Southwest Airways Flight Cancellations Mount as Summer time Begins

Southwest Airways (NYSE:LUV) has a flight cancellation downside.

As air journey demand has come roaring again in 2021, the low-fare airline large has quickly ramped up flight volumes. Nonetheless, it has struggled to function its schedule reliably in latest weeks, due to a mixture of staffing shortages, an IT outage, and dangerous climate. If Southwest cannot get its operations again on monitor rapidly, the airline may squander the expansion alternatives it has been pursuing over the previous 12 months.

Flight cancellations mount

Final month, Southwest Airways canceled 2,687 flights, a mean of about 90 per day. Greater than 34,000 of its flights have been delayed. The service underperformed its prime rivals by a large margin on each metrics.

The difficulty started across the center of the month. An issue with a climate information supplier on June 14 precipitated Southwest to delay greater than 1,400 flights. The next day, a separate IT outage compelled it to cancel about 500 flights and delay greater than 1,300 others. Flight cancellations continued at an elevated price within the subsequent days, as Southwest struggled to reposition flights and crews following these disruptions.

Southwest Airways has continued to cancel numerous flights over the previous two weeks. The airline primarily blamed dangerous climate. Southwest executives have additionally famous that whereas the service continues to be working fewer flights than it did earlier than the pandemic, its flying is unfold throughout extra routes and extra cities. That has added operational complexity, making it onerous to get better from climate occasions and different exterior challenges.

Picture supply: Southwest Airways.

In contrast, Southwest’s pilot union claims that administration has scheduled means too many flights given present pilot availability. Certainly, whereas the service’s schedule is likely to be possible underneath splendid circumstances, the rash of delays and cancellations in latest weeks means that administration did not construct in an ample margin of security.

Making an attempt to cease the bleeding

It isn’t shocking that Southwest Airways’ flight cancellation downside has been getting worse fairly than higher. Final month, the airline stated it deliberate for capability to be simply 7% beneath 2019 ranges in June and three% beneath 2019 ranges in July, in comparison with an 18% discount in Might. Capability sometimes will increase sequentially from Might to July as nicely, so Southwest has ramped up its flight schedule by greater than 20% in a matter of weeks.

In an try to stop issues from getting worse, Southwest Airways has supplied a lot of its staff — together with flight attendants, floor crew, and cargo employees — double pay to work extra time within the first seven days of July.

Sadly, it could not attain an settlement with its pilots for the same association. Which will restrict the effectiveness of this premium pay program, as pilot staffing is especially tight proper now. Over 600 Southwest pilots took early retirement provides through the depths of the pandemic final 12 months. Tons of extra stay out on voluntary leaves. Furthermore, many pilots want catch-up coaching to be cleared to fly once more.

A Southwest Airlines plane on the tarmac.

Picture supply: Southwest Airways.

Southwest Airways wants to repair this rapidly

Up to now, Southwest’s try to repair its reliability points by throwing cash on the downside does not appear to be working. The airline canceled 212 flights on Thursday — greater than 5% of its schedule — and 194 on Friday, in response to FlightAware. One other 40% of the service’s flights have been delayed on Thursday, and on-time efficiency wasn’t significantly better on Friday.

The latest rash of delays and (particularly) cancellations is aggravating clients, inflicting some to reevaluate their loyalty to Southwest Airways. For now, these are simply anecdotes, however because the variety of impacted clients rises, the probability of serious harm to Southwest’s repute will increase, too.

Southwest Airways has been gearing up for an enormous progress push not too long ago. It has added 18 cities to its route map since early 2020 and not too long ago exercised 34 Boeing 737 MAX 7 choices, greater than doubling its scheduled plane deliveries for 2022. This might trigger its staffing shortages to linger, until it quickly hires and trains extra staff. On the identical time, if the service alienates a variety of clients in 2021, demand may fall in need of its projections subsequent 12 months.

Clients sometimes do not care why their flight was canceled. They care about lacking a gathering or the disruption to their trip plans. Southwest Airways cannot make excuses for its poor operational efficiency over the previous few weeks. The airline simply wants to repair its operation as quickly as attainable. If it does not, the corporate may completely harm its model — and its long-term progress prospects.

This text represents the opinion of the author, who could disagree with the “official” suggestion place of a Motley Idiot premium advisory service. We’re motley! Questioning an investing thesis — even one in all our personal — helps us all suppose critically about investing and make selections that assist us turn out to be smarter, happier, and richer.


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