DALLAS — Southwest Airlines Co., the busiest carrier at St. Louis Lambert International Airport, plans to spend $1.3 billion on technology upgrades and maintenance this year as part of a plan laid out by executives to rectify the issues that led to the carrier's holiday operations meltdown.
CEO Bob Jordan offered his latest apology to customers during Southwest's fourth-quarter conference call Thursday with Wall Street analysts and the media that lasted more than 90 minutes. The call focused on Southwest's response to the crisis in December when the Dallas-based carrier canceled more than 16,000 flights, creating chaos for travelers.
Southwest (NYSE: LUV) took an $800 million hit in the fourth quarter as a result of the debacle, resulting in a $220 million loss. The company said bookings for January and February have decelerated, which will likely result in another loss in the first quarter.
"This was a significant event," Jordan said. "We disrupted thousands and thousands of customers at a critical point in time and really made a mess here for our employees and our customers. And I really can't apologize enough for that. I own that, and we will do everything it takes to ensure we don't have an event like that again."
Southwest's mitigation plan falls into three buckets: immediate actions that have already been taken or are happening right now, department-level assessments and actions, and a review by consulting firm Oliver Wyman that will result in additional recommendations for improvements. Jordan said the firm's report will be completed in "weeks, not months."
Some of the early Jordan said Southwest has taken have included:
- The creation of an "early indicator dashboard" that closely monitors operations and sets off an alert if the airline reaches "pre-defined operational thresholds."
- The establishment of supplemental operational staffing that can quickly mobilize to support crew recovery efforts at the first sign of a potential workload backload.
- Enhancement of tools used by crew members for crew scheduling notifications during irregular operations.
Leaders of the unions representing Southwest's pilot and flight attendant unions, as well as many industry experts, have blamed old technology and a lack of investment for causing some of the issues. Jordan himself even said last fall Southwest needed to make modernization a priority because the "scale and the growth of the airline got ahead of the tools that we have."
On Thursday, Southwest executives seemed to send mixed messages. They said the company's processes and technology worked but could not keep up as the number of last-minute cancellations piled up due to a winter weather storm around Christmas. Jordan also said Southwest was fully staffed. Chief Operating Officer Andrew Watterson said the crisis had nothing to do with the carrier's point-to-point network strategy.
In particular, experts have pointed to a crew scheduling tool called SkySolver as one of the main culprits for Southwest's issues. Watterson said the tool worked exactly as intended but that the high number of close-in cancellations revealed a "functional gap" in the software. SkySolver works great for automating future crew schedules but could not work backward to reassign crew members when so many flights got canceled, Watterson said.
"If a crew member's individual schedule is not repaired before the next assignment begins, then we aren't able to use the automation to repair the individual schedule," Watterson said. "Consequently, without updating crewmembers schedules, the software can't reassign crew members to solve for flights with crew coverage issues."
Southwest has worked with General Electric, the software's manufacturer, on a fix to enable it to work backward. Watterson said the fix should be done within a few weeks.
For its part, Southwest will make investments in upgrades and maintenance of its technology as part of its capital spending plan this year. Normally, the company spends about $1 billion on technology annually, Jordan said. This year, he said the company plans to spend about $1.3 billion.
"The recent disruptions will likely accelerate some of our plans to enhance our processes and technology," Jordan said.
IT projects in the works right now include an upgrade of Southwest's ground maintenance operations infrastructure in order to complete paperless turns and a new control center operations system.
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