As Southwest looks back on a troubled quarter, its outgoing CEO reminisces about 10-minute turn times
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After an unprecedented four-day schedule meltdown earlier this month, Southwest Airlines is tabulating costs, voicing regrets, implementing fixes, and — on its earning call— reminiscing about the days when it was best known for quick turn times.
Southwest CEO Gary Kelly, now at the center of an increasingly unpleasant battle over whether airline employees must be vaccinated against COVID-19, also said on the call that he does not oppose vaccines, but he is “empathetic with those who don’t want to be vaccinated.”
Kelly noted that he has one more earnings call before he retires. It’s hard to imagine that he foresaw that his penultimate earnings call would be focused on a schedule meltdown and a divisive battle over his employees’ health.
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Southwest said Thursday that the four-day Columbus Day weekend meltdown cost it $75 million, related to more than 2,000 flight cancellations and “related customer refunds and gestures of goodwill” after thousands of passengers were stranded.
The carrier also cut its December capacity to 92% of what it flew in December 2019: Before the meltdown, it had planned to fly 95% of the schedule, but it must hire more employees to reliably maintain its schedule. “We have reduced our flight schedules to provide more staffing cushion,” CFO Tammy Romo said during the carrier’s third quarter earnings call.
Incoming CEO Bob Jordan added, “Our immediate goals (include) to bulk up our staffing. We have made tremendous progress (and will) modestly trim fourth- and first-quarter schedules.”
Even so, Jordan said, “It is clear that 2022 will be another transition year in the pandemic recovery,” with Southwest and its competitors “dependent on the recovery of business travel and our recovery of staff.”
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For his part, Kelly conceded, “I pushed a little too hard there in the third quarter with capacity, but the encouraging thing is demand is there. Right now, our constraint is just making sure we have the resources, the people to balance all that.”
As an aside, longtime JP Morgan analyst Jamie Baker asked Kelly what now prevents the 10-minute turns that once distinguished Southwest from competitors who operated complex hub systems rather than the seemingly simpler point-to-point system flown by Southwest.
In response, Kelly reminisced that in 1972, on his first Southwest flight, he was one of just three passengers. “Lamar Muse, who was the genius that designed the open seating concept, told me that ‘you don’t need to assign seats when the airplanes are empty’,” Kelly said. That saved time, as did another early Southwest policy that Kelly recalled: “We would push the airplane before everybody was in their seat.”
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Southwest still seeks quick turns, said President Mike Van de Ven, but several factors make the process slower than it once was. One is waiting for wheelchairs, which can add five to 10 minutes. Additionally, he said, “more people (bring) bags on the airplanes; stashing bags in overhead bins takes time.” Finally, he added, it used to be that airport agents were located right by the aircraft: now, they are separated from the crew by a jet bridge. “It’s a long walk,” he said. “You have to make that trip two or three times.”
At a time when Southwest was reducing the number of employees, it was too much, too soon, the airline’s executives all seemed to agree.
Excluding items, Southwest’s third quarter loss was $125 million or 23 cents a share, better than the consensus estimate of a loss of 27 cents. Revenue was $4.68 million, down 17% from third quarter 2019.
Featured photo by Zach Griff/The Points Guy.
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