Southwest Airlines Fell Apart: Here's What They're Doing to FIX It

By now, you’ve probably heard about the struggles that Southwest Airlines faced back in December 2022.

Southwest Airlines

Due to a combination of issues with weather, scheduling, and holiday travel, thousands of flights were canceled over a period of multiple days, leaving many customers (and even Southwest employees) upset. We’ve been following the news since then to see how the company is recovering and encouraging customers to come back, and now we’ve got some updates from their recent earnings call!

On Thursday, January 26th, Southwest Airlines held its Q4 earnings call, publicly addressing the events from the holiday season. There was quite a bit of information mentioned throughout the call, and we’re ready to break it all down for you.

©Southwest Airlines

For starters, they began the meeting by reporting a fourth-quarter net loss of $220 million, or $0.37 loss per diluted share. However, they had record fourth-quarter and full-year operating revenues of $6.2 billion and $23.8 billion, respectively. Bob Jordan, President and Chief Executive Officer, stated, “Due to the operational disruptions in late December, which resulted in more than 16,700 flight cancellations, we incurred a fourth-quarter pre-tax negative impact of approximately $800 million (or approximately $620 million on an after-tax basis), which resulted in a fourth-quarter 2022 net loss.”

©Southwest Airlines

Jordan also said “Based on current revenue and cost trends, we currently expect a first-quarter 2023 net loss. However, we are encouraged by current booking trends in March 2023.” That is likely the timeline for when Southwest will begin to get back on track financially.

Were you affected by the Southwest cancellations?

But financials aside, what is Southwest doing to make sure the events of December 2022 don’t happen again? Executives first started by sharing that “the recent disruptions will likely accelerate some of our plans to update our current processes.” Meaning, changes are imminent within the company.

The events in December were caused by a variety of factors, starting with inclement weather. But disaster really struck when Southwest had problems with their crew schedules. Andrew Watterson, Chief Operating Officer, said “It appears that the last domino to fall was when we could no longer use our automation for crew scheduling.” The entire ordeal “uncovered a functional gap in our technology.”

Terminal C at MCO

However, Southwest is in the process of addressing the issue. They said “we feel very confident in our new aircraft network” and that the software will be updated within the next few weeks. But just to be extra sure that these problems won’t arise again, Southwest Airlines is implementing a 3-part plan. The plan features the following:

Immediate mitigation efforts.
Department-level actions.
A systemic review by a third party.

The department-level actions include increasing the number of schedulers on staff to help reschedule pilots and flight attendants when necessary and looking for opportunities to optimize performance on bad weather days. As for the systemic review, it should be completed in the near future, and once those results are in, it will help Southwest decide what other changes need to be made.

Orlando International Airport

So, even though the average consumer may not notice changes on their next Southwest Airlines flight, it seems these updates will be happening behind the scenes. Executives really doubled down on their apologies for the December incident throughout the call, assuring investors that they were doing everything possible to prevent if from happening again.

We’ll continue to watch Southwest and see what comes next, so stay tuned to DFB.