Aviation Industry News

WRIGHT AMENDMENT AND LOVE FIELD


On February 3, 2014, Southwest Airlines announced the 15 cities it would serve non-stop from  Dallas' Love Field Airport once the Wright Amendment would be lifted on October 13, 2014. The fifteen cities named by Southwest included:

* Denver; Baltimore; Las Vegas; Chicago Midway; and Orlando; (the non-stop service begins October 13, 2014)

* New York's La Guardia; Washington Reagan National Airport; Atlanta; Phoenix; Los Angeles; Nashville; Orange County, California; San Diego; Tampa; and Fort Lauderdale.

Southwest is celebrating the whole year to the run-up of a regulatory event that has characterized the aviation history of North Texas for the last three-and-half decade. A snippet of Wright Amendment:

* 1980: The law was passed to help the newly established D/FW International Airport from unfair competition by restricting the non-stop flights from Love Filed to the adjacent four states: NM, LA, OK and AK.

* 1997: Congress added four more states to the list of non-stop destinations

* 2006: An agreement was reached among the city of Dallas, city of Fort Worth, American Airlines and Southwest Airlines to extend the Wright Amendment through October 13, 2014. The agreement later passed by Congress also called for, among others:
(1) Reducing the maximum number of gates from 32 to 20
(2) Prohibiting international flights
(3) Curfew on overnight operation of landings and takeoffs


Delta to Revamp Frequent Miles Program
Delta Air Lines announced on February 26, 2014 that it would revamp its SkyMiles frequent-flier program to reward miles based on dollars spent instead of miles flown. The proposed change will become effective January 1, 2015. Delta's SkyMiles program includes five tiers: (1) General; (2) Silver; (3) Gold; (4) Platinum; and (5) Diamond. A "general" flier will get, under the new plan, 5 miles for each dollar spent, while a "diamond" will get 11 miles per dollar spent. Delta's move was not new in the aviation industry. In the USA, Virgin America and Jet Blue already have frequent flier rewards based on "dollar spent" model. Delta is the latest, but the first US legacy carrier, to switch to "dollar-based" model from the "miles-based" model. Now, it is to be seen how the new American Group integrates its two "miles-based" frequent-flier programs: AAdvantage from the old American's, industry's oldest frequent-flier program, and US Airways' Dividend Miles program. Southwest Airlines changed its Rapid Rewards frequent-flier program on March 1, 2011 to a "dollar-spent" model.

Judicial Probe against Major Airlines on Price-Fixing
On July 1, 2015, major US airlines admitted that US DOJ had opened an inquiry into "price-fixing" of the nation's major airlines.


Obama Administration Launches Formal Probe in Price Gouging
The Department of Transportation on July 24, 2015 sent letters to nation's five biggest airlines-- American, Southwest, JetBlue, Delta and United--seeking for information before and after May 12, 2015, Amtrak accident near Philadelphia that killed eight people, thus formalizing Obama administration's launch of price gouging investigation of airlines. The report that DOJ was looking into airlines' price-fixing strategy came into light on July 1, 2015, and since then, at least 49 lawsuits were filed in 12 federal district courts.

Buffett's Airline Holdings Pay Rich Dividends
That he has been an iconic investor with a knack for choosing long-term value over short-term quick bucks has been proven one more time this year as Warrant Buffett's equity stake in Southwest and Delta Airlines has returned $428 million and $398 million in earnings, respectively for a three-year period ending November 2019.
To avoid giving up the profits for a major shareholder for short-term investing under the so called short-swing rule, Berkshire Hathaway has retained equity positions below 10%. 

Pair of Airline Quality Surveys Put SW on the Top

The Dallas Morning News on May 17, 2022 has published a couple of aviation industry quality surveys that shows an industry in decline, but Dallas-based Southwest holding the top spot in both Wichita State University's Airline Quality Rating and J.D. Power's Airline Satisfaction Ranking. AQR ranks airlines on four measures: (1) customer complaint, (2) flight delay, (3) bumped-up passengers and (4) lost/mishandled luggage. ASR ranks airlines on customer satisfaction by class (premium, economy and business). Southwest ranks top on the basic ASR scores which apply to economy class rating. 

