How Southwest Tanked Its Operational Performance… And Then Took a Year to Fix It

In early 2013, Southwest realized that demand was strong. Faced with a set number of airplanes, it had two choices. It could keep flying its existing schedule or it could push itself and squeeze more flights into the system. It chose the latter, and it incredibly failed to understand how badly that would drag down the operation. Beginning in August of last year, Southwest’s operational performance tanked. Due to issues unique to Southwest and its archaic technology, it wasn’t until last month, a full year later, that on-time percentage returned to normal.

While at Southwest media days last week, I spoke with EVP and Chief Operating Officer Mike Van de Ven. He explained in detail what went wrong, why it took so long to fix, and how the operation is now back on track. This is the story of Southwest’s bad year.

[Disclosure: Southwest paid for my flight to Dallas and hotel]

An Aggressive Schedule
In January of 2013, the operations group looked at past performance and told the network team that it could make a tighter schedule work. With demand strong and fares good, the network team wanted to take advantage. When the schedule was agreed upon, Southwest was going to operate the equivalent of 16 new airplanes’ worth of flying without increasing its fleet at all.

To achieve this, the airline had to make changes in two areas. First, it cut down on its turn times. Those are the times scheduled in between flights; or the time it takes the “turn” the airplane around. At the same time, it trimmed its block times. Block time is the amount of time scheduled from departure from one gate until arrival at the next.

The ops team looked at performance during 2012, a relatively good weather year, and it figured it could make this work. Southwest had run an aggressive schedule like this before, but the airline somehow failed to realize that this wasn’t the same old Southwest. The new schedule went into place in August of 2013 and things immediately went south.

Southwest On Time Performance Versus Industry

August 2013 wasn’t a great weather month, so the team cautiously bet that this was just a temporary problem due to worse than expected conditions. As you can see above, that bet didn’t pay off.

Identifying the Problem
By November and December of 2013, it was clear that this was a systemic problem. Though the airline could operate its schedule well on a day where nothing went wrong, those days were few and far between. Weather got ugly, airplanes broke, and the airline fell behind on a regular basis. The schedule Southwest had operated in 2012 was no longer a schedule it could run. But why?

The increase in weather issues had an impact, of course. Southwest found itself flying around weather more frequently, and those tightened block times weren’t enough. But that was just the tip of the iceberg.

It turned out that a lot had changed since 2012 in the way Southwest operated, and incredibly, the airline didn’t quite realize how much of an impact that would have. To begin, Southwest had gone through a process of adding a row to most of its 737-300s and all of its 737-700s. That meant capacity increased by 6 seats from 137 to 143. At the same time, Southwest began taking delivery of 175-seat 737-800s, further adding seats into the system.

All those extra seats, however, only made it tougher to turn an airplane quickly if there were people in those seats. That was the next issue. Beginning at the end of 2013, Southwest saw its load factors increase significantly.

Southwest Year Over Year Change in Load Factor

Lastly, baggage transfers became an issue. As Southwest developed bigger and bigger hub-style operations in cities like Chicago and Denver, it begun transferring a lot more bags. It found that even when people could make the connection in time, airplanes had to wait for bags to make it.

With turn and block times under pressure, on-time performance crumbled. In general, the day would start ok, but flights would often end up being 3 to 5 minutes late. It didn’t seem like a lot, but after 3 or 4 flights, the rest of the day for that airplane would run late under the government’s definition that flights arriving 15 minutes after schedule would show as delayed. By the end of the day, flights could be 45 minutes to an hour late just due to the cumulative mini-delays through the day.

Southwest hadn’t run more than 75 percent of flights on time since last year, but it wanted to be running an airline in the 83 to 85 percent range. To get back to that level, each aircraft line would need about 25 minutes more slack in a day.

A Small Band Aid on a Major Wound
You would think that once this problem had been identified, Southwest would have implemented a fix as soon as possible. You would be wrong. Southwest’s ancient reservations system is so basic that it can’t handle schedule changes. If the airline were to make major changes to its schedule to right the ship, it would have to manually process every single change. That would have been such a herculean task that it wasn’t feasible. (Southwest’s new Amadeus Altea system is handling international flying now but won’t be ready for domestic operation for a couple more years at least.)

Instead, Southwest decided to use as many bandages as possible to try to lessen the impact on travelers. The airline created a program called “Strong Start” to put a big focus on getting every airplane out on time on its first flight. Those were precious minutes that weren’t under pressure due to block and turn time issues.

The airline also put a higher priority on making sure all maintenance issues were dealt with quickly and proactively. In other words, Southwest had to run a perfect airline just to keep its head above water under the tight schedule it had created.

Performance still struggled, so Southwest decided that all it could do was deliver the best customer service possible. It held a lot of airplanes for late connections. It compensated travelers where appropriate. Apologies flowed freely. The end result was that while Southwest sat at the bottom of the pile when it came to on-time performance, it still maintained an extremely low complaint rate with the Department of Transportation.

Finally, a Real Fix
Early this year, when time came to plan the schedule for travel beginning in August 2014 (last month) the real problem could finally be fixed. Southwest reverted back to a schedule with more slack in it to account for the airline’s systemic changes.

On its 737-300s and 700s with 143 seats, the standard turn time became 35 minutes. In the last schedule, Southwest had about 60 percent of its flights turning in under 30 minutes. In the new schedule, that dropped to only 28 percent. All 20 minute turns have been eliminated. The larger 737-800s had been largely scheduled to turn in 45 to 50 minutes, but Mike noted that the latter is more appropriate. Block times were also lengthened a bit so that the airline wasn’t always playing catch-up.

Perhaps most interesting was a decision to increase the minimum permitted connecting time. Historically, Southwest had allowed itineraries with as little as 25 minutes between connecting flights. Beginning this August, that has been increased to 35 minutes. And in key connecting airports like Chicago/Midway, Baltimore, and Denver, it’s now 45 minutes.

That means that connections that used to be legal are no longer permitted. As you can imagine, that will end up hurting revenue, but Mike insists that it wasn’t significant. Besides, fixing the bloated costs of running a delayed operation will offset or surpass any potential revenue losses.

It’s Working
Just how is this new schedule working? Quite well. The new schedule went into place on August 10 and there was an instant impact. The airline really hit its stride beginning August 24. According to masFlight, from then through September 11, it has run on-time 83.5 percent of the time. That’s still behind Delta and US Airways but well ahead of United and American which are both under 80 percent.

In the past, many airlines have used schedule padding to run an on-time operation as a corporate priority. Mike says that’s not what’s happening here. The airline is simply adjusting to a different operating environment. These changes, though not helpful for an airline trying to keep its costs down, aren’t temporary. I still just can’t believe how long it took to fix.

The airline is now working on its schedule beginning April 2015. Mike says that with more 737-800s and the possibility of even higher load factors, the airline may have to add a little more to turn times still.

Will we ever see a return to a tighter operation? In the future, Southwest may look at having different turn times during different days of the week. After all, a jam-packed Friday night flight to Vegas will take more time to turn than a less full flight on Tuesday night. But as always the airline is cognizant of the potential customer impact on not having consistent schedules, and I didn’t come away feeling confident that we’d see that happen.

For now, the airline is going to be paying much closer attention to make sure it doesn’t have a repeat of the last year. It may cost a bit more to run the operation this way, but as Robert Isom, Chief Operating Officer at American says, there’s nothing more expensive than running a bad operation. Let’s hope that Southwest’s miserable year is over, and it’s done running that most expensive kind of operation.

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