Over the last 40 years, a lot of criticism has been made of Southwest at various times and Southwest has managed to prove people wrong about its decisions over and over again.  For instance, analysts are just screaming for Southwest to put baggage fees into place and Southwest just as adamantly refuses to do so.

I’m a fan of Southwest for many reasons.  First and foremost for their track record in delivering annuals  profits.  They work hard to do this and should be admired and appreciated for it.  The truth is, I think their stock gets short shrift over and over again on this point alone.  It’s as if everyone has been waiting 40 years to pounce on a failure of theirs.

I think they’ve been very smart to keep baggage fees out of their system.  It’s a key discriminator at this point and by now they have enough hard fact to back up this decision.  People need to give this a rest.

They are starting to take flack for their fare prices going up and up but I don’t think that this is deserved.  Southwest is as good at revenue management as anyone else and better than most.  And even though it hits me in the pocketbook, fares *should* go up some.

They take hits for their high(er) labor costs now.  Yes, their labor is paid very, very well.  Their labor also delivers very, very well.  Yes, their pilots earn exceptional salaries but they also work like mad to earn it.  This is a group that actually fights to take on more flights rather than fewer each month.  When the company needs operational efficiency, they deliver in a variety of forms.  Peace and efficiency from a labor group is a vastly underrated value in my opinion.  j

They do have hubs although they are referred to as focus cities.  They aren’t traditional hubs and Southwest works a hub like no one else.  They deliver more people through their gate space than is generally imagined possible.  They skillfully schedule flights through these hubs to not only make connections possible but also to offer many, many one-stop, no plane change flights between some rather unusual city pairs.  And do it so well that they can deliver a total travel time that meets (and sometimes exceeds) the performance of non-stop flights on other airlines.

But I am unimpressed with two aspects of Southwest Airlines.

I’ve said it before and I’ll say it again:  Where the hell is an upgraded IT system?  An airline of the size and scope that SWA is should not be using a relic reservations system that has Braniff International’s original COWBOY system at its core.  It was a great move on SWA’s part to buy it and incorporate it in the 1980’s.  That was truly a smart way to go.  It was fine that they kept building on top of it all through the 90’s and even in the early 2000’s.

It’s appalling that Southwest hasn’t fixed this glaring problem in the last 5 years.  The airline has changed and the airline industry has changed.  Southwest hasn’t changed its IT systems to meet those challenges well.  It’s long overdue.  My greatest fear is that they are working on this internally, too. Building a strong, world class reservations system for an airline of its size is no trivial task and should have been outsourced to someone who had a system on the shelf.   Given the state of reservations systems in general, it defies my imagination why SWA wouldn’t have bought into one of the strong legacy systems and moved on with other tasks.  SABRE or SHARES could have done the job and done it at a fair price.

I also don’t like the feelings I get with SWA’s merger integration.  I don’t get a sense of urgency on SWA’s part to get this done.  Certainly not when SWA is predicting that merger integration won’t be complete until 2015.  The minimum time it would be for that is 27 months from now.  It’s likely to take as much as 36 more months and only if the airline manages to get the Airtran system talking to the SWA system.

I have an ugly feeling that SWA is going to use the Airtran reservations system as its “international” reservations system, too.

I think the merger integration has distracted the airline from looking at growth opportunities elsewhere.  Yes, the airline grew with the addition of Airtran.  It’s now contracting considerably and it bothers me that we don’t see Southwest making any growth moves at present.  More than anything, I get a sense that SWA is creeping into conservatism just because the entire industry is as well.

Where is the next big purchase of slots at Newark or La Guardia or Washington National?

What preparations are being made to exploit Dallas Love Field in 2014 when the Wright Amendment goes away?

We saw a move in Houston to create an opportunity for international destinations in Central America and then. . . everything went silent.

I honestly think SWA needs more help in their merger integration.  In particular so that they can get their creative executives back to work on developing more growth and more profits.

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