Buttigieg Urge Airlines to Help Passengers Travel "Safely, Reliably and Affordably"

As the airline cancellations and delays rose to 3.2% and 24% of all flights, respectively, in the first half of 2022, an exasperated transportation secretary on August 19, 2022 wrote in sharp letters to nation's airline CEOs that they should focus on operational reliability to help passengers fly from origin to destination "safely, reliably and affordably". Transportation Secretary Pete Buttigieg added that his department would soon unveil an "interactive portal" for air passengers. The portal will be up and running by September 2, 2022. The letter advises the airline leaders to follow best practices and protocols on 

* Meals and lodging if flights are significantly delayed or cancelled

* Improved customer services

* Efforts to address complaints more efficiently 

* Better refund policies. 

Airlines Update Delay, Cancellation Policies 

In response to Transportation Secretary Pete Buttigieg's August 19, 2022, letters to airlines' CEOs to call attention to the surge in flight delays and cancellations that had worsened in the summer months of 2022, nation's major airlines on August 31, 2022 updated their voucher and other compensation plans for flight delays and cancellations caused by worker shortages or operational problems. The airlines' actions were meant to ward off any potential administrative or legislative action as major airlines such as American, Southwest, Delta, United, Spirit, Frontier and JetBlue faced challenging times to sustain operational reliability during summer months of 2022. 

Key FAA System Glitch Grounds All Domestic Flights for 90 minutes

The malfunction of a key Federal Aviation Administration safety system has grounded all U.S. flights for about 90 minutes, beginning around 8AM CT on January 11, 2022. Although the airlines resumed their flights after the aircraft grounding was lifted, the operation didn't return to normalcy until hours later. FAA said in the evening that it had traced the root cause of the problem to a damaged database file in its Notice to Air Mission, or NOTAM, system. NOTAM feeds critical information to airplanes and pilots. 

FAA is now without a permanent head. Former Administrator Stephen Dickson resigned in March 2022, halfway through his five-year term. Billy Nolen, FAA's top safety executive, is working as an acting administrator. Biden administration in July 2022 named Denver International Airport chief Phillip Washington to the post. The confirmation hearing was not held, and Biden administration resubmitted Washington's nomination.  

********************** FEDERAL AVIATION ADMINISTRATION **********************

Biden Pick Withdraws Nomination

Biden administration's pick for the FAA chief withdrew his nomination, according to March 26, 2023, edition of The Dallas Morning News. Denver International Airport chief Phillip Washington faced hurdles from Republicans from the get-go moment as GOP Senators insisted that Washington lacked aviation experience. Key Democratic Senators had also doubt about Washington, making it all but impossible to win a Senate confirmation. During Senate hearing, Washington was attacked by Senator Ted Cruz and other Republicans on the merit of qualification. 

Senate Confirms Nominee as New FAA Chief

The U.S. Senate on October 24, 2023 confirmed 98-0 Michael Whitaker as the new head of Federal Aviation Administration, filling a critical void that had been left vacant for 18 months amidst surging airline traffic, employee unrest at major airlines and growing number near-collision incidents averted by happenstance. 

********************** FEDERAL AVIATION ADMINISTRATION **********************

FAA Requires a Second Cockpit Barrier in New Planes

Federal Aviation Administration on June 13, 2023 announced that the manufacturers had to build a second cockpit barrier for the new commercial passenger planes. The rule is to be published in the Federal Register in August 2023 and will be effective circa two years henceforth. The FAA requirement on the second cockpit barrier is obtained after a series of negotiations with airlines, unions, manufacturers and regulators. Acting FAA Administrator Polly Trottenberg on June 13, 2023 expressed optimism that airlines and manufacturers would make those changes quickly. 

*********************************** PART 135 CARRIERS ***************************

American, Southwest Oppose the Rule Relaxation of Part 135 Carriers

American Airlines and Southwest objected to waiver of several FAA rules for Part 135 carriers such as private charter airline JSX that operates from Dallas Love Field airport. Part 135 carriers can operate planes with 30 or less seats, and their passengers and crew members don't need to go through the TSA security checkpoints. The Dallas Morning News reported on October 14, 2023 in the Business section that two North Texas-based legacy carriers had recently expressed concern over security and safety of passengers and airline staff because of the lax rules covering the Part 135 airlines. 

