8 Lessons the Southwest Airlines Fiasco Can Teach Bankers (and Travelers)

Customer experience, branding, technology ... The lessons to be learned from how Southwest Airlines ruined Christmas vacations for thousands of its customers touch on some of the biggest topics in the banking industry. Many of those customers were once raving Southwest fans, including Brad Smith of Cornerstone Advisors. Here's his insightful — and entertaining — take on the holiday fiasco and his advice on how to avoid similar trouble at your financial institution and in your travels.

With the announcement that Southwest Airlines’ Christmas week meltdown caused a $226 million fourth-quarter loss, I thought I’d share the lessons I learned from being one of the many travelers impacted by this fiasco.

Some of these lessons apply to the banking industry in a big way, so hear me out.

Early in the morning on December 26th, Southwest Airlines cancelled the flights for our family ski trip and lost our luggage for 12 days. We ended up driving round trip (nearly 20 hours from Austin, Texas, to Steamboat Springs, Colo., and 20 hours back), lost three days of skiing, scrambled to buy new ski clothes, and wasted eight hours on calls with the airline and another five hours creating an expense report trying to fix the mess! This was the worst travel experience ever for this “80 flights a year x 30 years” traveler.

Looking for the silver lining in my misfortune, I realized that the experience can serve as a great reminder for banks to evaluate their systems. It was, after all, a series of poor business decisions by Southwest Airlines — including a decision to put off technology upgrades that would accommodate the company’s dramatic growth — that resulted in thousands of canceled flights and significant disruptions to its operations.

Here are the top eight lessons to be learned for bankers (and travelers!).

1. Use AirTags

Put AirTags in your checked bags and put must-haves that you can’t buy at the airport in your carry-on. I had AirTags in my carry-ons to catch any sneaky thieves but hadn’t envisioned needing to know which city my checked bags were in. And as a road warrior, I knew to have my meds, glasses and contacts in my carry-on. But my back-up contact lenses were in my checked bags, and, of course, I tore a contact lens on my trip. Lesson learned the hard way.

2. Book Direct Flights

Pay the premium for direct flights and look for first flights out. It’s been decades since my stats class, but somehow the odds of problems on flights with connections are significantly more than twice the odds on direct flights. Southwest Airlines is particularly exposed to the cumulative effect of weather problems, because it isn’t a hub-and-spoke model, and their crews are often assembled from incoming flights from multiple locations. All of this contributed to the fiasco. But direct flights and first flights out have significantly fewer delays and cancellations.

3. Nix Road Trips With Teenagers

Avoid any road trips longer than three hours after your kids are 14 years old. My wife and I used to make the annual road trip from Austin to Colorado when our three boys were little. Back then an iPad, some goldfish crackers and the occasional family game made the trip fly by. Once they hit TikTok and Snapchat age, their attention span became about 1.3 seconds and they’re now as needy as a Kardashian. Worse, they all have Waze, Apple Maps and Google Maps on their phones and remind you of every gas station, rest stop and Chick-fil-A along the way while pointing out in unison every exit you miss. Did I mention three teen boys in the car? Imagine basking in that aroma for 20 hours. If you’re thinking pork rinds and feet, you’re close.

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4. Beware the Impact on Brand Equity

Decades of hard-earned brand equity can be destroyed in a day. Southwest Airlines’ tagline, “You are now free to move about the country,” captured the airline’s mission to democratize air travel and its low-cost, lots-of-flights and lots-of-fun brand has achieved cult-like status. I’ve been a raving fan for 30 years. But with just one day of operational errors that snowballed into a week’s worth of problems, their brand became the poster child of poor airline experience and a pop culture punching bag. Should you have any doubt, see SNL’s parody of its poor technology and customer experience.

You think one day of operational errors can’t destroy your financial institution’s brand equity? It already happens a few times a year in our industry, typically on the Monday that a digital, core or cards conversion goes live or on the first day of an operational merger integration.

