STUCK IN AUTOPILOT: SOUTHWEST AIRLINE’S PEDESTRIAN APPROACH TO CLIMATE CHANGE

Southwest’s tunnel vision approach to climate change leaves its business exposed to today’s climate conditions

Airlines are a major contributor to increasing environmental climate change due to their large contribution to global fuel consumption and the associated release of greenhouse gases [1]. As a result, companies have actively attempted to decrease their contribution to climate change through initiatives focused on fuel-efficiency and alternative fuels. Southwest Airlines is an industry leader that consistently aims to surpass greenhouse gas emissions targets by investing in partnerships and innovation that push continuous supply chain and operational improvement. [2]

Despite Southwest’s efforts to mitigate its impact on global climate change, has its focus on mitigation distracted the company from focusing on the operational business challenges it will face in current and future climate change?

Global climate change: Impact on Southwest’s business

At least two documented consequences of climate change have significantly impacted Southwest Airlines: the increase in hurricane frequency and intensity and the rise in air temperatures. This year, the world witnessed the historically severe hurricanes make landfall in Texas, Florida, the Caribbean, and Puerto Rico, which left many airports temporarily closed due to massive wind and water damage. Southwest attributed its third quarter losses of ~$100M directly to these natural disasters. [3]

Besides financial metrics, Southwest is also qualitatively impacted by the rising global air temperatures. As temperatures increase, the hotter air causes difficulties in planes’ ability to takeoff. Ultimately, airlines must delay flights until conditions improve or reduce the weight aboard (i.e., remove either passengers or cargo) until conditions are suitable. Since 1980s, the number of weight restricted summer days has increased validating the persistence of this problem. [1]

Reactive measures taken by Southwest’s leadership team

In response to increased hurricane disasters and air temperature, Southwest’s management team has lead with safety and people first approaches, but has yet to truly demonstrate a comprehensive strategic response to the looming environmental threats facing the business.

For example, in the wake of Hurricane Harvey, Southwest’s biggest challenge was its limited fuel supply after the hurricane surge subsided. As a short-term proactive measure—in fear that operations of refineries would not resume immediately—Southwest organized tanker trucks to deliver fuel from Dallas to Houston. Southwest was fortunate to have a small buffer of fuel on-hand to resume routes until additional fuel could arrive. In addition, Southwest communicated to its workforce the importance of limiting its use of unnecessary fuel (e.g., air-conditioning when parked). Southwest’s point-to-point flight pattern model also contains some of the challenges within specific geographic regions. [4]

Increasing air temperatures have seen even less action from the management team. The general solution has been to reduce plane weight during extreme temperatures, “Typically in the hotter days of the summer, you may have to bump payload, which includes cargo and/or passengers”[1]. Again, Southwest’s emphasizes safety over profit by using a reduction in passengers to mitigate takeoff issues rather than implementing an alternative strategy (e.g., rescheduling) to keep planes full. [1]

Taking the climate response off autopilot

Southwest’s previous focus on limiting their contribution to global climate change will not be enough to prepare the business for the operational impacts of today’s new climate conditions. To reduce the impact of their topline, Southwest needs to build in new measures that prepare its operations to better manage the risks associated with severe weather events.

Mitigating the effects of severe natural disasters on operations:

  • Establish a permanent organizational group that focuses on natural disaster scenarios and preparations. While Southwest currently creates temporary teams during emergencies, it should maintain a constant team that focuses on geologist forecast and plans to mitigate the impacts of storms.
  • Create resource buffers within cities likely to be impacted by natural disasters. This will decrease the downtime of operations, allowing the business to resume quicker to generate revenues and serve as a social leader by offering flights to those effected.

Mitigating the effects of severe temperature on operations:

  • Integrate air density calculations into airport forecast for suitable takeoffs and landings to increase the visibility into potential weather impacts
  • Improve flight patterns to reduce flights during peak temperature times while maintaining total flight volumes
  • Coordinate with manufacturers to design planes that are more adaptive to weather changes

Southwest’s chance to soar past competitors and climate change

Southwest faces many challenges ahead: it must balance its focus on reducing its current greenhouse gas emissions and the realities of climate change on its existing business. What do you view as Southwest’s best option to reduce its business exposure to the drastically changing environmental conditions? How has such a huge issue flown below the radar of Southwest’s other climate priorities. What will it take for the leadership team to view this as a more serious and top priority for the business?

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[1] Wichter, Z. (2017). Too Hot to Fly? Climate Change May Take a Toll on Air Travel. [online] Nytimes.com. Available at: https://www.nytimes.com/2017/06/20/business/flying-climate-change.html [Accessed 14 Nov. 2017].