*********************************** PART 135 CARRIERS ***************************

************************************* BELL HELICOPTER *************************

Recent Crash Raises Red Flag about Tilt-Rotor Aircraft's Safety

The controversy over the tilt-rotor technology is not something new. They have been swirling around for years as Bell Textron is developing the military's Future Long-Range Assault Aircraft, or FLRAA, that does take off and land vertically like copter and fly at an elevation like a turbo-prop plane. Last year, the U.S. military rewarded Bell Textron for V-280 Valor for the Army to replace its iconic UH-60 Black Hawk utility helicopter. V-280 Valor beat out a competitive model, compound rotor Defiant X, offered by a collaboration of Boeing and Connecticut-based Sikorsky, owned by Lockheed Martin. Connecticut's Congressional delegation, including Senator Chris Murphy, are still questioning whether it [choosing V-280 Valor] is a rushed decision without a more vetted review. The Connecticut delegation received more ammunition after the November 29, 2023, crash of a V-22 Osprey off the coast of Japan that had killed all eight airmen on board. Although V-280 Valor and V-22 Osprey are fundamentally two different platforms, they are functionally similar on many operational aspects. Bell pioneered the underlying technology of V-22 Osprey in collaboration with Boeing.

Osprey Cleared to Resume Flying

Osprey was grounded on December 6, 2023 a week after a fatal crash in Japan had killed eight airmen. The fleet-wide grounding came after two fatal accidents in a span of few months and four fatal  accidents in two years. On March 8, 2024, the U.S. Naval Systems Command announced that the Osprey would resume flying for Marine Corps, Air Force and Navy. However, U.S. military pointed out that special attention and focus were given on Proprotor Gearbox, putting new checks-and-balances and instituting new operational guardrails prior to clearing. 

************************************* BELL HELICOPTER *************************

BOEING

****************** GROUNDING OF BOEING 737-9 MAX AIRPLANE ******************

Alaska, United Ground all 737-9 MAX Planes

Many airline safety experts are seeing repeat of the failure of a key component of an earlier model of the Boeing 737, which is thought to be responsible for two fatal crashes resulting in 346 deaths, in the January 5, 2024, midair accident of the Alaska Airlines Flight 1282 in which a door plug has come off, resulting in injuries and chaos, but no fatalities as the plane has been brought to an emergency landing at the Portland airport. Since the January 5, 2024, fateful experience, all 171 Boeing 737-9 MAX planes were grounded. The affected airlines are United Airlines and Alaska Airlines, according to the January 9, 2024, edition of The Dallas Morning News. National Transportation Safety Board is conducting an investigation. Alaska Airlines Flight 1282 was on its way to Hawaii when the mishap had happened midair on January 5, 2024, but fortunately no major injury was reported. 

Prior to the January 5, 2024, incident, Alaska Airlines had three prior flights--December 7, 2023, January 3, 2024, and January 4, 2024--that had experienced the auto-pressurization fail light going off. NTSB Chair Jennifer Homendy said that the earlier incidents were concern too and would approach the investigation holistically. 

FAA Investigating Boeing on Door Plug Falling off Incident

Boeing on January 11, 2024 said that it would cooperate with Federal Aviation Administration in the agency's investigation into whether the aircraft manufacturer had adhered with all the quality procedures related to door plugs. components used to fill in the emergency exit doors, of the 737-9 MAX. Boeing is under the scanner after two fatal crashes involving 737-8 MAX planes in Indonesia and Ethiopia. After the January 5, 2024, mid-air mishap, in which a door plug fell off the Alaska Airlines Flight 1282 from Portland to Hawaii after it took off from Portland, FAA grounded all 737-9 MAX jets, including Alaska's 65 planes and United's 79 planes. 

Passengers File Suit against Boeing

Six passengers and a family member on January 11, 2024 filed a lawsuit against Boeing for a door plug loosening and falling off midair, leading to the passengers of the Alaska Airlines Flight 1282 going through a harrowing experience. The carrier is not listed as defendant.

FAA Recommends Checking for 737-900ER

FAA on January 22, 2024 recommended that airlines do check the door plugs for an earlier version of 737-9MAX, which had been grounded. According to the recommendation, airlines are to assess the door plugs for 737-900ER. Boeing delivered about 500 737-900ER planes between 2007 and 2019. Out of that, 380 do have door plugs instead of exits. 

