The People Deficit That Contributed To Southwest’s Meltdown – And May Continue To Drag Them Down

The primary explanation for the Southwest Airlines meltdown over the holidays has been technology. And that’s certainly a key part of what made the carrier’s cancellations spiral, and what kept them from fully recovering from so long. They didn’t have full track of their crews, were communicating individually by phone (and people couldn’t get through on the phone lines), and rebuilding schedules and crew pairings by hand when SkySolver failed at the task.

But I think the story is more complicated than this. For Southwest to enter this operational mess a lot of things had to go wrong. The IT capital deficit wouldn’t have mattered if everything else didn’t go wrong.

It started with weather that exposed some employee shortfalls, for instance they didn’t have enough rampers in Denver and even had a Tampa to Denver flight turn back around because they had no one on the ground to meet it at the start of the holiday. They had more sick calls than usual, and weather meant they needed more rampers than usual (in extreme temperatures they can’t be outside as long).

The explanation of technology for Southwest’s woes, while true, also exposes a gap in people. They didn’t have enough people to rebuild their schedules by hand and were taking volunteers from within the company. There’s also a knowledge deficit.

  • The airline hired 15,700+ new employees in 2022
  • 18% of their workforce was new since January.

Now, that’s across the whole company and involves a lot of flight attendants not just operations people. But there’s a lot of institutional knowledge that was lost during the pandemic.

In the midst of the meltdown, the Washington Post‘s Megan McArdle offered,

How did it come to this? If I had to pick only one factor — one hole in the cheese — it would be staffing. That’s hardly Southwest’s only problem, but it’s probably the one problem that made all the others worse.

The operational efficiency and brand loyalty that made Southwest a case study were built on a foundation of human capital. You can’t run a finely tuned productivity machine with disgruntled, undertrained employees who are phoning it in; you need teams that work together well and solve problems on the fly. …Companies that are good at getting the best out of their employees sometimes underinvest in other aspects of the business, because they can get away with it, relying on their workforce to patch any holes in the system.

The airline, like other airlines, was shedding staff voluntarily through buy outs while taking payroll support funds specifically designed to keep existing employees connected to the company. Some institutional knowledge was lost here. (Southwest is very much not alone in this, and I believe it helps explain some of Delta’s operational challenges over the past two years, their ops guru Gil West left. Delta’s poor holiday operations were undercovered because they were trumped by Southwest’s mess.)

Lack of experience and lack of systems hit a perfect storm of bad weather, insufficient staffing redundancy, and sick call outs (tripledemic! Plus holidays when nobody wants to work in bad weather!) and it all snowballed.

While Southwest has managed to hire new people, who haven’t yet built up experience, they’ve lost people with decades of context. And airlines generally, not just Southwest, have difficulty in hiring the best and brightest. The ability of an employee to be as productive in the airline industry as they can be in other industries is limited. The airline industry is ossified, there’s very little creative destruction.

That’s partly because of regulation (for safety, everything is highly constrained, but also every element of travel is bureaucratized from airports to air traffic control to distributing hand sanitizer to passengers) and partly because of protection from competition (bans on foreign ownership, slot controls, lack of access to gates at government-owned airports heavily influenced by incumbent carriers).

But it means that talent won’t change as much, create as much value, as in other industries. It means low margins. And it means therefore not paying talent as much. (As wages rise elsewhere due to productivity gains, airline wages have to go up to compete for staff who aren’t in a position to generate as much value at an airline as they might at other companies. Wages go up to attract talent that is in more demand elsewhere not because they’re doing more each year for the airline’s bottom line. This is known as cost disease, or the Baumol effect.)

Brian Sumers covers the inability to attract top talent with low pay in his Airline Observer,

If Southwest offered better pay and improved perks, might it have had employees who understood the problem with the crew scheduling system and the risk it posed, who realized they would have to fix it immediately, regardless of the cost? People who might have marched into Gary Kelly’s office and demanded a budget to fix things? Maybe. Regardless, Southwest needs them now, and let’s hope other airlines are doing some self-examination too.

The extent to which each driver of Southwest’s troubles mattered more than others will take some time to sort out. But it’s not just the ‘point-to-point’ nature of Southwest’s schedule, which was the explanation for Southwest’s fall 2021 meltdown, when Jacksonville ATC issues snowballed because around half of Southwest aircraft touch Florida on a given day.

It took interminably long for Southwest’s CEO Bob Jordan to speak publicly. He wasn’t out doing interviews. He blamed weather. So did the airline’s spokespeople. It took public comments by DOT for the airline to say they’d cover costs for travelers that were stranded. Even internally there had been limited communication, with the CEO sending a brief note early in the debacle telling employees to expect to hear from Jordan again ‘in a few days.’

The airline does a lot to maintain its culture. They hire for personality, and the airline actually sends welcome kits, swag, to new hires before they start training. When a class completes training, the whole company comes out into the corridors of headquarters to welcome them and cheer them with music blasting as they walk a red carpet.

https://viewfromthewing.com/wp-content/uploads/2023/01/southwest-employee-graduation.mp4

Front line people from gate agents to flight attendants at Southwest Airlines usually seem to like their jobs, which can be a contrast from other carriers. And it’s notable in the context of being heavily unionized. But Southwest’s people were beleaguered. They weren’t been able to reach the airline (lots of screen shots in social media of 12 and 15 hour wait times for *crew* to get through).

There’s going to be a lot of IT spending ahead, and also a lot of work on culture ahead, for Southwest. I suspect passengers will forgive them. But capital spending and culture are harder. And around a fifth of employees don’t have a long-term experience with the company against which to judge recent unpleasantness, including being stranded away from home for some time.

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