Southwest Airlines Plans To Spend $1.3B To Prevent Future Meltdown, Announces Tactical Action Plan

Southwest Airlines has announced that it would be spending more than $1.3 billion in upgrades and maintenance of systems and would increase winter staffing as part of its Tactical Action Plan to prevent meltdowns in the future.

The airline received a revenue hit of around $350 million after it faced heavy criticism for canceling more than 16,700 flights during the last 10 days of 2022, leaving thousands of passengers stranded over the holidays.

Southwest said it continues to expect a loss in the first quarter as the unit cost is likely to be 6.5% year over year this quarter, way more than the previous forecast of 4%, CNBC reported.

CEO Bob Jordan, who previously apologized for the holiday chaos the airline made, said Tuesday that the airline would be implementing an action plan to prevent further meltdowns.

"We understand the root causes that led to the holiday disruption, and we're validating our internal review with the third-party assessment. Now, we expect to mitigate the risk of an event of this magnitude ever happening again," he said in a news release.

"Work is well underway implementing action items to prepare for next winter—with some items already completed," Jordan said during a J. P. Morgan Industrials Conference.

According to a study by Southwest's pilot union SWAPA, a lack of investments in IT systems was identified as one of the major factors that contributed to the operational meltdown. To address the issue, the airline now plans to invest over $1.3 billion in its operational systems, including crew scheduling and customer phone systems.

Analyzing the root cause of the holiday chaos last year, the company said in addition to the chaos brought out by the winter storm Elliot, the carrier was unable to cope with a high volume of close-in cancellations.

"In addition to Winter Storm Elliot, which was more severe than expected, a driver of the disruption was determined to be the volume of cascading and close-in flight cancelations during the storm which overwhelmed Station operations and the airline's Crew Network and hindered established processes and internal tools," Air Insight reported.

As part of the action plan, Southwest will now bring the execution of operational plans under a senior leader, which would improve the coordination between the Network Planning and Network Operations Control Teams.

Southwest also plans to invest in hiring more staff and buying winter equipment, such as deicing trucks, deicing stations, and engine covers and heaters to tackle disruptions from winter storms like Elliot.

Jordan said the airline has already improved operational reliability and has touched a 97.7 percent completion rate through February. The carrier is now seeing a return of customers earlier affected by the meltdown through new bookings from them, according to the company.