Boeing Fires Executive at Its Vaunted 737 MAX Program

Boeing on February 21, 2024 announced that its head of 737 MAX program, Ed Clark, an 18-year Boeing veteran, was leaving the firm immediately. He will be replaced by Katie Ringgold, vice president of 737 delivery operation. The firing of Clark came after the high-profile safety mishap of an emergency door plug loosening off in the midair for an Alaska Airlines flight in January 2024 and subsequent security lapses identified related to door plugs in the follow-up maintenance check-ups. 

Boeing CEO to Step down

Strings of setbacks led to the reorganization at one of the most iconic American firms. After two crashes in Asia and Africa, high-profile security lapses, critique by the airline executives over its safety culture and in the midst of ongoing numerous investigations, including the recently launched FBI investigation, it was quite natural that there would be some degree of purge and upheaval at the top hierarchy of Boeing. 

On March 25, 2024, Boeing CEO David Calhoun said in a memoire to employees that the world's eyes were on "us" after the January 5, 2024, falling-off of the emergency door panel at an Alaska Airlines flight and he would step down at the end of the year. Calhoun became CEO in January 2020 after Dennis Muilenburg had been fired. 

In addition, Stan Deal, CEO of the firm's commercial airplane unit, is retiring. He will be succeeded by 51-year-old Stephanie Pope, who has been company's COO just for three months. Boeing Chairman and Board member Lawrence Kellner will not seek reelection. The aviation firm has tapped Former Qualcomm CEO Steven Mollenkopf to replace Kellner. 

Aside from personnel changes, Boeing is also reconsidering manufacturing model revamp by bringing in-house the Spirit AeroSystems, its fuselage supplier, which had been spun off two decades ago. 

Boeing Names New CEO

Boeing on July 31, 2024 named industry veteran Robert "Kelly" Ortberg the new CEO of the iconic company. Ortberg will begin his journey at Boeing on August 8, 2024.

****************** GROUNDING OF BOEING 737-9 MAX AIRPLANE ******************

AMERICAN AIRLINES

Pilots, Airline Reach a Tentative Deal

The Dallas Morning News reported on May 23, 2023 a tentative deal that had been reached last week by American Airlines and its pilots union, Allied Pilots Association. The deal in amendable on August 1, 2027. According to the deal, pilots will get an average raise of 21% this year, followed by 5% in 2024, 4% in 2025, 4% in 2026 and 3% in 2027, respectively. The raise will be effective every year on May 2. This year's hefty raise of 23% will come on the top of raises in back-payment going back to 2020, including 4% from 2020, 4% from 2021, and 14% from 2022, respectively. The agreement is expected to be ratified by August 1, 2023. The deal is considered to have bested the Delta's deal with its pilots that has raised Delta pilots' salaries, on the average, 18% on the day of signing, 5% in 2024, 4% in 2025, and 4% in 2026, respectively. Delta deal reached earlier this year will be amendable in December 2026. 

Pilots Approve the Deal

Allied Pilots Association members voted overwhelmingly to support the new contract. The approval vote was 72.7%, according to Ed Sicher, president of the Allied Pilots Association. The Dallas Morning News reported on August 22, 2023 the outcome of the endorsement vote by the APA members.

American Flight Attendants Ratify New Deal

The Dallas Morning News reported on September 13, 2024 that American Airlines' flight attendants ratified a new contract that would add an additional $4.2 billion to the current levels of benefits and compensation. The flight attendants' journey of a contentious negotiation began in 2019, but halted during the time of pandemic. The negotiation resumed in August 2021. After a tortuous journey, "they finally are getting an agreement that they have earned and deserve after a very long fight with American Airlines", added Association of Professional Flight Attendants, or APFA, President Julie Hedrick. American CEO Robert Isom celebrated "this important milestone" too. The new contract will be effective October 1, 2024 and become amendable on October 1, 2029. 

DELTA

DOT to Investigate Delta on Mass Flight Cancellation-related Passenger Impact

DOT Secretary Pete Buttigieg on July 23, 2024 announced that the regulators were looking into how Delta had addressed the passenger needs in the midst of mass flight cancellations last week because of CrowdStrike-related outage. 

