4 Important Leadership Lessons From Southwest Airlines’ Holiday Meltdown

Things went south for Southwest over the December holidays, as the airline canceled more than 15,000 flights, stranding thousands of travelers across the country.

While the flight cancellations were initially triggered by a major winter storm, they grew exponentially as the weather-related disruptions overwhelmed Southwest’s antiquated crew scheduling system.

It was a terrible episode for a company that has long been held up as a model for others, thanks to its unique corporate culture and its relentless focus on the customer experience. But there are several important lessons that every business should learn from Southwest’s holiday debacle:

1. Great recoveries can eclipse ugly failures.

Even the best, most well-managed companies are not immune to failures in the customer experience. But what makes those companies different is they recognize that they need not resign themselves to creating a dissatisfied customer (or, worse, a vocal brand detractor) when failures occur.

Rather, they understand that if they overcorrect on the recovery, they have an opportunity to create a more loyal customer after the recovery than they had before the failure. It’s a phenomenon that’s been studied so extensively, there’s actually a term coined for it – the service paradox. It’s a consequence of how our brains are wired, because the memories we carry away from an experience are largely shaped by the peaks and valleys in the encounter, along with the last thing that happens to us in the interaction.

Exceptional recoveries create an impressive peak at the end of an experience — that’s the perfect combination of ingredients for memory-making, and it’s why a truly great recovery can wholly overshadow the negativity of the original failure. (To see the phenomenon in action, check out this video where I describe my personal experience with The Best Service Recovery… Ever!)

The jury’s still out on whether Southwest’s recovery will be good enough to capitalize on the service paradox. The airline has said it will refund the tickets of passengers impacted by the cancellations, as well as reimburse them for additional expenses they incurred (meals, hotel accommodations, and ground transportation). In addition, Southwest is offering affected customers 25,000 frequent flier miles (worth about $300 towards future travel), with no expiration or blackout dates.

At least one industry analyst who was booked on a canceled flight (The Points Guy’s Zach Griff) has been impressed with Southwest’s recovery thus far, posting this tweet commending the company’s response. That’s precisely the kind of reaction the airline needs to elicit from many more of its impacted passengers.

The key takeaway, however, for any business is simply this: View experience failures as an opportunity to engineer remarkable recoveries, because that’s how you turn disappointed customers into delighted ones.

2. Don’t equate glamour with importance.

In the end, Southwest’s Achilles heel was aging crew scheduling software that buckled under the strain of so many flight cancellations.

As Captain Michael Santoro, Vice President of the Southwest Airlines Pilots Association, told CBS News: “The storm was the catalyst that started this whole event, but the major problem is that our scheduling IT infrastructure is outdated and can’t handle the massive cancellations that had to happen that day when the weather event occurred. You get this snowball effect where it can’t keep track of where pilots are, flight attendants are and airplanes are.”

Southwest’s pilot and flight attendant unions both assert that these systems issues were no surprise to anyone in the company. They claim that, despite repeated pleas from the unions, the airline elected to not make significant remedial investments in its IT infrastructure.

Southwest CEO Robert Jordan now seems to recognize that as a mistake. In a Christmas Day message to employees, he acknowledged the need to invest more in modernization of the airline’s crew scheduling system.

This challenge isn’t unique to Southwest. Plenty of companies are saddled with aging legacy systems that are starved for investment, held together with the IT equivalent of duct tape. Reluctance to invest in such areas reflects a larger management bias, one that directs attention (and money) to more “glamorous” parts of a business – the parts that are perceived to be more visible, more exciting, more stimulating.

Indeed, it is these types of corporate “shiny objects” that more easily draw investment: retail store makeovers, branding initiatives, bleeding edge technology projects, distribution expansions, mergers and acquisitions. Left in the dust is funding for seemingly less “sexy” endeavors, be it in fulfillment operations, general logistics, or internal systems and IT infrastructure.

It’s not that the glamorous, buzzworthy projects aren’t valuable, but they must be balanced alongside investments in more “boring” (but no less important) endeavors. Oftentimes – as Southwest discovered with its crew scheduling software – it’s in the least glamorous parts of a business where the strongest operational foundations need to be forged.

If the essential gears of your business machinery are not well-oiled, then you are planting the seeds for future underperformance, if not outright failure. Steer your investment dollars accordingly.

