Here’s The Long-Term Damage To Southwest Airlines From Holiday Meltdowns

Southwest Airlines experienced an operational crisis greater than any in its history – and this is an airline that managed to operate a four aircraft schedule with just three planes, and developed the 10 minute turn – in order to survive.

It didn’t just cancel flights broadly across its system for the holidays, it kept doing it day after day, unable to recover effectively. That ruined the holidays for more and more people, compounding the issues – and hits to their business.

As they’re recovering we can now look at what the long-term damage here is? Reputationally, I’d argue there’s very little. However there’s likely a bigger long-term impact to the airline’s finances.

Southwest’s reputation will recover with customers.

  • United recovered from David Dao. A passenger being dragged off of a plane and bloodied was a worldwide phenomenon and customers all over swore they’d never fly the airline again. That didn’t last.

  • Spirit Airlines recovered from an operational meltdown at similar scale last summer.

  • The media stopped referring to AirTran as ‘formerly ValuJet,’ after a couple of years and Southwest even acquired AirTran. That was a far worse disaster.

Customers either perceive airlines as being all the same, or anchor their expectations. Southwest’s reputational hit will be temporary. Nonetheless there will be long term costs.

  • Their operational debacle exposed long-term underinvestment in technology which Southwest has been addressing very slowly. That will need to accelerate. That will mean a lot of capital spending and shifted focus away from growth opportunities.

    They simply don’t have the tools to properly track crew and rebuild flights after major disruptions, and they won’t be able to defer those investments any longer.

  • A huge percentage of employees are new. The culture has taken a hit, and fewer employees remember what things were like – this will have a bigger impact on how employees see their company than it will how customers see it. Southwest hired more than 15,000 people in 2022. Nearly 20% of their workforce has been with he company less than a year. They don’t have a career in which to put this in context – being stranded themselves, or having their friends stranded, and feeling that their company has failed rather than being on board a winner will loom large.

  • There will be a big hit to revenue and one-time costs from this. But there will be longer-term cost to growth and higher costs and that could weigh on the stock and the business.

    They will see hundreds of millions of dollars of revenue loss from customers they weren’t able to fly, and hundreds of millions of dollars in expenses to cover for passengers they stranded. But the higher capital spend will be even greater, the re-prioritization will mean other lost opportunities as well.

Historically markets valued Southwest’s business differently than the rest of the industry. Some of what made them special may have already eroded, but this incident accelerates those changes.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. What lost opportunities?
    Hasn’t Southwest been out of business opportunities for a while? Releasing B’s back to stockholders via buyback or dividend means they didn’t see an opportunity to beat the market.

  2. I don’t agree there is little long term reputational damage. If customers think twice about booking with SW at thanksgiving or Christmas, that is enough, and there are plenty of people who would hesitate at this point.

  3. I think that the one long term effect will be heightened DOT scrutiny of WN’s systems and procedures . What we haven’t seen is the WN Board holding any executive management accountable. This meltdown will have astronomical costs that were preventable had WN management invested in the IT necessary for WN’s size and schedule complexity .

    The WN Board has a duty to protect the interests of shareholders and stakeholders . It will be interesting to see if they take any action to hold key decision makers responsible for the debacle.

  4. The workforce wouldn’t be so new if they wouldnt have made the foolish decision to fire employees who chose not to get the (mostly) failed injections.

  5. I agree. The damage to Southwest will be minimal. With decades of good flying on its side they will get past this. The real question is what they do to fix this huge problem. As for the public, their attention span is not long enough. If they were even aware of the melt down to begin with.

  6. You know how many folks took to online forums and television vowing they’d never fly on any Boeing Max 8/9 but these very folks couldn’t care less what plane they’re on now?

    Yea, Southwest will take it on the chin now but the same folks pissed of today will be happily planning their spring break travel using travel vouchers, credits, and tax refunds in a couple of weeks with the same airline they hate today, Southwest.

  7. The recent SW meltdown had been predicted by many but Gary Leff was too busy shilling for Southwest to notice.

  8. SWA’s Hawaii “service” is likely vulnerable to long term concern. It’s flights here has been spotty off and on and now this last episode has proven that they can’t be relied upon for vacation planning. It’s simply not worth a couple free checked bags to have to count on an airline that is less likely to operate in the event of bad weather on the mainland.