SOUTHWEST AIRLINES

Southwest to Consider DFW Expansion in 2025

As part of a 2006 agreement among the city of Dallas, city of Fort Worth, Southwest Airlines and American Airlines, Southwest will have rights to operate from 18 out of 20 gates at the Love Field Airport. However, if the discount airliner chooses to expand its service to another regional airport, say DFW International Airport, it has to give up one gate, according to the 2006 landmark agreement. The 2006 agreement is effective for another few years. Southwest will be able to expand to other regional airports such as DFW International Airport, or a regional airport at McKinney, without conceding any Love gate effective 2025, according to a July 22, 2022, front-page article by The Dallas Morning News. 

Report Accuses Southwest, FAA over Unethical Relationship

A report prepared by the Office of Special Counsel was sent to President Joe Biden's desk on July 26, 2022, pointing out cozy relationship between FAA officials and Southwest Airlines' executive that had led to compromised investigation into the airline's business practices. The report was released on July 27, 2022.

****************** SOUTHWEST AIRLINES: 2022 HOLIDAYS WOES ******************

Thousands of Flights Cancelled around Christmas Holidays

To the inconvenience of hundreds of thousands of passengers stranded at various airports because of the "bomb cyclone", airlines cancelled, or delayed, tens of thousands of flights since December 22, 2022. On December 26, 2022, at least 3,700 flights were cancelled, including at least 2,700 by the Dallas-based Southwest Airlines. Since December 22, 2022, Southwest Airlines cancelled at least 8,000 flights. Although the operations of the other airlines are improving, Southwest's remain bogged down to massive cancellations and delays, stranding thousands of customers at airports in Dallas, Chicago and Denver. Southwest blamed weather and technology for this massive disruptions. Southwest CEO Bob Jordan emphasized need for massive investment in the technology revamp. The U.S. Department of Transportation issued a statement on December 26, 2022, saying that it was assessing whether to look into the airline's operational woes as well as its compliance with the Dallas-based airline's customer service commitment.

U.S. DOT to Examine Southwest's "Cancellations" and "Customer Service Plan"

Southwest Airlines on December 27, 2022 cancelled an additional 2,600 flights, adding on the top of over 10,000 flight cancellations that had piled up since December 22, 2022 through December 26, 2022. First, a fierce winter storm has severely disrupted flight operations at Chicago, Denver and other key airports, creating a domino effect over its network and messing up crew schedules. As chaos at major Southwest hubs continues on December 27, 2022, Department of Transportation during the day announced that it would "examine whether cancellations were controllable and if Southwest is complying with its customer service plan". Southwest's woes are attributed partly to obsolete technology that the airline CEO Bob Jordan had vowed to replace as soon as possible. The scheduling software didn't work out under the overwhelming burden of cancellations, thus failing to match flight crews with the appropriate flights. Stories are being shared on the social media about flight attendants and pilots waiting out for hours in the hotel rooms for the airline to get them instruction. Southwest's another big problem is their Point-2-Point Flying Model that requires same plane to fly between various airports, thus an adverse weather condition in one segment to torpedo the entire trip of the same plane and thus disproportionately affecting passengers in each of the segments in the plane's flying path. Other legacy airlines, instead, use Hub-and-Spoke Model where planes fly between the Hub and another city and back to Hub again, thus insulating the operation from adverse weather conditions in a separate region. 

More than 2,500 Flights Cancelled for Dec 28, An Additional 2,300 for Dec 29

At least 4,800 flights were cancelled for December 28 and December 29 combined, but these cancellations didn't happen at the eleventh hour. Instead they had been pre-planned--and announced dating back to December 26, 2022--in order to "re-set" the flight operation. 2,509 flights, or 62% of the network's total schedules, have been cancelled for December 28, 2022, according to Flightaware.com. An additional 2,300, or so, flights are cancelled for December 29, 2022. After a massive snow storm pattern, known as "Bomb Cyclone", has impacted major parts of the nation and led to issuance of some kind of wintry advisories for the nation's two-third population, mass-scale cancellations on December 22 and December 23, 2022 have led to a very rare edge case situation that Southwest Airlines' scheduling software has not been prepared for. As a result, it was not able to handle the overwhelming cancellation burden and assign crews to flights. The airline's Point-2-Point Flying Model also didn't help. Southwest then badly needed a "re-set". On December 26, 2022, the airline cut almost all of its future flights by two-third, and imposed a temporary moratorium on re-booking and new reservation. Southwest CEO Bob Jordan on December 27, 2022 apologized for the inconvenience and begged for patience. 

