Failing to keep up with technology (the real cost to Southwest Airlines)
January 17, 2023
Southwest Airlines, one of the world’s most well-known and respected airlines, experienced a very public operational meltdown over the past December holiday season that was caused by the ineptitude of its legacy computer system. This event was a clear example of how a company’s reliance on old technology can cause significant disruptions and damage to the company’s reputation and bottom line.
Southwest’s failure to proactively upgrade legacy technology went largely unnoticed until the inevitable. And CEO Bob Jordan’s, “the tools we use to recover from disruption serve us well 99% of the time, but clearly, we need to double down on our already existing plans to upgrade systems”. While their competitors throughout the U.S. were operating normally, Southwest was canceling over 60% of their flights.
So how did Southwest Airlines get into this mess, and most importantly, what can we learn to avoid it?
What Is a Legacy System?
A legacy system is any computer system or software program that has been around for several years but may no longer be supported by its developers or users. These systems are often outdated, lack features found in newer systems, and can be difficult to maintain or upgrade. For many companies, legacy systems (and processes) are an ingrained part of their operations and cannot easily be replaced due to perceived cost constraints or complacency.
Southwest Airlines’ Legacy System
Southwest Airlines has used the same reservation system for internal operations and client access since 1971 – more than four decades ago! This system was designed for the paper ticket era. Southwest operations came to a standstill as a result of inefficient and inflexible legacy systems. Pilots and flight attendants could not be assigned to flights while travelers waited in airports. Furthermore, this outdated system restricts Southwest Airlines’ ability to innovate and adapt to changing internal operations, customer needs, and the inevitable weather challenge.
The need to upgrade Southwest’s technology stack was well-known internally. The unfortunate cost of doing nothing caught up with them. The real dollar cost and brand impact are immeasurable.
The Benefits of Modernizing the System
Modernizing Southwest Airlines’ reservation system is foundational for the airline to operate. It would bring table stakes benefits, including better customer service through improved online booking options; increased loyalty programs; improved flight tracking capabilities; faster gate changes; improved flight planning capabilities; better communication between passengers and agents; better customer data collection capabilities; improved security protocols; better fraud detection capabilities and more efficient operations overall. Furthermore, it would allow them to leverage new technologies such as artificial intelligence (AI) and machine learning (ML) which could help them improve operational efficiency further by automating certain processes. Finally, it could help them reduce costs associated with manual labor required for certain tasks such as ticketing or boarding processes.
Modernizing their technology will benefit both customers and employees by providing a better user experience, enhanced operational capabilities, greater security, while reducing costly manual processes (which inevitably leads to errors). The pressure to at least maintain your position, let alone stay ahead of your competition, cannot be realized if you’re handcuffed by old technology.
So what’s the real cost of the operational meltdown? Southwest Airlines expects this will cost them between $725 to $825 million.