Southwest’s CEO Makes Changes at the Top, Focuses on the Operation

Southwest

It’s never easy to follow a long-serving CEO at any company. When it happens, I find it particularly worthwhile to follow the new CEO’s big early moves to see where the focus will be under a new regime. That’s exactly the situation that’s been unfolding at Southwest now that Bob Jordan has taken over after nearly 20 yers of Gary Kelly’s reign.

This past week, Bob rolled out some executive changes that I think are quite telling.

  • President and Chief Operating Officer Mike Van de Ven will give up the COO job this weekend and the President job at the end of the year. He will join former President Tom Nealon as an “Executive Advisor” which I’m pretty sure means he gets paid a lot to not do much.
  • Current Chief Commercial Officer Andrew Watterson will move up to take on the COO job.
  • Current Chief Marketing Officer Ryan Green will move into Andrew’s old CCO job.
  • Current Chief Communications Officer Linda Rutherford keeps her job and adds Chief Administration Officer to her domain.

This is the end of the line for one of Gary’s faithful lieutenants in Mike Van de Ven. Bob will take over the role of President, reuniting them for the first time since Gary Kelly gave the job to Tom Nealon a few years ago. Taking over the COO job will be Andrew Watterson.

On the surface, this might seem like a headscratcher. After all, Andrew is the commercial guy and has been for a long time. But there is some method to this madness. Andrew, after all, has an MBA from Vanderbilt in Operations Management, and he did significant operations work consulting at Oliver Wyman and Ernst & Young. This is far different than actually being directly responsible for running an airline’s operation, but at least he is not new to this world.

On top of that, there is one very unique twist here. As the press release notes, Andrew “will continue to oversee the airline’s Network Planning Department.”

Network planning tends to be the heart of the “commercial” side of the business along with revenue management, marketing, and all that. The routes you fly and schedules you sell are a big part of the product that gets sold to customers. So why would this be broken away from commercial? I can think of a couple of reasons.

Less likely is that Ryan is more of a marketing guy, though according to his bio he has some ancillary revenue background as well. Andrew is a network guy, so you can see how that might be why this was divided this way. More likely and more importantly, however, is that network planning is a kind of bridge between commercial and operations. After all, the network that gets built has to be flown, and if it can’t be flown, well, it ends up like some of the very public meltdowns Southwest has suffered over the years.

Under Mike, Southwest’s operation has struggled to maintain the reliability of years gone by. That’s not necessarily to suggest that he’s bad at running any operation. The problem is that Southwest’s operation used to be so simple and easy, and that’s no longer the case. The airline now has more connecting hubs — even if it doesn’t call them that — and it flies into much more congested airspace than it used to. It’s a different airline, and it’s an airline that has struggled to modernize its operation to match its ambitions under current leadership.

Just take a look at what has happened to operational performance over the last 20 years.

Southwest Arrivals Within 14 Minutes and Cancellation Percent by Year

Data via BTS

I faded 2020, because that year was obviously an anomaly. But other than that, Southwest has struggled with on-time performance, and it has seen cancellations rise. This is not the same airline that invented the Triple Crown for having the highest on-time percentage, fewest mishandled bags, and lowest number of complaints.

With new leadership comes new opportunity to fix this, but it is not going to be easy. There is a lot of history in that operation, and change is tough. But having control of network planning as well as the operation gives Andrew a leg up in being able to mold the network to match operational capability… and actually run the airline well.

The thing is, there should always be tension between network planning and operations, because the right answer usually lies somewhere in between what each side wants to run. That now falls on Andrew to make sure there’s a healthy balance while righting the ship. It’s certainly a good test for someone who looks to be cementing his position as Bob’s number two.

At the same time, Linda takes on IT and internal audit in addition to her existing roles. It’s the IT piece in particular that will also be key in modernizing the operation. Bob has put the ability to make real change into the hands of two of his key people, and that should make it more feasible to actually achieve something. This at least provides a ray of hope that Southwest is going to tackle its operational issues. It’s a positive sign that Bob is focusing on the right areas.

6 comments on “Southwest’s CEO Makes Changes at the Top, Focuses on the Operation

  1. WN is already making progress, their on-time rate improved by 5 pts. in June-July, as did UA’s.

    The on-time performance story has changed dramatically in 2022. The two biggest drops in on-time performance year-on-year for June and July were HA and DL, about 9 pts. and 6 pts. respectively — granted they still rank second and third overall, but when was the last time HA was under 80% on time?

    And because I enjoy crapping on the AZ of NYC, B6, they posted an 11 point improvement (56% to 67%) in July — and still ranked DFL (excluding G4). Imagine if they hadn’t cut their summer schedule by 11%. (That improvement was bested by both NK and F9, 15 and 13 pts., respectively in July.)

    2021 data: https://www.transportation.gov/sites/dot.gov/files/2021-09/September%202021%20ATCR%20.pdf
    2022 data: https://www.transportation.gov/sites/dot.gov/files/2022-09/September%202022%20ATCR.pdf

  2. Watterson reportedly said at the Northeast Alliance trial (still not sure why he had to testify or if he just wanted to) that B6 is transitioning to a legacy carrier with higher costs. He knows full well what B6 is going through because WN has been and is still going thru the same process.

    WN has figured out how to manage the cost and revenue part of becoming a legacy better than any other carrier but they still struggle to either simplify their operations – which have become very complex moving aircraft from one side of the country to the other – or provide enough resources to ensure reliability. I suspect that WN’s improved performance this summer is because they have decided that rebuilding their operation post-covid needs to be as important if not more so than re-adding capacity.

    Obviously, the other transition that LCCs heading to become more like legacies is with technology. WN had simple technology for years – but it was largely enough for what they did. As they have added revenue management, sales, and operational systems that are much more like those of the “big boys,” they have made alot of progress but still have a ways to go.

    This leadership transition at WN is probably more about becoming and acting like a “big boy” than any other transition that WN has been through. The good news is that all of their execs are well vetted so everyone knows where they will go.

    and then there are the legacy -like labor relations challenges…..

  3. If JetBlue is moving toward being a legacy because it has different seats, I’d be remiss if I didn’t point out that Spirit has apparently already gotten there because of its “Big Front Seat.” Every airline has problems – even the “perfect airline.” At least Southwest is doing something to address theirs.

    1. no one suggested that seats determine whether an airline is a legacy or not. Costs are the determinant of whether an airline is LOW COST or not. Every airline is doing “something” to address their “problems.” WN is restructuring its operations to be more legacy-like – just as AA, DL and UA all have spent years learning what it takes to operate complex operations. I would also dare say that the only real difference in the big 3’s operations is the hubs from which they operate and the level of reserve resources (aircraft, crews, and gates) they are willing to spend to keep the operation running well.
      DOT data shows that WN made a remarkable comeback in operational integrity in the first half of the summer but let’s also remember that the low cost carriers all added capacity back much faster than the legacies and the LCCs made cuts earlier – WN happened to be one of the first as a result of their performance last summer. I am waiting to see DOT data for August but I will bet it will go down as one of the best summer months for airlines as a whole operationally.

      Not sure why Delta has to get dragged into this (since you frequently refer to them as the perfect airline) but the most significant rumors that are floating among their employees (and on the web) is that their board (which will presumably be meeting within a couple weeks before earnings) have been asked to approve an order for up to 20 A350-1000 aircraft, possibly as a result of QR’s decision to walk away from Airbus and forfeiting significant deposits which could lower the price to Delta. If true, that will be a huge addition of low CASM ultra long haul capacity.

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