Southwest Direct Route Model under Scanner

The Dallas Morning News reported on December 29, 2022 that the Southwest Airlines' Point-2-Point Flying, or Direct Route, Model that connects multitude of airports, including many small- to medium-sized, and picks up different batches of crews along the way has become a key focus for the its operational failure during this Holiday period. The Point-2-Point Flying, or Direct Route, Model  has enabled Southwest to service more routes and markets in a span of 24 hours compared to other legacy airlines which are dependent on the Hub-and-Spoke Model. The Point-2-Point Flying, or Direct Route, Model also enabled the airline to achieve a torrid growth over the past four decades, making it the largest domestic carrier of the nation. But, the Point-2-Point Flying, or Direct Route, Model came as a bane to normal operation during a major storm system such as the one during this year's Christmas time as it had disproportionately impacted the operational model of the Southwest Airlines as it had less leeway to insulate its flight operation from the wrath of mother nature that might have afflicted one region, but not the other regions along the path of Direct Route of a flight. Hub-and-Spoke Model is better insulated from disruption in a weather pattern such as this as the planes fly from a Hub to various Spokes and return to the same Hub. 

Southwest to Begin Operation Normalization on December 30

After cancelling about 15,700 flights in a span of eight day (December 22-29, 2022) and inconveniencing and stranding millions of passengers, Southwest will restore the schedules of 4,000 flights on December 30, 2022, according to the Dallas-based airlines' press release on December 29, 2022. 

Southwest Back to Normal Schedules

Southwest Airlines flew about 4,000 flights on December 30, 2022 and experienced only 43 cancellations, all but four were planned cancellations, according to Flightaware.com. Appearing on the  ABC's Good Morning America, Southwest CEO Bob Jordan said on December 30, 2022 that the airlines was on its way to "operate a really tight operation today". The meltdown had happened after thousands of flights were cancelled beginning December 22, 2022 and its "archaic" scheduling software, SkySolver, was overburdened by sheer number of cancellations and was unable to assign crews to designated flights. On December 26, 2022, Southwest decided to "re-set" its operation by chopping two-third flights off its schedule through December 29, 2022, by which the Dallas-based airline had cancelled more than 15,700 flights since December 22, 2022. With the December 30, 2022, restoration of the full flight schedule, Southwest, hopefully, leaves behind a dark chapter of operational failure in the nation's aviation history. 

The tool, SkySolver, that Southwest uses for crew and pilot scheduling is a bespoke tool that has been built in-house. Many other airlines, especially the legacy airlines, use industry-standardized, vendor-developed tool that's easy to make improvement. To change or replace the crew scheduling software, Southwest may take months or even years. Meanwhile, Southwest is putting in place a 1,000-strong "volunteer" team that will manually assign crews to planes in case the extreme severity in weather condition leads to massive cancellation and subsequent functional breakdown of the bespoke crew scheduling software. 

Southwest Hires OW for Independent Review of Christmas Meltdown

Southwest Airlines on January 12, 2023 announced that it had hired Oliver Wyman for a "top to bottom" review of the conditions and circumstances that had led to cancellation of about 16,700 flights. In addition, Southwest formed an internal "Operational Review Committee" to go through what had happened during meltdown, according to Southwest CEO Bob Jordan, who told reporters on January 12, 2023 that "I can't say it enough, it just can't happen again". Southwest said in a recent filing that the Holiday 2022 meltdown would cost the Dallas-based airline an estimated $725 million to $825 million in lost revenue, reimbursements, refunds and goodwill gesture in frequent flyer points for impacted customers and company store points for employees. Southwest COO Andrew Watterson worked for Oliver Wyman for 12 years as aviation consultant. 

DOT Investigating into Southwest's Overscheduling

The Dallas Morning News has reported on January 26, 2023 that the Department of Transportation is investigating whether the Dallas-based airline has overscheduled flights during holidays that has gone awry by a severe snow storm during Christmas in 2022, eventually leading to cancellation of more than 16,700 flights and stranding millions of customers and crews at various airport for days. 