[2] Southwest.com. (2017). Environmental Initiatives. [online] Available at: https://www.southwest.com/html/southwest-difference/southwest-citizenship/environmental-initiatives/ [Accessed 14 Nov. 2017].

[3] Southwest 2017, Quarterly Report Q3 2017, Southwest Airlines Company. Available at: http://otp.investis.com/clients/us/southwest/SEC/sec-show.aspx?Type=page&FilingId=12353450-5695-122971&CIK=0000092380&Index=111000 [Accessed 14 Nov. 2017]

[4] Schlangenstein, M. (2017). Southwest Airlines Begins Its Houston Return. [online] Bloomberg.com. Available at: https://www.bloomberg.com/news/articles/2017-09-01/moving-crews-saving-fuel-southwest-primes-for-houston-re-start [Accessed 14 Nov. 2017].

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5 thoughts on “STUCK IN AUTOPILOT: SOUTHWEST AIRLINE’S PEDESTRIAN APPROACH TO CLIMATE CHANGE

  1. Excellent post with some remarkable insights. I had no idea rising temperatures had such a direct effect on airline operations!

    While I do agree that South West’s current approach to climate change events has been reactive, I wonder if they are the ones to blame for it. By all accounts, the severity of these events has caught everyone by surprise. I agree that better ways to predict these events would help, but I am unsure whether SW has the bandwidth or the know-how to invest in them. For now, they might be better served with a more robust yet reactive approach. This could be through investing in buffers like you suggest and creating a dedicated team which can respond to such events on a consistent basis. Even if you can’t predict where the next hurricane will occur you could create a centralized knowledge base and plan of action for how SW responds in these situations.

    You also raise an interesting point regarding rescheduling flights (better from a climate change and utilization perspective) vs flying with a reduced load (fulfilling customer promise). While it is difficult to select a right answer without detailed analysis, my gut reaction would be to go with the latter. Rescheduling flights consistently is likely drive to away customers to rival airlines which could create more problems than it solves.

  2. Thank you for sharing this. Interesting analysis and recommendations! I agree with your recommendations to predict / monitor weathers continuously with a dedicated team, create buffers with oil inventory, work with airplane manufacturers to re-design airplanes, etc. They are all great ideas for a single business to operate around climate changes and severe weather patterns. However, I also agree with you on Southwest’s efforts are enough. As one of the biggest oil spending companies, I think they make a bigger impact on changing climate patterns and rising temperature by partnering with other airlines / airline manufacturers and working with government agencies to come up with measures to prevent (or slow down) climate changes and rising temperature. An example would be using all planes that use less oil and are better suited to withstand severe weather. I would be interested in what the airline industry is doing globally to deal with climate changes.

  3. This is fascinating! I thought your analysis of the problem and proposed solutions were excellent. To your last question, I think that Southwest will likely take climate change challenges more seriously if they view it as a customer service problem. Southwest prides itself on its customer service, presenting itself as a friendly, down to earth airline that goes out of its way to delight customers and doesn’t nickel and dime them by charging baggage or change fees. Management should realize that being more proactive about climate change could be another way to differentiate the airline from its competition in terms of customer service. It can enhance its reputation for reliability if it manages inevitable weather events to be less disruptive for customers compared to competition. On the flip side, if it lags its competitors in addressing climate change challenges, it could irreparably damage its reputation in the market.

  4. This was a great summary and analysis of a situation I had not thought of before from this perspective. I specifically appreciated all your suggestions to Southwest to mitigate the effects of severe natural disasters on operations. This post reminded me of the Ikea case. To some extent, I wonder how sincere and genuine Southwest’s efforts at sustainability truly are. Yet again, we have a case where the company doing something to fix the problem is also one of the companies causing the issues. As such, I would add a third bucket to your proposed solutions: what should Southwest do to help the effects of climate change? Perhaps they should focus on co-developing airplanes to be more fuel efficient, or focus on gas-saving even aside from times of temperature stress.

  5. I agree with the suggestion to create a permanent group focusing on natural disaster preparedness and contingency planning. I think this is really the only short-term solution to the natural disaster question…route adjustments (e.g., avoiding hurricane-prone areas) don’t seem possible before populations shift away from these same spots, and the airlines likely have long-term gate leasing arrangements which would preclude simply moving operations elsewhere.

    One option on the air temperature front may be to start offering “flex” tickets at a discount to customers with flexible travel plans. This may work in these hotter US southwest climates given the higher mix of retirees in the area (e.g., Phoenix). Passengers could buy tickets within a certain window (e.g., one or two calendar days) and be informed of the exact flight time a week or three days ahead of time (once weather patterns are known). This could allow the airline to shift some passengers onto night flights if temperatures are indeed too hot during the day. This could allow the airline to avoid costly “bumps” where they have to compensate passengers.

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