  9. Eh, I will still fly Southwest over Allegiant Air at any time. Now, THAT airline needs to go.

  10. @Gary: “Some of what made them special may have already eroded, but this incident accelerates those changes.”

    That may occur but not as a result of this incident. As a SWA pilot said during the meltdown the values changed when Herb Kelleher’s obsession with operations was replaced with accountants’ values. That c aused the meltdown and it hasn’t been fixed.

  11. I thought Southwest was automatically extending Companion passes that were due to expire 12/31 to 1/31? This is not showing up in my account or my wife’s.


  13. You have illustrated such an important point, Gary. Comparing this massive SouthWest failure to the single incident of United and David Dao makes an excellent point. The media decided to crucify United and the pubic bought it all. The public cannot differentiate between long-term incompetent SouthWest management and a pax being removed from a United plane by O’Hare police. The public just wants the ‘best deal’ when they fly. They’ll make fun of themselves and each other, but they’ll make those reservations just like always. I’ve flown SouthWest a few times up and down the coast … their people are usually upbeat and it’s been a pleasant experience. Airline management should wake up and realize how important front-line people are to a reputation. They’re the key to recovering from this debacle, as long as all those well-paid managers can figure out how to do their jobs and get SouthWest up to speed technologically.

  14. The long-term damage to Southwest Airlines would best be realized if the US had in place legislation delivering something like the EC 261/2004 regulation for flight delays and cancellations.

  15. After spending 33 years with an aairline based in the same region as WN,, believe me they will be just fine. I breathed, ate and slept with this industry for too many years to not see this pattern with ALL airlines.
    Just wait until Spring break, it will all be back to normal in no time.

  16. I have always loved SWA and even during the 22 years my spouse worked for a (once) great airline I always said that SWA was my second favorite airline.
    Three of my siblings did not make it to my child’s wedding last week so I was somewhat impacted by the meltdown. That being said, I still REALLY like SWA and plan to use them as my primary airline this coming year (mostly w/ points & companion pass though)

  17. @jsn55: ” The media decided to crucify United ”

    Actually, United decided to crucify Dr. David Dao.

  18. Passengers have pathetically short memories.
    Three months from now SWA will be golden………

  19. I already made decisions to choose another airline over Southwest. My daughter goes to Grinnell College in Iowa and SW is the cheapest option. In the warmer months she can fly SW but as soon November hit, I had her pay more on American for a nonstop flight that avoided winter weather and SW’s connections. I knew they would have trouble with bad weather and she could be stuck. My husband wasn’t happy paying more but in the end my concerns and instincts were prescient. I will only fly SW when there is temperate weather and not over holidays. And I don’t think I’m the only one who will make those choices.

  20. I fly them a lot because they are the only carrier that serves numerous non-stops daily between where I live and where my family lives. I will watch them and they had better invest immediately in a major much delayed update and replacement of all of their useless systems, and part of that process needs to be zero bonuses of all exectives until it is completed and reliably on line; zero stock buybacks and dividents until same, 1000% focus on making this a 21st century viable functioning air carrier. And if possible a roll back of the bonuses paid out in recent months or as far back as they can legally reach. Nothing less will scream to the world that they realize the gravity of their prior lack of clearly required actions, and that they know what they need to do.

  21. I think an in-between position is the most rational for now. No hesitation to fly WN to Phoenix in April, but there’s no way they’ll have things fixed by the time I book for Ohio for next December. Gary is probably right about the general public, but I’m thinking his blog readers are a little more discerning on things like lthis than the occasional flyer.

  22. Credits never expire since mid-2022,free change/cancellation since forever, two checked bags free – southwest already has more goodwill than any other carrier that will not be lost over the holiday meltdown.

  23. Their mess has finalized my decision to stick to American Airlines only and downgrade my southwest credit card from the priority down to the plus. I have no plans to fly southwest in the future.

  24. Meh, SWA is a last resort option either way. No IFE and no business class product is a hard pass for me but if I was stranded on Christmas for days because of them I’d never fly them again. It’s all comes down to preference. They do seem like a sht airline tho.