Southwest Executive Peppered with Question at a Senate Hearing

Southwest Airlines COO Andrew Watterson on February 9, 2023 appeared at a hearing held by the U.S. Senate Commerce, Science and Transportation Committee. The committee members, especially the panel chair Sen. Maria Cantwell, probed the airline's operations head over the company's worst meltdown during Christmas Holidays in 2022 that had led to more than 16,700 cancellations and millions of passengers stranded at various airports. Lawmakers focused on lack of technology upgrade as the primary reason for the meltdown. SWAPA President Casey Murray testified that his employer had not taken much of a lesson from previous smaller meltdowns. 

Southwest Unveils Plans to Address Meltdown Issues

Three months after a 10-day-long wave of cancellations of circa 16,700 flights, Southwest has a three-part plan to address the roots of the massive disruptions and avert a future meltdown on that scale. The consulting firm Oliver Wyman has been hired to carry out a thorough investigation into the causes of disruptions and come up with recommendations to avoid the ones in future. Based on initial findings and internal ongoing reviews and analysis, Southwest CEO Bob Jordan on March 14, 2023 said at an industry conference, J. P. Morgan's Industrials Conference, that the Dallas-based airline would focus on implementing a three-part plan to prepare for the coming winter months. The three components are:

* Winter Operations that will ramp up preparations at key airports--such as Denver International Airport and Chicago Midway Airport, two airports where cascading of disruptions has begun just before the Christmas 2022 because of massive snow storms--including acquiring additional deicing vehicles

* Accelerating Investments, including a circa $1.3 billion in upgrading the airline's technology (just days ago, Southwest announced partnership with Amazon to embrace AWS as its preferred platform for  fare search tools, crew scheduling and software related items)

* Cross-Team Collaboration, including aligning Network Operations and Network Planning functions

Largest Fine Imposed on Southwest for December 2022 Meltdown

Southwest Airlines on December 18, 2023 agreed to pay $140 million in fines for the traveler woes during the Christmas Holidays in 2022 that had seen almost 2 million passengers inconvenienced after the nation's largest airline had cancelled more than 16,000 flights. Alluding the largest aviation fine, Transportation Secretary Pete Buttigieg said in a statement that "taking care of passengers is not just the right thing to do--it's required". 

The fine amount breaks down as follows:

* $35 million in actual fines

* $90 million in compensatory fines which Southwest will receive a $72 million offset

* $33 million in credit that it already distributed earlier this year

The Holidays 2022 disruptions had already cost Southwest Airlines $1.1 billion.

****************** SOUTHWEST AIRLINES: 2022 HOLIDAYS WOES ******************

Southwest Airline's Pilot to Vote on Strike Authorization

Southwest Airlines Pilots Association is calling for a strike authorization vote by rank-and-file members, beginning May 1, 2023. SWAPA President Casey Murray on January 18, 2023 called it a "historic action".

Southwest to Lose Money even in Q1 2023

Southwest Airlines said on January 26, 2023 that its pre-tax loss of $800 million stemming from the holiday meltdown that had led to 16,700 cancellations had forced the airline to lose money in the final quarter. It said that it had lost $220 million in the Q4 and made profit of $539 million for the full year. The Dallas-based airline also said that it would lose about $300 million to $350 million in the first quarter of 2023 because of lower booking.

Another Mass-scale Disruption Hits Southwest Airlines

Circa three months after an operational meltdown that had forced the nation's largest airline to cancel about 16,700 flights in the midst of Christmas and New Year Holidays, Southwest on April 18, 2023 morning was forced to suspend its operation for 30 minutes because of a "vendor-supplied firewall" failure that had disrupted connections with certain vital systems. As the flights resumed flying, the chaos stemming from a 30-minute operational shutdown was too big to overcome for operations to return to normal in a span of few hours, and as of 2PM on April 18, 2023, the flight delays stood as high as 47% of Southwest's circa 2,000 daily flights. 

