Southwest Airline's incoming CEO says he has a "bias for action." That's not a bad trait to have in an environment where everything has changed in the last 18 months.
Southwest Airlines incoming CEO and Executive Vice President Robert Jordan spoke with Airline Weekly Editor Madhu Unnikrishnan at Skift Global Forum 2021. The two discussed the theme “Aviation’s Inflection Point: How the U.S. Moves Forward From Here.”
You can watch a full video of their discussion as well as read a transcript of it, below.
Madhu Unnikrishnan: Good morning, everyone. Thank you for joining us today, and thank you for all of you who are listening online. Thank you, Bob, for joining us.
Robert Jordan: Hey, you’re welcome. Thanks for having me.
Unnikrishnan: I’m thrilled to actually see you in person, it’s been a few years.
Jordan: Well, but the last year and a half, feel like about five years, right?
Jordan: We can’t count it that way, but I think it’s been four years since we’ve been together.
Unnikrishnan: Exactly, and it’s great to be in person. I’m not so thrilled not to be wearing sweatpants, unfortunately.
Jordan: I’m not sure what that meant, exactly.
Unnikrishnan: Well, it’s been a pandemic, it’s just weird.
Jordan: Actually, I’m thrilled you’re not wearing sweatpants, either.
Unnikrishnan: Well, I’m glad for that. The theme of today’s conversation, is aviation inflection point, or airline inflection point.
Jordan: You bet.
Unnikrishnan: This is probably the worst crisis, that has hit-
Jordan: Oh, undoubtedly.
Unnikrishnan: … airlines worldwide, but I wanted to get started with, you yourself are at an inflection point. So, I understand 33 years ago, you had quite a job interview at Southwest.
Jordan: Funny you ask. I’m not sure if I’m an inflection point, or not. I’m not sure what that-
Unnikrishnan: We’ll get to that.
Jordan: … because those could be up or down. No, when I was working for Hewlett Packard in California, and we actually, the family’s in Dallas, wanted to get back to Dallas. I had my mother-in-law send me the Dallas Morning News, this is back before that thing called the internet.
Unnikrishnan: You circle a job.
Jordan: Yeah. You circle a job and maybe, and it was for a company called Southwest Airlines, and I had no idea who they were, they were so small. So, I apply, and I fly in on Southwest. This is before the Wright amendment. I fly in for an interview, and I have one day. We land, I have to change planes in El Paso, and of all things, I get snowed in, in El Paso.
Unnikrishnan: When does that happen?
Jordan: Well, that day. Yeah, never.
Unnikrishnan: Yeah, never.
Jordan: I get snowed in El Paso. So, by the time I get to Dallas, I have an hour for my interview. I run down to what we call the people department, do a quick interview. It turns out it’s the day after the corporate Christmas party. So, everyone that I talk to, is hungover at Southwest. Not just Herb. I get a couple of questions, and then I run over, and I’m interviewed for a programmer job. I meet with our CIO for a few minutes. We’re talking and in runs a guy, and he goes, “Oh my gosh, we’ve got this issue with our Hewlett Packard system.”
They had no Hewlett Packard programmer, I was filling the one job. I’m like, “Well, I could probably help.” So, I go in there and I clickity, clickity, clickity, and I fix something, I fly home, never really interviewed. I get this call the next day, “You want to come to work for Southwest Airlines?” So, that is my start.
Unnikrishnan: It turned out all right for you, now you’ll be CEO in February.
Jordan: I will, it has turned out, it’s funny, who could ever imagine? I could never, when I get out of college, start at Southwest, would never have imagined this would be a possibility. I will admit I was surprised. Whenever I, this is what we chose to do with the board, and with Gary, and it’s a completely humbling experience to be able to lead such an iconic company, our 56,000, terrific, wonderful people.
I tell people, I get a lot of, how do you feel about all these questions? It’s semi joking, semi not. I usually say I’m 80% completely excited, and about 20% terrified. [crosstalk] it is a big job-
Unnikrishnan: I want to talk about that 20% terrified.
