Southwest Airlines’ 2022 pre-Christmas nightmare is unlikely to inflict lasting damage on the company’s reputation if management compensates customers and follows through on vows for operational changes, communications and management professionals say.
In recent days, social media has been flooded with angry Southwest customers after storms and unstable computer systems forced the airline, the largest domestic carrier in the US, to cancel more than 13,000 flights . Chief Executive Bob Jordan has issued multiple apologies as employees work overtime to clean up the mess, which Washington officials are vowing to look into.
However, even a meltdown of this magnitude poses little long-term threat to the Southwest. The carrier will have to demonstrate that it has fixed the technical problems that contributed to the crisis and offer customers generous compensation.
The first test for the airline, which did not respond to a request for comment, comes Friday as the carrier tries to resume normal operations.
“They’ve come into the year with a lot of goodwill in the tank,” said Jay Sorensen, a former Midwest Airlines marketing executive who is now president of IdeaWorksCompany, a consulting firm. “I don’t see any long-term damage to Southwest Airlines unless they completely disrupt the recovery.”
Customer service blunders like Southwest’s provoke a harsh public backlash and prompt business leaders to promise change. But gaffes are often soon forgotten.
United Airlines came under fire in 2017 after a 69-year-old passenger crawling off a plane was captured on video that went viral. The company reached a private, out-of-court settlement with the individual.
Other than a long streak of bad press and public outcry, “none of this really had a big impact” on United, said David Austen-Smith, a business professor at Northwestern University whose work includes corporate ethics. and crisis management.
“The bottom line is that when people buy airline tickets they’re looking for price and convenience,” he said. “Southwest offers value and convenience, and for the most part they are reliable.”
This does not mean that the airline will not suffer any consequences. Consumers are likely to book with other carriers in the first quarter of next year, although that will likely moderate in subsequent months, according to Savanthi Syth, an analyst at Raymond James Financial Inc. who recommends buying the shares.
The softness in bookings may last “until the half-life of anger is over and people are making plans for spring break,” said Andrew Davis, a former transportation analyst at T. Rowe Price Group Inc. which is a long-haul airline. investor and currently the fourth shareholder of Southwest.
“This time next year, just like a lot of people who were going to fly Southwest will be doing it again,” he said.
Shares of Southwest started to rally on Thursday, but were still down more than 9% for the week. Analysts have estimated that the crisis may reduce fourth-quarter profits by up to 5%.
Working in the industry’s favor is a dearth of alternatives to long-haul travel in the US, making it harder for customers to avoid a carrier for poor service.
“This has given the industry a certain level of confidence that they can get away with it more than other industries, and they’re right,” said Eric Dezenhall, chief executive of crisis management consultancy Dezenhall Resources.
Internally, such a crisis can be all-consuming for a company. And while industry watchers say the incident is unlikely to put Southwest’s leaders in danger, it will fuel plenty of scrutiny.
“The board will worry. The board needs to worry,” said Davia Temin, founder of New York-based crisis consultancy Temin & Co. “The board is responsible for making sure the reputation is as good as it can be and that there are crisis management plans for even the unthinkable.”
Dezenhall said business collapses that capture the public’s attention often fuel speculation about a company’s possible demise. But this rarely happens without a clear mistake on the part of an individual.
“People tend to move on once they’re done in a way,” he said. “They’re still mad, but they got some goodies out of it.”
Southwest has pledged to honor “reasonable requests” for reimbursement from customers who incurred expenses for lodging, meals and alternative transportation after their flights were delayed or canceled.
Davis, now senior vice president of strategy and investment at Cox Enterprises, said the airline will likely also offer customers a generous travel voucher or discount.
“A significant force, probably the biggest you’ll ever see,” he said.
Starbucks Corp. sparked a heated race controversy after a 2018 incident in which two black men were arrested at a Philadelphia store after one asked to use the restroom without ordering while waiting for another guest to arrive.
Video of the incident was widely shared online, and the hashtag #BoycottStarbucks trended on Twitter. After an apology from then-CEO Kevin Johnson, the coffee chain closed more than 8,000 stores for anti-bias training and instituted a policy that its bathrooms would be open to everyone. It has also released corporate diversity data and published details about its inclusion initiatives.
Jordan, Southwest’s CEO, has already taken steps to rebuild public trust. In addition to his apology, he told employees, “I’m responsible for this,” and promised to “double down” on plans to upgrade systems that were overwhelmed.
“It’s not enough for even a well-intentioned CEO to give his word,” Temin said. “It has to start a real series of events and change.”