3. Listening to employees is as important as listening to customers.

According to the Washington Post, Southwest’s unions had warned the airline for years that its outdated systems were a critical point of vulnerability. Those warnings, however, apparently went unheeded, as executives declined to make the IT investments required to resolve that vulnerability. Recent events have forced their hand, but not without first inducing a great deal of customer pain.

It’s immaterial whether Southwest executives either never heard these employee concerns or chose to ignore them. The lesson is the same, regardless: Leaders must listen to their frontline employees and view that constituency as a key source of intelligence for shaping future business decisions and investment allocations.

A business’ frontline staff is arguably most knowledgeable about the obstacles that stand in the way of delivering a consistently great customer experience. (In the case of Southwest, it came in the form of pilots and flight attendants sounding the alarm over the antiquated crew scheduling systems.) But too often, the ideas and concerns volunteered by rank-and-file employees falls on deaf ears.

Voice-of-the-Customer programs are all the rage in organizations that are trying to foster customer-centricity, but they represent an incomplete solution. The Voice-of-the-Employee is just as important to capture – and act on.

In some organizations, employees won’t be shy about voicing their suggestions. In others, cultural norms might dissuade staff from speaking up (for fear of retribution), and so in those environments, it’s important that leaders proactively and visibly open the employee feedback spigot.

While employees might not get the final say, what’s important is that their input is actively solicited, thoughtfully considered, combined with other intelligence sources, and ultimately used to drive executive decision making.

4. Brand equity can help contain the damage from experience failures.

Much has been written about Southwest’s holiday troubles, with quite a few customer experience experts and management gurus declaring how difficult it will be for Southwest to regain its former glory. The go-to platitude is always some variation on “it takes a lifetime to build a reputation and a moment to destroy it.”

But the reality is more nuanced than that.

Yes, Southwest had a terrible, horrible, no good, very bad week. And, no question, it’s going to cost them from both a financial and reputational perspective. However, to understand just how scarring the debacle might be to the Southwest brand, it requires some context.

Let’s remember that this is an airline which has earned either the #1 or #2 spot in J.D. Power’s North America Airline Satisfaction Study for eleven years in a row. (In 2022, Southwest was the top-ranked airline in the Economy/Basic Economy segment, based on J.D. Power’s passenger surveys.)

What that means is Southwest has built up quite a reservoir of customer goodwill – or, to put it in marketing parlance, they’ve got some impressive brand equity. A lot of people have favorable impressions of Southwest, and the airline has more than its share of vocal, passionate brand advocates.

That context is important, given the psychology of how brand perceptions are formed and maintained – in part through our (unconscious) reliance on the “confirmation bias.” That cognitive bias leads us to interpret the world around us in a manner that confirms our pre-existing beliefs. We pay more attention to data points that align with those beliefs, while conveniently overlooking those that contradict them.

In the business arena, this means happy, lifelong customers will cut you some slack when problems arise. They’ll be more forgiving, more willing to view a problem as an isolated failing. (Notably, the bias cuts both ways – it also makes it more difficult for companies with poor reputations to quickly reverse negative customer sentiment.)

It’s for this reason that Southwest has a somewhat clearer path forward compared to lower-rated and less-loved airlines, such as Spirit, which have also experienced significant service disruptions in the recent past. When a company like Spirit disappoints, people think, “Oh, there they go again!” Our confirmation bias frames a Spirit failure as yet another reaffirming data point for the airline’s poor reputation. However, when the much higher-rated Southwest has a similar misstep, it’s more likely to be viewed by consumers as an anomaly rather than a brand-defining moment.

To be clear, beloved businesses aren’t immune to the brand tarnish that can be triggered by high-profile customer experience failures. (If Southwest has repeated episodes of mass cancellations, comparable to what happened in late December, it will move the needle on consumer perceptions.) But strong brand equity – forged not through clever marketing, but through consistently great customer experiences – does provide helpful armor for weathering such storms.

Carefully studied for decades by academics and business leaders alike, Southwest has taught us much over the years about how to create distinctive experiences that turn customers and employees into lifelong fans. While it might not be the platform the airline would have hoped for, its recent struggles offer yet another valuable set of lessons for any business that aspires to greatness.

Jon Picoult is the author of FROM IMPRESSED TO OBSESSED: 12 Principles for Turning Customers and Employees into Lifelong Fans. Sign up for his monthly Customer Experience & Leadership eNewsletter here.