Analyzing the Southwest meltdown

My Operations Professor* from graduate school shared a neat analysis of the recent Southwest Airlines meltdown.

Southwest has been a darling of many strategic textbooks over the years thanks to a unique strategy. For example, they only use Boeing 737s (standardized!)), avoid large/busy airports, have a bags-fly-free policy, and have no assigned seating. They’re also famously a “point-to-point” airline vs. using the more common hub-and-spoke system.

As a result, this is Southwest’s network

That looks very different from United’s.

That difference is central to Prof Allon’s argument – “I would argue that the point-to-point system, paired with a specific route for each plane (where they don’t just fly back and forth, but rather follow a circular route) is not suitable for a situation of correlated shocks, such as simultaneous bad weather in Seattle, Buffalo, Chicago, and Denver. For such situations, a hub and spoke system seems better, since there are more resources located in the “pooled” hubs, allowing the airline to recalibrate quicker. In particular, a fully centralized system (which hub and spoke is closer to) that can pool the issues and re-route people based on where they need to go, would be better in a situation like that, since passengers fly through a hub anyway.”

Southwest’s utilization rates are also very high compared to the rest – their popularity compounded the problem.

He concludes with two simple and powerful ideas – “No competitive advantage is long-lasting since firms are constantly forced to grow and put pressure on what brought them their initial success. No single solution hedges against all risks. For the risks you are not hedged against, think about how they can be mitigated when they happen. And finally, never check in your luggage … Never.”

The first idea that resonated deeply is – no single solution hedges against all risks. Trade-offs are inherent in every strategy. Be aware of them.

And the second is one that applies just as well to our lives – what got us here won’t get us there.

*My favorite educational experiences in graduate school revolved around incredible teachers. Prof Allon was one of them – he role modelled intensity, an awe-inspiring work ethic, and held a relentlessly high bar. For what it’s worth, I can totally picture his family never checking in luggage. :-)