Southwest Vows to Invest in Improvements and Admits Mistakes After Operational Meltdown

Southwest Airlines Boeing 737 MAX aircraft are parked on the tarmac after being grounded, at the Southern California Logistics Airport in Victorville, Calif., on Mar. 28, 2019. (Mark Ralston/AFP via Getty Images)

Southwest Airlines vows to invest more in software improvements to avoid another meltdown, after its CEO admitted that they “messed up” and would cut executive bonuses.

The COO of Southwest, Andrew Watterson, apologized before a U.S. Senate committee panel on Feb. 9 for the airline’s meltdown over the Christmas holidays that stranded thousands of passengers across the United States.

More than 16,700 flights from Dec. 21 through Dec. 31 were cancelled, as the airline dealt with a major winter storm that overwhelmed its computer systems, long after rivals had resumed normal operations.

Southwest admitted that its outdated technology failed to keep pace with the numerous flight changes due to the storm, forcing the airline to suspend most of its flights for several days to reset its systems.

Southwest COO Promises Systems Upgrade This Week

General Electric, who designed its failed operational system, said it has delivered updates to Southwest, which are currently undergoing tests.

Watterson promised the senators that the airline would have the software upgrades in place by the end of the week to avoid a similar repeat of the fiasco.

“Let me be clear: we messed up. In hindsight, we did not have enough winter operational resilience,” said Watterson.

Last year saw chaos throughout the airline sector after the industry struggled to bring travel capacity back to normal, as demand rebounded post-pandemic.

The Senate hearings were the second time in just over a year that industry executives were brought in front of the committee regarding flight delays.

In December 2021, for example, major U.S. airline executives were grilled by the Senate over flight disruptions and staffing shortfalls after they received $54 billion in funding during the pandemic that required them to keep paying staff.

Airline executives have blamed the Federal Aviation Administration for some of the latest light disruptions due to inadequate staffing and funding for flight operations.

Senate Committee Grills Airline Executives on Progress

Public pressure on the industry has risen due to the mishaps, with Congress and the Biden administration looking to improve protection for airline passengers.

Sen. Maria Cantwell (D-Wash.), the head of the the Senate Commerce Committee, asked Watterson: “People want to know: Are these guys going to invest in the technology that will make this system operational, so this will never happen again?”

The cost of upgrades will “undoubtedly be in the millions and millions of dollars,” responded Watterson, but the airline would not know the exact cost of the improvements until next month.

“We need to invest in technology, but also in our operational systems outside of technology, because the winter operations were too much for us,” he added.

The Southwest COO also defended the carrier’s attempts to fix its systems since December and it other improvements in the works.

“To be able to better handle the winter weather, we need more infrastructure at airports for de-icing. We need more de-icing trucks. We need new technology systems with de-icing. We need to weatherize our ground support equipment,” he said.

Sen. Ted Cruz (R-Tex.), the top Republican on the committee, called the meltdown “an epic screwup,” but said he was confident Southwest executives were “committed to doing everything possible to prevent its recurrence.”

Meanwhile, Southwest CEO Bob Jordan failed to attend the committee meeting, saying that he had a scheduling conflict, a company spokesperson told CNBC.

The air carrier took a massive hit of $800 million in the fourth quarter due to the disaster in pretax earnings.

The airline’s COO told reporters outside of the Senate chambers that executive bonuses would be slashed this year because of the poor holiday performance.

Watterson did not provide further details about the cuts, but said the bonuses would be announced in March.

Pilot’s Union Blames Southwest Leadership for Ignoring Tech Problem for Years

Meanwhile, Casey Murray, president of the Southwest Airlines Pilots Association (SWAPA), told the panel that the union had been sounding the alarm about the airline’s crew scheduling technology and “outdated” operational processes for years.

“Unfortunately, those warnings were summarily ignored,” he said.

Murray claimed that more than 350 aviators were stranded by the systems failure and that over 1,000 pilots were on duty for more than 15 hours during the crisis, “with many on continuous duty overnights awaiting schedule changes.”

Southwest has also attempted to mollify angry passengers with refunds and reimbursements for added expenses, for flights on other airlines, and hotel stays during the delays, which cost the company hundreds of millions of dollars.

The airline has so far paid out more than 96 percent of the reimbursement requests, while the remainder have been recently submitted, said the COO.

“Anything that was well documented and under $4,000, our representative approved on the spot,” while anything above was elevated to supervisors, Watterson told reporters after the meeting.

“We reimbursed tire chains, strollers, car seats, pet sitting but things we didn’t reimburse were things like $7,000 shopping sprees at luxury stores or chartering a private jet.”

Reuters contributed to this report.