The Southwest Airlines Debacle: What Happened?

Stranded Travelers with Southwest Airlines

The Southwest Airlines system meltdown over the Christmas holidays was perhaps the worst debacle ever in the air travel industry. The weather was a factor, but other airlines were only minimally impacted. The Southwest catastrophe that resulted in over 90 percent of its flights being canceled and tens of thousands of passengers stranded was caused essentially by poor leadership at the corporate level. This epic failure provides a classic case study of leadership.

In 1971, brilliant entrepreneur and Southwest Airlines founder, Herb Kelleher, began a small Texas airline serving Dallas, Houston, and San Antonio with three Boeing 737 aircraft. With a few investors and an austere budget, Kelleher undercut fares of all other airlines operating those routes. His business model was no-frills flying, cheap tickets, streamline operations, along with fun and laughter among the crews and passengers. He spent lots of time in the trenches mixing with the employees and listening to the passengers. His style was emulated throughout the workforce from pilots to baggage handlers. Kelleher’s people-first leadership grew the corporation to capture a nation-wide market with economical, reliable, and enjoyable flight experiences. Southwest had a phenomenal reputation, loyal customers, and exceptional employee buy-in when he retired in 2004.

Gary Kelly replaced Kelleher as CEO. Kelly’s background was in accounting having been Southwest’s Executive Vice President and Chief Financial Officer. He chose another accountant as the company’s Chief Operating Officer. Neither had any appreciable operations experience. Their focus was on capitalizing on the success and popularity of Southwest by retaining more of the profits for stockholders and external investments while cutting the operating budget. Stock prices began to soar under Kelly’s leadership, but necessities like maintenance, technology, capital improvements, and employee benefits tended to suffer. This priority of financial growth at the expense of internal investment filtered down through the lower management levels. For two decades, Southwest lagged behind other major airlines in upgrades to automation of crew scheduling as well as passenger and baggage handling. Terminal equipment and processes were not sufficiently modernized. Operational effectiveness and efficiency had taken a back seat to financial goals. The airline labor union repeatedly raised warnings of the airline being on a trajectory of failure and in dire need of capital infusion. But the warnings fell on deaf ears at corporate headquarters.

When Kelly retired in early 2022, his successor, Bob Jordan, inherited a mammoth enterprise that was operationally handicapped from years of negligent leadership. Southwest exhibited a healthy composition on the outside but was grievously wounded on the inside. Although it had the management processes and infrastructure to conduct normal operations, it only took a brutal winter snow event to inflict almost total paralysis. The corporation’s insufficient infrastructure and outdated technology rendered it far inferior to its competitors in keeping planes moving. Jordan had begun some restorative initiatives, but they were still being developed when the Christmas crisis hit. He appears to be from the same mold as the founder, Kelleher. He is operations and people oriented. But it will take a few years to correct the course of this iconic corporation. A lot of that course correction will be the culling of ensconced middle managers from earlier years who have made a career of misplaced priorities.

All leaders, from those of small organizations to major corporations, can learn a lot from the saga of Southwest Airlines. Finances are important and must be attended to. But, put your employees and your customers first, and the finances will usually fall in line. Those principles were hammered into me in both undergraduate and graduate management courses. Yet, too many seem to give them a nod in school but forget them in the workplace.

2 thoughts on “The Southwest Airlines Debacle: What Happened?

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  1. Thanks for this excellent article Terry. Far too many companies have CEO’s with impressive credentials and little real experience. These people learn a lot in college but seem to have no common sense. Each new leader tries to leave his mark but leaves a mess.

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