When you’re planning out your conversion or merger integrations and you’re under pressure to cut testing to accelerate the timeline, remember Southwest’s fiasco.

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5. Stop Worrying, Start Fixing — Now

That part of your delivery model that keeps you up at night? The ops or tech capabilities you’re worried won’t scale? Fix. It. Now.

Southwest Airlines was known for its excellent customer service and its mobile app has been rated a 4.8+ for years (near perfection on a scale of 1 to 5). The airline spent hundreds of millions on training and customer-facing technology over the years while their entire operations were dependent on outdated back-office scheduling software.

Sound familiar? Banks and credit unions have been pouring millions into customer-facing digital technology and improving customer service training while relying on 30-year-old core processing and payments systems to run daily operations. If your digital transformation initiatives are focused on the front-office only, you run the risk of breaking your entire delivery model when you scale.

Listen to your COOs and CIOs. Their concerns are clarion calls for modernization.

6. Live Your Values, Especially on the Bad Days

If you don’t live out your values on your hardest day, they’re not really your values. Southwest Airlines has a strong culture with well-defined values, like be accountable, show humility and practice hospitality. In my 31 years of flying with Southwest, in nearly every interaction, I’ve seen Southwest employees personify these values.

But on December 26th, when all hell was breaking loose, Southwest employees acted a lot like the employees of airlines at the bottom of the customer-service ratings. The gate agent announced the cancellation and quickly disappeared to avoid answering hard questions. The baggage claim folks threw up their hands and said they didn’t know where our bags were or when we’d see them again. The CEO didn’t make an announcement until 30+ hours after the meltdown was underway.

Those aren’t employee issues. Those are management issues, because Southwest didn’t provide the tools, technology and investments for employees to live out the company’s values.

Are your values just posted in an investor deck and on breakroom walls? Or are your values a voice at the table when justifying an enormous spend in operational and technical improvements?

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7. Plan for Business Disruptions of Every Type

Develop and test your business resumption plans. The board at every bank and credit union is familiar with interest rate shock analysis. But how many understand the risks of shocks to your operations, technology or delivery model? The risk of not being able to post ACH or wires for two days during next year’s payments system conversion? The risk of your mobile banking app being down for 10 days, or the risk if 60% of your customers try to reach your call center at the same time, or the risk if the core is down for a week? Any of these could be a fiasco of Southwest Airlines’ proportions.

A list of scenarios with contingency plans to mitigate the impact of unexpected disruption isn’t something you do to check a box on an exam for the Federal Deposit Insurance Corp. or the National Credit Union Administration. It should be part of your risk management discipline.

8. Pass Along This Career Advice

Tell your kids and grandkids to take a logistics or supply chain class. The elements of organizational transformation haven’t changed much in my 30-plus years of consulting. It’s still balancing people, process and technology. But as businesses have become more dependent on technology, they tend to forget about the importance of people and process. There’s a bright future for folks who can understand this balance, create new omnichannel fulfillment strategies and solve supply chain disruptions.

So, will I ever fly Southwest Airlines again?

I think you learn more about a company based on how they respond to your poor customer experience than from the actual experience. Southwest eventually found my bags, reimbursed me for all my out-of-pocket expenses, including all the new ski clothes for my family, and gave me a bunch of reward points for future travel. So yeah, I’ll fly with Southwest again.

Will I get back to being a raving fan? That all depends on the customer experience I have in the coming months of travel, which I now know is based largely on their operational performance and improvements to their scheduling system.

I hope they’re listening to their COO and CIO.

 

About the author:
Brad Smith, a partner at Cornerstone Advisors, has spent three decades helping community and regional financial institutions achieve their business goals by integrating strategy with sales, marketing, operations, and technology execution. For more of Cornerstone’s insights on the banking industry, check out “Where Are Bank-Fintech Partnerships Headed,” The Financial Brand’s take on the consulting firm’s annual  “What’s Going On In Banking” study.

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