Advertisement
This is member-exclusive content
icon/ui/info filled

businessAirlines

Will Southwest Airlines’ meltdown crash the airline’s 51-year reputation?

While it threatens the Dallas-based company’s stature as one of America’s most beloved airlines, experts and analysts agree: Southwest holds the cards to own its redemption.

Liz Moyer was a Southwest Airlines loyalist. She flew Southwest two or three times a week for work. Since retiring in 2014, the Flower Mound resident’s travel has slowed to three or four times a year.

The Dallas-based carrier was her go-to airline for decades — until the recent holidays when Southwest was forced to cancel nearly 17,000 flights that stranded flight crews and passengers at airports around the country. Moyer was left stuck in Denver and out hundreds of dollars.

“They need to get their ducks in order,” Moyer said. “But until I see something that shows it, or proves it, it’s going to be years until I fly Southwest again.”

Advertisement

Over its five-decade history, Southwest has benefited from a near-bulletproof reputation, despite catastrophes that could have ruined other companies. In the past four years alone, the airline dealt with a fatal accident where a passenger was pulled through a plane window, a recall of its widely-used Boeing 737 Max jets, a pandemic that brought the air travel industry to a near halt and a smaller-scale meltdown last October.

Aviation News

Stay prepared. Receive the latest airlines news, delivered straight to your inbox.

Or with:

Southwest has yet to confirm how many travelers were affected by the holiday fiasco, but the scale rivals or exceeds any of the previous calamities. The financial toll to the airline is expected to top $800 million — compared with an average loss of $26 million for its competitors.

While the meltdown threatens to shake Southwest’s stature as one of America’s most beloved airlines, industry experts and analysts agree: Southwest holds the cards to own its redemption.

Advertisement

The airline’s ability to repair damage and rebuild consumer trust will depend on how satisfied its customers are with refunds, reimbursements and returned lost luggage. It’s already taken steps to restore trust with the traveling public.

But Southwest also needs to demonstrate that it’s still tapped into the culture that’s made it a traveler favorite, said Mark DiMassimo, founder of marketing agency DiGo.

“There’s no question that Southwest has sustained the most extensive and the most challenging amount of damage to its brand reputation in its 51-year history,” said Henry Harteveldt, a longtime travel industry analyst and president of Atmosphere Research Group. “That doesn’t mean that the damage can’t be repaired.”

Advertisement
Southwest Airlines employees sorted through luggage stored in carts at Dallas Love Field in...
Southwest Airlines employees sorted through luggage stored in carts at Dallas Love Field in an effort to return bags to travelers during one of its biggest operational failures in company history.(Tom Fox / Staff Photographer)

Southwest risks becoming a poster child for politicians wanting stronger consumer protections and lawyers seeking to build class-action cases against the airline, said Nir Kossovsky, chief executive officer of Pittsburgh-based reputation risk insurer Steel City Re.

“In addition to the large swath of customers who are angry and disappointed, reputational damage of this magnitude often triggers a pile-on of regulators, litigators and activists,” Kossovsky said. “There are also costs associated with lost loyalty of employees who saw the crisis coming, were disappointed by the company’s risk management and had to stand on the front lines when an estimated 2.3 million angry customers sought relief.”

A Capitol response

The debacle is top of mind for congressional lawmakers who’ve been frequent critics of what they view as the airline industry’s cozy treatment before and during the pandemic.

Sen. Richard Blumenthal, D-Conn., plans to re-introduce a “passenger bill of rights,” which failed to become law in the last Congress.

“The Southwest debacle creates a moment when the forces in favor of this kind of consumer-protection measure could prevail,” Blumenthal said.

A Senate committee will hold hearings into Southwest’s meltdown, potentially putting the airline’s top executives on the hot seat.

“This problem (of flight disruptions) is hardly limited to Southwest,” Blumenthal said. “It’s hardly the first meltdown in airline travel, and it’s hardly unforeseeable.”

Advertisement

He said it’s baffling why Southwest had not improved its crew-scheduling technology after it had failed during previous disruptions in the summer and fall of 2021. Southwest CEO Bob Jordan, in a video message released Thursday, said the company spends $1 billion a year on its technology, though he didn’t provide specifics.

The Department of Transportation is the enforcer of consumer-protection laws aimed at safeguarding airline travelers. Several consumer groups are urging Congress to let state officials and private parties sue airlines to enforce those laws — an effort that has been unsuccessful so far.

“The airlines are going to lobby hard to have as little regulation as possible, but with each passing meltdown it becomes more apparent that real change is needed,” said John Breyault, vice president of public policy at the National Consumers League.

Some of the Southwest Airlines planes grounded in 2019 in California following two Boeing...
Some of the Southwest Airlines planes grounded in 2019 in California following two Boeing 737 Max accidents that killed 346 travelers.(AP)
Advertisement

Past controversies

Weathering crises has been an important part of Southwest’s recent history.

Four months into 2018, a 43-year-old woman was killed when she was pulled through a Southwest plane’s window when a fan blade in an engine broke off, resulting in the most serious aviation accident in recent U.S. history. The fan blade sent debris into the plane, causing a window to blow out. The airline estimated it lost $100 million in bookings after the accident.

