Over the last week, tens (hundreds?) of thousands of Southwest Airlines customers had flights cancelled, bags lost, and family time curtailed. My friend Dan was one of them.
“I was going to fly from Dallas to San Jose to spend time with my brother and his fiancee’s family,” he told me. “After 10 hours at the airport, my dog and I left at 4 a.m., but our bags landed in California a few days later.”
Southwest is going to lose tens of millions of dollars in ticket, food, drink, and other revenue thanks to a perfect storm of bad weather, high illnesses among staff, and its outdated staff scheduling technology. NPR reports that Southwest’s oft-praised point-to-point flight strategy was also vulnerable to horrendously bad weather.
The bad press on top of it all will cost them millions more in public trust – and possibly customers. And the U.S. Department of Transportation is threatening huge fines if Southwest doesn’t follow through on reimbursements.
The first two consequences make sense. That’s what happens when a company messes up – the market responds.
But the Department of Transportation’s threats seem disproportionate and timed more as a PR effort than real oversight. Yes, hundreds of thousands of people were mildly to severely inconvenienced. But issuing threats against Southwest before the company has a chance to assess what happened, provide reimbursements, track down luggage, and make changes has a bad, and hypocritical, smell to it.
First, the feds aren’t great at performance
“Southwest didn’t know where my bags were on Tuesday,” said Dan. “But by Thursday, they showed them to my brother and said they were going to ship them to me.”
Southwest’s mess-ups caused a lot of pain and suffering because it’s difficult to scramble to the airport, wait for hours, go back home, come back, and radically change holiday plans. Being stranded is even worse – have you ever slept on an airport chair overnight?
Still, we’re ultimately talking about missed flights. It’s nightmarish, but nobody died or lost their life savings. It’s not like customers were forced to buy tickets from Southwest – whereas Americans were forced to receive COVID-19 vaccines or lose their job, and were forced to close their businesses for months during the pandemic. (The feds did a bang-up job helping companies recover from that, too – at least $100 billion was lost to PPP fraud.)
Compared to the feds, Southwest is an angel – and, unlike the feds, Southwest actually gives back at least some of what its mistakes took from customers. Try getting money back from the IRS after it makes a mistake.
And they lousy at accountability
I’m a public relations consultant who regularly tells prospects and clients that being prepared for disasters is critical to not burning bridges with customers, investors, employees, and other stakeholders. Southwest executives know this – it’s why they stopped blaming weather, acknowledged employee concerns, and focused on customer reimbursements and rebookings.
While the federal government is pouncing on a private company that will be held accountable by market forces, the bureaucracy is ignoring the log in its own eye. What were the consequences for decades of lying in Afghanistan, the disastrous pandemic lockdowns, and regular reports of tens of billions of dollars in improper payments, fraud, and other wasted taxpayer money? Firing politicians is easy – voters can do it every two, four, or six years. Firing bureaucrats is nearly impossible.
Most people don’t like to admit that they’re wrong. It’s why the federal government has a legitimate consumer protection duty – so that when companies try to lie, cheat, and steal, there is recourse. Politicians don’t seem willing to do the same for taxpayers.
Third: Southwest is already being held accountable
Market accountability is already hitting Southwest hard. The company lost $75 million after a similar debacle in 2021 – and CNBC reports this time the cost may be higher. Company executives have said that it will take weeks for all reimbursements to come through, but the company appears ready to honor its commitments.
The Thrifty Traveler blog also reports that Southwest has:
- Issued flight change waivers
- Offered reimbursement of some extra costs travelers were forced to endure.
- Obligations under the law to reimburse customers whose flights it cancelled.
Additionally, CEO Bob Jordan promised that the company “need[s] to double down on” existing “plans to upgrade systems” – a vow that will be expensive to implement and even more expensive to the company’s financial statements and public image if he’s lying.
Some customers have made it clear that this debacle is the last straw for their relationship with Southwest. Dan, however, will still be a customer. “I haven’t heard from Southwest about reimbursement, but I trust they’ll come through. I’d fly them again because of their consistent safety and the fact that they appear to be making the changes necessary to protect customers against this type of debacle.”
In short, there seems little for the Department of Transportation to actually do to “protect” customers from Southwest’s mistakes. Secretary Pete Buttigieg’s TV appearances and statements appear to be more about opportunism and virtue signaling than doing anything substantive.
If only we could say the same about the federal government.
Courtesy of Real Clear Markets.
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