  25. VJ says:
    January 2, 2023 at 12:11 pm

    Credits never expire since mid-2022,free change/cancellation since forever, two checked bags free – southwest already has more goodwill than any other carrier that will not be lost over the holiday meltdown.

    Goodwill evaporates quickly when the airlines strands you and your family for days during the holidays while your bags (checked for FREE!) travel on and are nowhere to be found for many days. I wouldn’t be so quick to dismiss the lingering fallout for some percentage of those screwed over in this debacle.

  26. @VJ: They are the easiest to do business with for sure with their free change/cancellation policies.

  27. Personally I think you’re living in a fantasy world. This airline, because of it’s intentional incompetence and greed, ruined the holidays of millions of people, and you think they’ll just blow it off and still fly Southwest. Well I’ll tell you one thing. I will not EVER be flying Southwest again. I look forward to the fines and the lawsuits that are coming.

  28. “I had her pay more on American for a nonstop flight that avoided winter weather and SW’s connections.”

    Kind of makes the point about short memories. It was a little over a year ago that American had some massive meltowns too and really screwed passengers.

  29. Despite some of the usual clowns here thinking the solution is more government regulation, this meltdown was a technological problem that is solved with new technology delivered by a management team focused on ops, not accounting. In an industry as competitive as the American airline industry, problems are solved by a nimble, responsive management, not by sluggish, bloated, government…

  30. The US airlines have a highly oligopolistic marketplace, not a highly competitive marketplace.

    The lack of government regulation, in a way, has allowed for massive industry consolidation whereby industry kingpins have secured oligopolistic profits for the “get rich quick(er)” schemes with larger amounts of money pocketed by company management and share”holders” at the ultimate expense of consumers in an environment where regulatory capture is profound due to the power of money spent by the big commercial interests to advance their self-interest against consumers and avoid consumer-friendly regulation.

  31. Oh @GUWonder… [insult removed] Since deregulation, air travel has become affordable to the masses, not a luxury only the well-to-do can enjoy. Sorry not sorry you have such a problem with a process and system that allows millions to travel who otherwise would not. While limited regulation has its place, certainly re safety, operational issues are best solved by the internal leadership for whom the very survival of the airline depends. Southwest will get this fixed because its leadership will be replaced if it doesn’t, not because of some new regulation, your typical sobbing here notwithstanding…

  32. [response to insult removed]

    Being in favor of consumer-friendly legislation and regulations which provide for compensation to consumers inconvenienced by airlines with the stacked contracts of carriage and an existing airline-supporting legal milieu? This is far removed from the socialism boogeyman that occupies the heads of Magnifico and the MAGA fellow-travelers.

    @L3: Oligopolies secure economic profits from oligopolistic marketplaces. If you struggle with the concept of what constitutes an economic profit, not my problem.

  33. @L3 “@GUWonder: They are losing money! What oligopolistic profits?”

    To whatever extent airlines are losing money, it’s because of rent-seeking by employees who have been given monopoly power by the US government. Even putting to one side the unions who hold airlines (and passengers) hostage, Federal law essentially requires that pilots be US citizens and cabin crew must be authorized to work in the USA which in practical terms means that they must be US based. These groups have been able to suck out the oligopolistic economic profits that are being made by US airlines.

    This of course could be ended immediately if we allowed foreign airlines to fly domestic routes. I can buy a car from Japan or Germany, but I can’t fly a Korean or German airline between NYC-LAX. Why should that be other than to grant these groups an oligopoly and provide excess rents to their workers?

  34. Cope harder GUwonder. While i’m sure your odes to Lenin, Marx, Stalin, Mao, and Biden knock’em dead in the faculty lounge, nothing even remotely like your punitive, and laughably ineffective, demands for regulatory retribution will occur. This is an ops matter. Let the recently installed Southwest ops team resolve. If they don’t, people can and will fly with another airline. Ain’t competition grand?

  35. @Mak: How much are pilot’s earnings above the free-market level? I don’t know of a queue trying to get in – rather the reverse.

  36. @L3 @Mak: How much are pilot’s earnings above the free-market level? I don’t know of a queue trying to get in – rather the reverse.