Southwest Pilots to Vote on the Deal

Southwest Airlines is the last among major carrier to have a deal with its pilots union after Delta, United and American have reached near-similar agreements with their respective pilots unions. On December 21, 2023, Southwest Airlines Pilots Association Board sent the deal for rank-and-file voting between January 8 and January 22, 2024. SWAPA President Casey Murray struck an optimistic tone after four years of, often rancorous, negotiation. The deal will increase the wage cumulatively, on the average, 50% over the life of the contract:

* 29.15% when the deal is approved

* 4% each on January 1, 2025, January 1, 2026 and January 1, 2027

* 3.25% increase on January 1, 2028

********** ELLIOTT INVESMENT MANAGEMENT'S STAKE IN SOUTHWEST **********

Activist Investor Takes Stake at Another Corporate Icon Headquartered in North Texas

Elliott Investment Management takes an important stake at the Southwest Airlines after investing $2 billion that has made the activist firm an important player with about 11% share in the Dallas-based airline company. On June 10, 2024, the activist investor sent a letter--signed by Elliott's portfolio manager Bobby Xu and partner John Pike--to Southwest Board of Directors, calling out the airline's subpar financial performance and "poor execution". The letter recommended three key action plans:

* Enhance the board

* Upgrade leadership [implies management overhaul]

* Undertake business review

In May 2024, Elliott Management wrote a similar letter to Texas Instruments, critiquing the semiconductor firm's high capital spending that prohibited the deserving returns to the shareholders. Elliott bought 1.3% stake in TI by investing $2.5 billion. 

Southwest Adopts "Poison Pill" to Thwart Takeover

The Southwest Board of Directors on July 3, 2024 adopted a poison pill that would make Elliott Investment Management's bid to take over the airline, or even to force the management out, a lot costlier. The poison pill, formally called the Limited Duration Shareholder Rights Plan, will trigger empowering the existing shareholders to buy shares at 50% discount if any shareholder buys more than 12.5% stake, or if the existing shareholders who have already more than that trigger point [12.5%] buy any additional shares. Elliott now holds 11% of the Southwest Airlines (based on the common stocks, not based on the beneficial ownership). If it acquires more than 12.5% shares, it's value will be diluted significantly, according to the poison pill. 

Elliott Holds 8.2% Beneficial Ownership in Southwest

According to an August 13, 2024, sharing of the Securities and Exchange Commission filing, Elliott Investment Management now owns 8.2% beneficial ownership in Southwest Airlines, according to the August 25, 2024, edition of The Dallas Morning News. Once the activist investor reaches 10% threshold, it will have the ability to call for a special shareholder meeting. 

Elliott Acquires 10% Beneficial Ownership

In an SEC filing, Elliott on September 3, 2024 said that it had acquired 10% beneficial ownership of the Southwest Airlines, giving the activist firm the right to call a special shareholders session. On June 10, 2024, Elliott bought 11% stake of the airline's economic interest through derivatives. Since then it has been converting them to eventually reach the 10% threshold of beneficial ownership. 

Elliott Forces "Unprecedented" Changes at Southwest

After meeting with Elliott Investment Management leaders on September 9, 2024, Southwest Airlines Executive Chairman Gary Kelly on September 10, 2024 decided to step down from the Board of Directors. Six other current directors--(1) Former Missouri Senator Roy Blunt, (2) Jill Soltau, former CEO of JCPenney, (3) Thomas Gilligan, (4) David Beigler, (5) Veronica Biggins and (6) William Cunningham--have decided not to rerun for reelection. 

********** ELLIOTT INVESMENT MANAGEMENT'S STAKE IN SOUTHWEST **********

Southwest Ends Open-Seating, to Fly Overnight

After Elliott Investment Management's June 2024 acquiring of significant stakes at the Southwest Airlines, things have changed drastically on the Southwest's side from some internal soul searching to adopting "poison pill" to fight back the activist investor. 

On August 13, 2024, a filing with the Securities and Exchange Commission showed that Elliott had acquired 8.2% beneficial ownership in Southwest despite a long-held belief among market watchers that Elliott might be interested in acquiring more stocks to achieve a beneficial ownership of 10% stake, a threshold required for Southwest investors to call a special shareholders' session. 

Last month (July 2024), Southwest ended its open seating model and favored overnight flights. Many analysts do believe that the changes decided last month are the beginning of a new journey under the pressure of Elliott. Meanwhile, the airline is coming under scrutiny for various reasons. The operational safety issues led FAA to launch in July 2024 a Certificate Holder Evaluation Process, bringing in a focused federal scrutiny on almost everything, spanning flight crew training to manuals. Currently the United Airlines is subject to such evaluation process.