Blame Corporate Greed for the Southwest Fiasco

Happy New Year! We hope you and your loved ones enjoyed a peaceful, joy-filled holiday and are feeling optimistic about the new year.

If you were traveling over the holidays, you might have been one of the hundreds of thousands affected by the flight cancelation chaos at Southwest Airlines. Between December 22 and December 29, Southwest canceled more than 15,000 of its scheduled flights, leaving customers and employees stranded and bewildered. For today’s Closer Look, we want to discuss one of the major causes behind Southwest’s meltdown and explain how it ties into our mission here at the Patriotic Millionaires to fight the concentration of money and power in America.

Like other airlines, Southwest was affected by the historic winter storm that hit most of the country two weeks ago. But unlike their competitors, Southwest was not able to bounce back once conditions cleared. On December 28, well after the storm had passed, carriers like Delta, American Airlines, and United canceled fewer than 40 flights, while Southwest canceled a whopping 2,500.

Why did Southwest struggle so much to get back on its feet after the storm? Look no further than the company’s outdated crew-scheduling technology and the greedy Southwest executives behind it.

For years now, it’s been widely known in the airline community that Southwest needed to modernize its crew-scheduling software. Because of its antiquated software, during disruptions like bad weather Southwest crews sometimes have to manually call the company to let them know their location and receive hotel accommodations. Over the past week, things got so bad that crews resorted to physical paperwork to get flights in the air and were left on hold by Southwest headquarters for up to 17 hours. It’s borderline unthinkable that, with all the advances in modern technology, an airline as large and as profitable as Southwest could struggle to locate and make accommodations for its own crew and force them to fill out paperwork to get people to their holiday destinations.

Sadly, last week’s fiasco was by no means a one-off occurrence. Southwest experienced similar catastrophes from software issues in both the summer and fall of 2021. These disasters prompted Southwest employees to raise the alarm over the company’s antiquated software system. Last March, the flight attendants’ union sent a letter to corporate outlining various demands: to drive home just how big of an issue the software system is, they prioritized updating it over pay increases. In September, they even went so far as to picket with protest signs that read “Another Victim of SWA’s Outdated Technology.”

“That’s horrible,” you may be thinking, “but why do the Patriotic Millionaires care?” After all, it isn’t like airline scheduling is about taxes, wages, or political equality. Why would an organization focused on those issues dedicate an entire email to talking about Southwest’s problems over the holidays?

It’s because Southwest’s irresponsible behavior is all about power and money. We are deeply concerned about how the concentration of power and money in both our economy and our political sector are affecting how regular Americans are able to live their lives, and many of the most negative consequences aren’t always so obvious. That’s the case here.

So let’s look at how the concentration of power and money in the hands of people like Southwest’s executives has led to hundreds of thousands of Southwest customers’ and employees’ holidays being ruined.

It would be expensive to modernize Southwest’s crew-scheduling software, but the company certainly has the money to do it. Between September 2021 and September 2022, Southwest reported $5.93 billion in gross profits – a 54% increase from the year before. And don’t forget: that all comes on top of $7 billion in pandemic aid the company received from the government, along with billions in tax savings since the passage of the 2017 GOP Tax Cuts and Jobs Act.

So why hasn’t Southwest invested its exorbitant profits in fixing its software? Because they spent it elsewhere in the form of stock buybacks and massive executive compensation packages. Between 2014 and 2019, Southwest spent a total of $8.5 billion on stock buybacks. In 2020, while the company posted profit losses and received billions in pandemic aid from the government, Gary Kelly, the then-CEO, received a record $9.2 million in compensation.

In short, it was apparently more important for Southwest to keep their shareholders and executives happy than to make critical investments that would save consumers and employees from taking on the burden of failures like the one that occurred last week. And they could do all this simply because they had the power to do so. No one in Congress (or elsewhere in government) is making them act responsibly.

Don’t forget: at the time of the airline bailout mid-pandemic, many members of Congress (and the Patriotic Millionaires) were calling for the bailouts to include very specific requirements for how the airlines would use the money, and for how they would reform many of their unfair and often predatory business practices. Congress had an incredible opportunity to hold airlines like Southwest accountable when they were at their most vulnerable, and they chose not to. Future legislators should look at this example and rethink how corporate bailouts should operate.

But we shouldn’t have to wait for the next cancelation catastrophe or bailout to force Southwest and other irresponsible corporations to act better. Unfortunately, however, the federal government has been MIA when it comes to holding Southwest and its peers responsible for their actions. Last week, Transportation Secretary Pete Buttigieg said that his Department would mount an “extraordinary effort” to ensure that Southwest meets its obligations to its customers. But where was Buttigieg’s voice during the fiascos that occurred in 2021? Where was he when flight attendants were picketing last year? Congress has the final say on big changes to regulations, but the DOT has a great deal of authority here and could undoubtedly be doing more to hold companies like Southwest accountable. Big problems require bold solutions, not just sternly-worded statements.

Lawmakers should use the new year and the new Congress to strengthen their resolve to hold greedy executives at companies like Southwest accountable. They can reform CEO pay packages so they are more closely linked to company performance. They can impose fines on companies like Southwest that are big enough to dissuade bad behavior. And, most importantly, they can do all these things before large-scale disasters like the one we saw unfold last week happen again. It’s not rocket – or even airplane – science.

Related Posts