Southwest went on to record-setting revenue the following year, bringing in $22.4 billion in 2019, a 2.1% increase from the year prior. One week after the death of the passenger and an emergency landing, the airline’s stock hardly budged — down 30 cents a share, or about half a percentage point.

Advertisement

The airline was the largest operator and customer of Boeing’s marquee 737 Max when it was grounded by the Federal Aviation Administration and other international regulators in March 2019, after crashes in Indonesia and Ethiopia killed 346 people. Southwest grounded 34 planes and canceled thousands of flights, costing the airline more than $435 million in 2019. Southwest brought the plane back to service nearly two years later.

Southwest would have lost nearly $1.3 billion as a result of the downturn in travel due to the COVID-19 pandemic, if not for the more than $5.6 billion in federal grants it received to help cover payroll.

Then, as air travel rebounded more quickly than airlines anticipated, Southwest had to cancel more than 2,000 flights in October 2021, blaming problems on bad weather and air traffic control issues that originated in Florida. That meltdown came after a summer spent struggling to secure enough labor to maintain flight schedules.

While most airlines took one or two days to recover, Southwest took five. It cost the airline $75 million in lost revenue.

Advertisement

Southwest shares have dipped since Dec. 23, when the stock price closed at $36.09. By the end of the day on Dec. 28, shares had fallen to $32.19. The stock price has floated back up since then, closing at $35.08 on Friday.

Despite the nightmare optics of unclaimed luggage clogging airports and lines of people stranded in airport terminals, Laurence Newell, managing director of North America for valuation consultancy Brand Finance, said Southwest’s reputation will likely bounce back.

“As consumers, we don’t easily forget, but we do easily forgive sometimes,” Newell said.

Travelers queued up at check-in counters at Denver International Airport on Dec. 30 to make...
Travelers queued up at check-in counters at Denver International Airport on Dec. 30 to make alternate arrangements following the cancellation of nearly 17,000 flights over the holidays.(David Zalubowski / ASSOCIATED PRESS)
Advertisement

The customer experience

Southwest CEO Jordan and other executives have indicated it will take months, possibly years, to replace outdated technology infrastructure being blamed for the holiday breakdown. Jordan told the company’s 66,000 employees that future improvements will include “lessons learned.”

“Restoring the trust of our customers and employees is everything to us,” Jordan said in his most recent video message. “... I’ve said it before, but I can’t say it enough how sorry I am for the impact these challenges have had on our employees and our customers. We have a long and proud record of delivering on expectations, and when we fall short, we aim to do the right thing.”

Lauren Smith, a disrupted passenger from the Dallas area, said she thinks the airline is making good on its word.

Advertisement

Smith, a travel nurse on assignment in Massachusetts, said she received a $250 voucher for her delayed connecting flight from Baltimore to Dallas, and a full refund, along with a $200 voucher for her canceled flight from Dallas to Boston.

“In all, it was a terrible experience, but it seems they tried to make things right,” Smith said.

The airline is known for its cheeky character, inexpensive tickets and reliable customer service. With the stock market trading symbol LUV, the company has crafted strong affection from longtime customers and employees dating back to the airline’s founder, Herb Kelleher, who was known for his witty and fun-loving persona.

Flight attendants regularly joke with passengers and, during the meltdown, travelers shared stories about how much grace under fire they witnessed from Southwest workers. On Friday, the company told workers they’d get points to an employee-store worth about $400 as a reward for their work during the crisis.

Advertisement

Southwest’s unique offerings and branding are the airline’s greatest strength, DiMassimo said. Its strong identity of cheerful frugality — think “bags fly free” — will grant Southwest more forgiveness than other brands, DiMassimo said.

But there’s a limit to how far brand history can carry companies, even those as admired as Southwest, Newell said. If severe accidents and meltdowns become more frequent, there’s no brand strong enough to withstand that kind of hate, Newell said.

“If this is the beginning of a terrible passenger experience or a one-off situation, remains to be seen,” Newell said.

JPMorgan airline analyst Jamie Baker tried to assess the fallout in a research note Friday.

Advertisement

“A modest increase in Southwest IT spending seems reasonable to us,” Baker wrote. “Some level of regulatory response seems likely, though we assume it wouldn’t be materially punitive nor anti-consumer. ... As to brand damage, our initial guesstimate is ‘not much.’”

Southwest’s next big test comes during the spring break travel season. In the following months, the airline has planned its biggest flight schedule in history, including more than 130,000 flights in July, according to Cirium.

Harteveldt said he plans to watch the company’s next few quarterly results closely for hard metrics that could indicate a shift in internal and external trust.

Advertisement

Levels of engagement with Southwest’s Rapid Rewards program, its revenue earned per mile, its rate of attrition and its ability to recruit new flight staff and employees can signal how the airline will fare going forward, Harteveldt said.

“Does it remain the reference point by late-night comedians?” Harteveldt said. “Is it able to escape being the butt of jokes?”

Dallas Morning News reporters Kyle Arnold and Noor Adatia and The Associated Press contributed to this report.

Read more about Southwest Airlines
View More