The Southwest crisis was born in the American corporate culture of the curmudgeon.
For most of 2022, the most frequently asked questions about Southwest Airlines have been questions such as the ability to use pre-assigned seats, the start of charging for all checked baggage, and the introduction of change fees—a rejection of all the policies that made the airline unique.
Today, Southwest passengers are wondering if its planes will even take off?
Southwest’s Christmas crash has received so much publicity that it doesn’t require a lengthy debriefing. Suffice it to say that as of Wednesday, as I write, 2,508 flight cancellations account for 90% of all U.S. domestic flight cancellations (statistics taken from FlightAware).
We talked a lot about the modernization of production and the need for this.
Southwest CEO Bob Jordan
On Tuesday, Southwest accounted for about 84% of more than 3,200 domestic flight cancellations.
This trend means that as the country’s other carriers began to address their own traffic problems stemming from the powerful “bomb cyclone” that hit the US the day before Christmas, Southwest remained mired in disaster. The airline says it will take days.
Obviously, Southwest cannot be blamed for the magnitude of the storm.
However, one can understand why the airline fared so much worse than its competitors, why other carriers fared less well, and why American companies so often find themselves with their pants down when operating conditions materialize. normal expectations or beyond them.
In short, they underinvest in preparation and planning. For decades, big business has been spending its resources on handouts to shareholders instead of spending them on workers and infrastructure. There is not enough return in the system, so when a crisis comes, it does not bend, but breaks.
What is driving this trend is the economy. Business leaders have become hostages to cost cuts, squeezing costs out of their systems in every possible way, relying on luck that what works under normal conditions will continue to work when the outside world fails. They put their companies on a bad strategy.
There are many manifestations of this raw food habit. One is just-in-time manufacturing, which spread like wildfire from Toyota, where it originated in the 1980s, to the rest of the auto industry and eventually to the manufacturing sector as a whole.
The idea was to reduce waste by coordinating parts inventories, labor supply and production times so that everything was in place when needed, not a minute early or late.
The pace of work accelerated, workers were limited in wages and working hours, and parts suppliers worked at ever tighter margins. Everything was working fine until it didn’t.
The dream of a production line “inherently flexible, without inventory, even without computers, replenished by infinitely responsive suppliers” was too simple, as Uday Karmarkar, an expert in manufacturing strategy and technology at the Anderson School of Management at the University of California at UCLA, observed back in 1989. Los Angeles.” Just-in-time production produces revolutionaries who don’t know when to stop.”
Starting in the summer of 2021, global supply chain congestion exacerbated by a surge in post-pandemic merchandise orders from consumers returning to stores has left manufacturers without needed parts and retailers without merchandise.
It wasn’t until this crisis hit that manufacturers realized they needed to move from “just in time” to “just in case,” meaning keeping more spare parts on site and more better-trained workers on call.
Another manifestation is outsourcing. Boeing could learn from its experience with the 787 Dreamliner that outsourcing can drive up costs and put a heavy burden on management.
The next-generation aircraft was billions of dollars over budget and years behind schedule when it finally began flying commercially in 2011, in part because Boeing outsourced much of the work to foreign contractors.
Some parts, produced by widely dispersed suppliers, did not fit together. Some subcontractors were unable to meet their production quotas, creating huge production bottlenecks when important parts were not available in the required sequence.
“We hired people who had never done this kind of technology before, and then we didn’t provide the necessary oversight,” admitted Jim Albaugh, then head of the company’s commercial aviation. “The pendulum has swung too far.”
However, Boeing has stuck to a strategy of outsourcing the critical systems of its 737 Max. After an aircraft suffered two fatal crashes in 2018 and 2019 due to faulty software, leading to years of shutdowns by aviation regulators around the world, Bloomberg reported that Boeing has outsourced software development to overseas firms hiring engineers, all for $9 each. hour.
The company claimed that it was quite capable of supervising the work of foreign software engineers. Max is back in the air and is now available to customers, the largest of which is Southwest Airlines.
This brings us back to the catastrophe in the southwest. A full explanation may not appear for some time, but some contributing factors can be identified.
One of them is the airline’s practice of operating with severe operating restrictions. Southwest has long prided itself on its short take-off and landing times aimed at maximizing the efficiency of its fleet and sometimes requiring short turns of up to 35 minutes.
However, this is not the first time the practice has led to disaster. It was in 2014 when the carrier’s timeliness suddenly dropped. The problem was that Southwest decided to cram a lot more flights into its schedule without expanding its fleet.
His confidence stems from relatively trouble-free operation during 2012, which was a favorable weather year. But it soon became clear that the schedule’s strict tolerances could only be met on days with near-perfect weather and no mechanical failures.
Since then, the airline has made its schedule more flexible, but other factors came into play last week. They include Southwest’s point-to-point flight map, which differs from the hub and spoke configuration of other major carriers such as United and Delta, which concentrate operations at major regional airports such as Chicago and Atlanta.
This simplifies the task of coordinating aircraft and crew to stay together, limiting (if not eliminating) the chance that local or regional weather crises will affect flights across the country.
Southwest doesn’t have that kind of coordination capability, and employees say its complex direct-communication system requires more robust scheduling technology than it has implemented.
“Our internal scheduling software can’t handle mass cancellations,” Michael Santoro, Vice President of the Southwest Pilots Union, told my colleague Margo Roosevelt in an interview. “The company has not invested in infrastructure planning to support the network they have developed.”
According to Santoro, the legacy system is not designed to handle redirects involving hundreds of cancellations. “So the pilots are calling and asking, ‘I’m done with this flight – where do I go next?’ Am I flying another aircraft? Will I spend the night here? And pilots wait for hours trying to figure out what to do next.”
In perfect weather, the software matches the crews to the planes. “But when there’s a disruption like this storm, our system can’t handle it,” Michael Massoni, senior vice president of the Local 556 transport workers union, which represents Southwest flight attendants, told Roosevelt.
“Southwest is losing control because we don’t have 21st. technology of the century. So there is chaos. Southwest starts solving the problem manually, which is incredibly tedious.”
Southwest CEO Bob Jordan acknowledged the problem with the software in a message to Southwest employees obtained by CNN.
“Part of what we suffer from is a lack of tools,” Jordan said. “We talked a lot about modernizing the operation and the need for it.”
What does an airline spend money on, if not on critical corporate infrastructure? For dividends and share repurchases that go directly to shareholders.
In early December, the airline announced that it would restore dividend payments suspended during the pandemic, paying investors 18 cents a share in early January. The payment will cost nearly $107 million. Since 2015, the company has paid out about $1.6 billion in dividends and repurchased more than $8 billion of shares — that is, giveaways to shareholders.
The resumption of dividend payments could be cold comfort to Southwest shareholders, whose shares have fallen about 28% this year and more than 18% just after Thanksgiving.
But passengers, thousands of whom are stranded at airports with no guarantee of a seat on a Southwest flight in the coming days, will be colder and may wish Jordan would stop talking about upgrading the airline. and started to act.
This story originally appeared in the Los Angeles Times.
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