    That’s an excellent question which I don’t know the precise answer to. But I do know that it must be substantial because if it wasn’t we wouldn’t need the rules keeping foreign pilots out of cockpits of US carriers. Cathay Pacific can hire Australian, South African, Canadian, etc., pilots . . . why can’t AA, United, Delta, Southwest, etc.?

  37. @L3

    “Actually, United decided to crucify Dr. David Dao.”

    Actually, the Chicago (or O’Hare) Police decided to crucify Dr. David Dao. No United employee pulled him from his seat.

  38. @Mak: In the domestic labor market there is no queue so these inputs are not eating up “oligopolistic profits” as you alleged. You have not explained the oligopolistic behavior yet, so you have no idea if there are any oligopolistic profits.

  39. @ Gary. If you are referring to SWA purchasing AirTran (formerly ValuJet) as “a far worse disaster”, you are correct sir. Kinda like what HP/US has done to AA. It’s a good time to be retired from airline employment.

  40. Go ahead and hate on SW. I think they will always be my favorite airline for good deals. All this hate ensures that I WILL see more good deals on SW in the future.

    It’s not like this Christmas meltdown was unique to Southwest. I flew Alaska, and was without luggage for the first 2 days of my vacation. Apparently Alaska Air at Seattle was withholding luggage on many of their flights, because they were overweight, and they couldn’t legally deny boarding to passengers so they held back half the luggage instead. After-the-fact, an Alaska employee told me what they were doing. When I boarded at Seattle, I saw they were sorting checked baggage in weird ways but DID NOT TELL THE PASSENGERS THAT THE AIRLINE WOULD DELAY THEIR LUGGAGE.

    Honestly, this was such a horrible practice that I will never fly Alaska again. When I showed up 2 days later to get my bag, there was a long line of customers trying to find out where THEIR luggage was… so apparently Alaska Air was delaying luggage for multiple days in a row.

    That seems to be flat-out FRAUD to me.

    I hope Southwest can invest in better software, if that’s truly the problem. I do have future flights on SW. I will not give a single extra cent to Alaska Air, though.

    FWIW, I had 2 very good flights on Sun Country this vacation. ALL their staff were very professional, the planes were on-time, the entire process was calm and they delivered the service they sold. Previously I’d thought of Sun Country as a crappy discounter like Spirit. But Sun Country definitely provided the best travel during my vacation this year. So I will definitely use them again. Further, part of my journey was on Greyhound Bus, yes, and that was certainly more comfortable than a plane and more affordable.

    I’m sure most of you would never ride a bus, but Greyhound was on-time, and my luggage came with, and CERTAINLY more affordable than Alaska Air.

  41. Lindy, the issue with your bags was because on days when there is a strong headwind the 737 can’t carry enough fuel and a full load of passengers and all the bags. So some bags get left behind to allow for sufficient fuel. Hawaii for most 737’s is stretching the limits. SWA has done the same thing bumping bags on days with a strong headwind. In fact, SWA was fined by the FAA because of an inaccurate accounting of bag weight when they first started flying to Hawaii. They tried to cut into the safety machine that an accurate weight and balance provides to increase their profits. SWA is not the white knight here, Alaska runs a superior operation in all ways except perhaps you have a problem paying to check a suitcase.

  42. @L3. “@Mak: In the domestic labor market there is no queue so these inputs are not eating up “oligopolistic profits” as you alleged. You have not explained the oligopolistic behavior yet, so you have no idea if there are any oligopolistic profits.”

    There is no queue in the US pilot market, but there is such a large queue outside the US that junior pilots are actually paying foreign airlines for the privilege of accumulating hours. I won’t say I know precisely what the difference is between domestic and foreign pilot salaries, but I think it is roughly double. That’s a nice monopoly rent from the restrictions for US pilots that’s ultimately paid for by passengers in oligopolistic economic profit (i.e., the difference between the market clearing price of tickets in a free market and the actual price paid by consumers under the oligopolistic market that protects US airlines and personnel from foreign competition). In other words, if we let SQ fly the JFK-LAX route, the prices on that route would go down from where they are today..

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