Dive Brief:
- United Airlines CEO Scott Kirby delivered a blunt assessment of the industry’s technology infrastructure during an earnings call last week. The Federal Aviation Administration as well as "most airlines, with the exception of the network carriers, have outgrown their technology infrastructure and simply cannot operate reliably in this more challenging environment,” Kirby said.
- The weather-related operational disruptions that snowballed into a nearly two-week crisis for Southwest Airlines were commonplace and impacted most airlines adversely. “One airline got the bulk of the media coverage, but the weather was the straw that broke the camel’s back for several,” Kirby said on Jan. 18, during his company's fourth-quarter earnings call for the period ending Dec. 31.
- Winter Storm Elliott, which caused temporary industrywide delays and cancellations, exposed Southwest’s inability to track and reassign flight crews during the holiday period in December. Southwest was forced to cancel 16,700 flights, stranding thousands and costing the airline approximately $800 million, according to the company's FY-2022 Q4 earnings report, for the period ending Dec. 31.
Dive Insight:
Southwest’s technological deficiencies raised concerns about operational preparedness in the airline industry. The FAA’s data systems failure, which grounded nearly 11,000 U.S. flights for several hours on Jan 11, further undermined confidence.
“I think this ought to be a wake-up call for all of us in aviation,” Kirby said. “Something many of us in aviation have been saying for a long time [is] that the FAA needs more resources.”
The FAA remedied the outage within a few hours of the failure, which was later blamed on human error while synchronizing a live database with and a backup system.
United recovered relatively quickly from “significant irregular operations” in the days following Elliott, according to the company’s earnings report. Nearly 36% of the carrier’s flights were impacted by severe weather, yet most customers made it to their destination within four hours of the scheduled arrival time.
Nonetheless, United, the third-largest U.S. airline based on revenue, was ranked fourth out of nine major domestic carriers in the Wall Street Journal’s annual scorecard last week, one spot behind Southwest. The scorecard assesses airlines based on several customer service metrics, including cancellations, delays and complaints.
Overall, the average cancellation rate for all major carriers last year was 2.6%, up from 1.8% during 2021, according to the report.
“Any airline that’s operating meaningfully worse than United is out over their skis and has simply outgrown their technology, infrastructure and resources,” Kirby said.
Southwest recently pledged to invest $1 billion in modernization over the next year and to accelerate IT upgrades. United partnered with Apple to digitize maintenance documents in October. And Delta signed a multiyear cloud migration deal with AWS in July.
Competitive advantage is one reason to modernize. Efficiency gains are another. But keeping operations up and running is now front and center in the airline industry.
“We believe any airline that tries to run at the same stepping levels that it had pre-pandemic is bound to fail and likely to tip over to meltdown anytime there are weather or air traffic control stresses in the system,” Kirby said.
