MIAMI — Southwest Airlines’ pilots and mechanics unions held a conference call this week, asking for the ouster of CEO Gary Kelly in the wake of a series of technology glitches that have afflicted the Dallas-based network airline.
In the most recent example, a cascading technology issue on July 20th, which Southwest claims was driven by a router failure, caused the delay and cancellation of more than 10,000 combined flights. The issue was not resolved until July 25, and Southwest saw thousands of unhappy customers in the interim.
In the intervening week, the board of the Southwest Airlines Pilot’s Association (SWAPA) union apparently voted 20-0 in favor of the removal of Kelly, and chief operating officer Mike Van de Ven.
“As tenured employees and frontline leaders of this company, we can no longer sit idly by and watch poor decision after poor decision deeply affect our customers and Southwest Airlines,” said Capt. Jon Weaks, president of SWAPA.
Southwest has mismanaged its technology
Dating back to the era of legendary company founder Herb Kelleher, Southwest has never been particularly close to the cutting edge in terms of its operating technologies. Kelleher, while certainly a visionary in certain areas such as evangelizing the importance of customer service and innovating the no-frills business model in the United States, was notoriously myopic in his viewpoint on Southwest’s approach to technology.
By creating a false dichotomy between simplicity and a robust reservations system, technology decision making under Kelleher sowed the seeds for Southwest’s current technical weakness.
Southwest’s ancient Sabre SAAS reservations system is literally based on the reservation system used by Braniff, an airline that died before the advent of the personal computer. Obviously the system has been heavily modified and patched, but the reservations technology still can’t handle code share reservations or international ones (though Southwest now has Amadeus’ Altea technology for international reservations).
Back in 2014, Southwest opted for similar Amadeus technology for its domestic reservations system, but that transition is still incomplete.
By sticking with the legacy reservations system for this long, Southwest’s management team injected substantial technical debt into its operation, and that debt has come home to roost over the last couple of years. Part of it is simply the fact that Southwest’s operation has increased in complexity and the reservations system hasn’t caught up. But another piece is more elemental — at this point, the only people who are specialized in and spend their work in Southwest’s reservations system are people at Southwest itself.
One of the ways that you deal with added complexity thrown at a legacy tech system and increasing issues is to patch the situation by bringing in more or better-trained users and programmers. But at this point, there’s basically no-one in the world still using this system, and that means that its harder for Southwest to utilize additional resources.
None of this has anything to do with pilots, who are posturing for more money
So there is certainly a case to be made that Southwest’s approach to technology has been mismanaged for a while now. But the pilots don’t care about that, at least not exclusively. In reality, this is just a way for them to fire a public salvo at management and yet another attempt to win leverage as they ask for the most expensive labor contract on a per-ASM produced basis in the U.S. airline industry.
In fact, if Gary Kelly came out tomorrow and announced that Southwest was committing an additional $200 million to managing the IT transition from Sabre to Amadeus, it would not change the pilots’ stance one iota because this isn’t about IT management, this is about pilot compensation.
If Southwest’s pilots were actually concerned about IT exclusively, they would be asking for the heads of Randy Sloan, Southwest’s Chief Information Officer, and Craig Maccubbin, Southwest’s Chief Technology Officer (note: we would not endorse the pilots’ case even if these were the names they asked to resign). Instead they want Kelly and Van de Ven because these are the management officers currently frustrating their efforts to win ever higher compensation.
We have written at length in this space about the recent turn in Southwest’s fortunes vis a vis its management-labor relations. Much of this is the gap between Southwest’s current operational and financial reality and the expectations of its work groups.
Southwest set the precedent for nearly three decades that its employees could expect a never ending train of raises and improvements in work rules. But as Southwest’s business model became more complex and it shifted from an ultra-low cost carrier to more of a network based one, Southwest’s ability to accept a massive increase in its largest line-item cost dissipated.
The reality is that in today’s U.S. airline environment where Southwest is increasingly squeezed for price by the ULCCs and product by the legacy airlines and JetBlue/Alaska, it doesn’t have a lot of room to raise prices enough to adjust for a 20% increase in labor compensation. The immediate cry from the unions is going to be to “take it out of the profits” but the counterpoint to that is that Southwest’s management has its first obligation to the company’s shareholders.
Simply offering a massive contract “out of profits” would be almost malfeasant to the folks that the management team works for at the end of the day. So this is just the latest salvo in what we expect to be a pitched and drawn out battle. Unless Southwest’s workers reframe their expectations or shareholders accept a start drawdown in earnings, the gap between labor and management will continue to grow.
Note: This article was written on Tuesday, August 2, prior to Southwest’s flight attendants and ground ops also voting no-confidence.