob Jordan can be a chilling consolation for passengers stranded at an airport, lost luggage or vacationing with family.
Transportation Secretary Pete Buttigieg told Jordan on Tuesday that the department expects Southwest to meet its obligations to passengers and workers and take steps to prevent situations like this. again. Senate Commerce Committee Chair Maria Cantwell, a Democrat from Washington, said her committee would investigate.
Southwest’s system — point-to-point flight instead of the hub and spoke modes used by competitors — is a point of pride, deeply rooted in the airline’s five-decade history and giving it access to many markets. medium size. However, the behind-the-scenes technology that helps with crew scheduling and the plane both proved vulnerable this week, as it did during a similar system crash in October 2021. When computers failed to complete the mission, humans had to track down the pilot and crew by phone.
Randy Barnes, president of TWU Local 555, which represents Southwest baggage handlers and other ground workers, said: “This is actually not the airline Herb Kelleher built, where planes fly directly to each point. “We are currently experiencing the same problems as more traditional airlines,” Barnes said in a statement, adding that “if airline managers had planned better, then The crisis we have witnessed in recent days could have been alleviated or prevented.”
Improving operations is one of the top five priorities Jordan has set for 2026, but at a media day on November 30, the CEO said he couldn’t value the cost of modernization. slow. At the event, executives discussed spending $2 billion to improve passengers’ in-flight experience — wifi, in-seat power outlets, etc.
“We are behind,” Jordan said at the time. “As we grew, we ran faster than our tools. If you are at the airport, there is a lot of paper, just turn the plane and there is a ton of paper. If you take our crew, we have a lot of moves around the country. If they are reassigned, someone needs to call them or chase them at the airport and tell them.
But at the same event, even some of Jordan’s top lieutenants dismissed the idea that Southwest had been slow to adopt new technology. “It’s a leftover image from decades ago — I don’t think it’s true,” Chief Executive Officer Andrew Watterson said in an interview. “Our scheduling system is the best in the world.”
The prospect of the company investing more in technology under Jordan is a change that Cowen analysts earlier this year said could be a catalyst for Southwest, analyst Becker said in the interview. .
Now, stocks are “reflecting the disaster that’s coming to them,” Becker said, adding that she expects earnings to suffer “in the hundreds of millions of dollars.” Becker said Southwest may have to cut fares sharply in the first quarter to attract returning travelers.
Shares of Southwest fell 2% at 10:26 a.m. Wednesday in New York, after falling 6% on Tuesday, its biggest drop since July. The stock is down 21% this year through Tuesday.
The airline said it would only do a third of its flights in a few days, and Becker said the schedule probably won’t be completed until this weekend. So far, flight tracking site FlightAware.com shows Southwest only officially canceled about three dozen flights on Friday.
And more than that, the airline may have to cut back on some of its ambitions, until the people it hires are adequately trained, she said. It has hired a network of about 11,000 people this year to help replace those who have left during the pandemic, meaning 20% of its workforce is new. With plans to hire more next year, Southwest says 40% of its workers will be new to the airline by the end of 2024.
“I don’t understand how they weathered another storm like this without a massive investment in systems to improve things,” Becker said.
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