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North America

Southwest Airlines to Dock Executive Bonuses After ‘Epic Screwup’ Over Holidays​

Edward Russell
February 9th, 2023 at 1:45 PM EST

Southwest ticket counter in Dallas

Southwest Airlines Chief Operating Officer Andrew Watterson was grilled by U.S. senators over the carrier’s meltdown during the year-end holidays in Washington, D.C., Thursday.

“We messed up,” he said at a hearing of the U.S. Senate’s Commerce, Science, and Transportation Committee. Watterson’s comments echoed those made by Dallas-based Southwest in previous remarks on the Christmas and New Years disruption that resulted in the cancellation of roughly 17,000 flights at the end of 2022, and cost it $850 million in the fourth quarter alone.

Watterson said the root cause of the meltdown, which Senator Ted Cruz (R-Texas) described as an “epic screwup,” was a large winter storm that swept across the U.S. in the days before Christmas. That disrupted operations for all airlines but, after many of its crews were displaced due to cancelled flights and Southwest lost track of them, the carrier was forced to fully reset its operation — resulting in more cancellations — to recover.

Watterson downplayed the role of technology in Southwest’s operational issues, describing it as an “end of the line” factor. The airline’s crew assignment software, SkySolver, has been widely scrutinized following the disruption.

“The bigger element of the disruption was how we handled the storm itself,” he said, adding that in hindsight Southwest’s preparedness for severe winter weather was “insufficient.”

“Our biggest investment this year is going to be how we handle winter operations,” Watterson said. While he did not put a specific number to that investment, he said it would be in the “hundreds of millions of dollars.” Southwest plans to invest $1.3 billion in technology this year, up from about $1 billion previously.

Asked the expected full cost of the meltdown to Southwest, including additional investments to avoid a similar snafu, Watterson declined to comment citing only the fourth-quarter $850 million hit.

Senators did not appear satisfied with Watterson’s explanations and contrite remarks. Senator Maria Cantwell (D-Wash.), who chairs the commerce committee, noted pointedly that Southwest’s CEO Bob Jordan was invited — but did not attend — the hearing, and pushed Watterson on the timeline for upgrades to the airline’s crew assignment software.

“Your CEO didn’t want to show up,” she said, adding that Southwest’s legendary long-time former CEO Herb Kelleher “would be here.” Kelleher led the airline from 1981 to 2001; he passed away in 2019.

The upgrades to Southwest’s crew assignment system, known as SkySolver, will be complete on Friday, February 10, Watterson said. Additional upgrades and investments will be determined following the completion of several reviews, including one by outside advisor Oliver Wyman, that are expected in March.

Senator Ed Markey (D-Mass.) called the fact that Southwest knew of its operational shortcomings “absolutely unacceptable” after Watterson confirmed it was aware of concerns raised before the meltdown by its pilots union, the Southwest Airlines Pilots Association (SWAPA).

“Southwest struggles to manage any disruption,” SWAPA President Captain Casey Murray said at the hearing. The union submitted data showing that the airline has seen an uptick in operational meltdowns over the past decade — as it grew but continued to use many older technology platforms — averaging one every 18 months since 2011.

Southwest will reduce executive bonuses for 2022 by an undisclosed amount as a result of the meltdown, Watterson said when asked if any staff would be penalized. The airline does not intend to halt investor dividend payments.

Senators on both sides of the aisle also used the hearing as an opportunity to raise the issue of potential new regulation on air traveler rights. Markey said he plans to re-introduce legislation that would bar airlines from charging fees for families to sit together onboard flights. And Senators Cruz and Moore Capito (R-W.V.) both challenged the idea that new regulation would improve service.

Additional regulation “would also predictably drive up the cost of air travel, and price many Americans out of the market,” Cruz said. He specified that his comments did not include safety regulations, which is an “integral responsibility” of the government.

Edward Russell
February 9th, 2023 at 1:45 PM EST

Tags: North America

Photo credit: Southwest ticket counter in Dallas Airline Weekly / Edward Russell

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