The cancellation before Christmas… Holiday festivities may be over, but lots of travelers are still recovering from a Southwest-flavored hangover. ICYMI: the Dallas-based airline canceled over two-thirds (think: 15K+) of its Christmas-week flights after a historic winter storm overwhelmed its operation systems and left hundreds of thousands of fliers stranded. The Department of Transportation said it’s investigating the meltdown and will hold Southwest accountable for reimbursing affected travelers.
- The good: On Monday, Southwest said its schedules were almost back to normal after it reduced capacity to recover from the cancellations.
- The bad: There are still mountains of unclaimed luggage. Southwest is working with FedEx and UPS to return lost bags.
- The ugly: The fiasco could cost Southwest $700M after covering ticket refunds and expenses like hotels and rental cars.
Old system, new snags… Airlines have been historically slow to adopt new software, because bugs can lead to grounded planes and passengers. Over the years Southwest’s pilot and flight-attendant unions have complained about the airline's outdated tech. They argued that it left the company vulnerable and that updating it should be a higher priority than shareholder perks (picture: dividends). Analysts expect the holiday tailspin to slash nearly a tenth of Southwest’s earnings when it reports this month.
Failure to upgrade can mean a major downgrade… Some experts say Southwest and other airlines have prioritized upgrading customer-facing systems (like: reservations and loyalty programs) over its back-end systems. While tech hiccups aren't usually a deal breaker in daily airline operations, they can be catastrophic when combined with outside disruptions like last month's massive storm. Southwest's fallout could spur other airlines to update their systems — or risk being grounded by customers.