Dive Brief:
- Southwest Airlines expects to spend roughly $1.7 billion on technology this year, according to its Thursday Q4 2023 earnings report.
- The commercial carrier reported operating revenues of $6.8 billion for the quarter, up 10.5% year over year, and $26.1 billion in revenue for the fiscal year, up 9.6% year over year. The company allocated $1.3 billion of its operating budget to IT upgrades last year, after a tech-related operational meltdown forced nearly 17,000 holiday week flight cancelations in December 2022.
- As part of the modernization push, Southwest chose AWS as its preferred cloud provider in March. “Like a lot of companies, we have a path to shift to the cloud,” President and CEO Bob Jordan said, during a Thursday earnings call. “I think we have shifted something on the order of just below 50% is what I've got in my head, and we have a goal to shift a lot more.”
Dive Insight:
Cloud migration is central to Southwest's modernization effort, according to Jordan.
“A lot of what you gain is reliability,” he said, pointing to failover and support systems. “The shift to the cloud is as much a resiliency effort and a modernization of the code base and all that effort as it is a cost savings.”
Jordan projected modest cost savings from cloud, amounting to tens of millions rather than hundreds of millions of dollars.
The 2022 operations failure was an expensive wake-up call for Southwest. It cost the company an estimated $725 million on the operations side and recently triggered $140 million in additional civil fines levied by the Department of Transportation.
In response, the carrier accelerated existing plans to enhance processes and IT capabilities last January, blaming the late 2022 cancelations on a confluence of severe winter weather and crew recovery software glitches.
Aviation consulting firm Oliver Wyman recommended the carrier upgrade its severe weather equipment, cross-team collaboration processes and operation technology and staffing in a report commissioned by Southwest released last spring.
In addition to remediating areas targeted by the report, Southwest promoted VP of Technology Lauren Woods to CIO last February. The company’s previous CIO, Kathleen Merrill, had been with the airline for almost two decades but signaled her retirement two months before the December event.
