[guest post by JVW]

I’m sure a lot of you followed the news over the weekend of the woes experience by Southwest Airlines (not to mention their passengers) as the carrier cancelled over one thousand flights, leaving passengers stranded. In many corners of conservative media it was popular to attribute these cancellations to a sick-out staged by pilots and/or flight crews to protest Southwest’s coronavirus vaccine mandate, which came into effect earlier this month. Not so, reports Dominic Pino writing at National Review Online: the real reason is just a run-of-the-mill business decision combined with bad luck:

Southwest does not have a hub-and-spoke route network like United or Delta or American. When you book a flight on United, for example, from Boston to Seattle, you might have a connection through Chicago O’Hare since that’s a major hub for United between those two destinations. From your point of view, it’s a flight from Boston to Seattle with a layover in Chicago. From United’s point of view, it’s one flight from Boston to Chicago and a second flight from Chicago to Seattle. That you happen to be on both flights is incidental to United for scheduling purposes. Further, if there’s bad weather in Boston and the flight can’t leave, it’s a problem for you, but it’s not a huge problem for United. There will be dozens of other planes at O’Hare, and schedulers will have other options to keep the network running. The Chicago-to-Seattle flight is completely unaffected since that was a totally different flight from United’s point of view anyway.

Southwest does not work this way. It mostly flies point-to-point between cities. Its planes fly long, sometimes convoluted routes across the country. So, for example, you might book a Southwest flight direct from Atlanta to Denver. That’s all you see. But from Southwest’s point of view, it’s a flight from Fort Lauderdale to Atlanta to Denver to Las Vegas to Houston. [. . . ] With these long routes, cancellations can cascade into major disruptions since people in four or five different cities can be dependent on the same flight, and there’s no hub to pull other planes from.

The hub-and-spoke and point-to-point scheduling systems each have advantages and disadvantages. Southwest is the largest American airline to not use the hub-and-spoke system, so it is able to offer direct flights between many cities that aren’t served non-stop by its competitors. The hub-and-spoke system’s major drawback is that if something does go wrong at a hub — say, a power outage or computer malfunction or inclement weather — it can throw off the entire network.

What happened to Southwest this weekend was that its point-to-point network was faced with a hub-and-spoke problem. Southwest’s network is not centralized on any one airport, but it is heavily concentrated in the state of Florida. Many people want to fly to Florida, and Florida has four (Orlando, Miami, Fort Lauderdale, and Tampa) of the top-25 busiest airports in the country, the most of any single state. There was bad weather in Florida this past weekend, and “close to half of Southwest’s planes fly through Florida on any given day, so disruptions there can ripple out to the rest of the country,” reports the Wall Street Journal. So your hypothetical Southwest flight from Atlanta to Denver could be canceled because the plane that was supposed to fly it is stuck in Fort Lauderdale.

So given Southwest’s business model, why doesn’t this happen more often and why did it seem so particularly severe in this case? Mr. Pino informs us this is a function of Southwest’s recent strategy to cut into its competitors’ market share:

[. . . ] This time, however, Southwest stretched itself very thin. The air-travel market came back much faster than many airlines expected after the pandemic, and they had a tough time meeting demand.

Southwest saw its competitors off-balance and decided to strike. “‘Predatory and Opportunistic’: Southwest Airlines Seizes the Moment as Rivals Struggle” was a Wall Street Journal headline on November 16, 2020. Southwest expanded into new cities it hadn’t flown to before and scheduled more flights than its competitors. Aggressive strategy has long been Southwest’s corporate M.O., and it is the only American airline that consistently makes a profit (2020 was the first time it reported an annual loss in 48 years). So Southwest had good reason to believe that it could make this work.

The summer had other plans. During the pandemic, Southwest encouraged many of its employees to retire early. The Wall Street Journal reports, “Southwest had about 5,000 employees leave permanently and 11,000 go on extended leaves. Once demand shifted, the airline struggled to call them back and retrain them quickly enough, Southwest executives have said.” Southwest was running more flights than its competitors with fewer workers than it thought it would have. The airline offered more overtime pay, but it still wasn’t enough. With very little slack in its operations, ordinary disruptions became major problems.

The executives at Southwest are on an apology tour, though they don’t seem willing to directly admit they got caught leaning well over their skis (as we say in Colorado). They, along with the pilots union, forcefully deny there was any sick-out at play due to resistance from the vaccination policy, with the union announcing that there were no more employees calling in sick this past weekend than was the case in recent weekends. However, Mr. Pino suggests, in the end Southwest’s problems truly did stem from the pandemic. As he concludes:

[. . . ] They seem to be the consequence of a long series of business decisions in response to the pandemic recovery that didn’t work out as well as planned, with bad weather mixed in for good measure.

Shutting a complex system down is much easier than starting it back up. We’ve seen this dynamic across the economy as the patterns of specialization and trade that were so routine before the pandemic have been upended and reconstructed. The Southwest debacle is only the latest example of this recurring phenomenon as businesses and consumers do what they can to get back to normal.

– JVW