Jordan: I would never have imagined I would never have imagined we would be here.
Unnikrishnan: Congratulations. Let’s get into it, then. What do you see as your main challenges and opportunities, on day one? Let’s start with the opportunities, and then go on to the challenges.
Jordan: Oh, you bet. I think the crisis that we’re in, is unlike anything we ever seen as a company, or an industry. 9/11 was really difficult. A lot of folks forget, that the first quarter after 9/11, we had record profits. So, the recovery was much faster. This is nothing like that. We’ve never seen our business, in three weeks, go down 98%. Fly aircraft with one passenger, and one bag on them. We’ve never seen anything like that.
As I think about, what are the priorities? I think, number one, we’ve got to continue to emerge from the pandemic, it’s really clear. I wish we didn’t have this Delta variant wave. It’s really clear that 2022, is another year of transition. I wish it was a normal year, but it’s clear, that we’re going to be in a transition period, here. So, just continue to recover from the pandemic, is certainly right up there. The way I’m thinking about, “What does Bob need to do over the next couple of months?” It’s really basic, thinking about the transition.
I’ve got a couple of things I really want to do. You’ve just got to communicate like crazy. I’m trying to say yes, to every opportunity to go out and be with media, be with our investor relations folks, and especially be with our people, be in town halls, and be in stations. You almost cannot communicate enough.
The second thing is, I want to be with our people. I feel it’s important for me, to affirm this terrific culture, that we have at Southwest Airlines. I’m trying to be in a station, every single week. I was in Phoenix last week with our people, and just truly enjoyed it. The people of Southwest Airlines, are just wonderful. I feel like I need to be out there, and then last, you just have to have a bias for action. Even though this is not effective till February.
Even for terrific people, in a terrific company, in a terrific culture, change, just generates uncertainty. The faster that you can move some of that uncertainty along, and have a bias for action, the better.
Unnikrishnan: Well, there is a lot of uncertainty right now, right?
Unnikrishnan: Southwest, how do you see the airline navigating out of this crisis, near to medium term? Has delta, not Delta the airline, how does the delta variant, and the coronavirus had to bring up Delta. Delta, might have probably scrambled your plans, as well, but how has the delta variant, scrambled your plans for the rest of the year?
Jordan: This whole thing has been unpredictable. You have a wave, you think maybe it’s over, you have another wave, you think it’s over. The good thing is, that every subsequent wave, the business has been a little bit less affected, but there’s no way to say, that the delta variant has not had an impact on our business, it has. Our bookings are off, revenues are off.
I’m hopeful, that we are at the peak of that impact. It looks like we’re on the backside of that. Our bookings, and our corporate business is stabilized. I’m hopeful, we’re sort of moving on there, but it’s had an impact, for sure, absolutely.
Unnikrishnan: Is the booking curve lengthening at all, or do you see it is still pretty short?
Jordan: No, I think if you look out, the bookings are really normal. If you look at the holiday period, it is relatively normal. What’s the real impact, are the close end cancellations. People just make decisions, a week, or two, or three. You’ve had this here, where you’re trying to figure out what the in person and virtual attendance, is going to be, and people make that decision, sometimes a week before the conference.
What I love is, we’ve been able to really take advantage, during the pandemic. When business is down 97%, you go looking for revenues, anywhere you can find it. You saw us open 18 cities, and they’re all doing really, really well. You saw us expand Hawaii. So, I think we’re able to really take advantage of the pandemic.
Unnikrishnan: If I could break in, for an airline to add 18 cities in a year, is pretty remarkable.
Jordan: It is.
Unnikrishnan: That’s essentially a decade’s worth of growth in one year, or new destinations in one year, for a lot of airlines. How have you rejiggered the root network, in response to the pandemic?
Jordan: Nothing that we did, was not planned, the way I would say is, that we basically pulled forward things, that we were going to do over a longer period of time, because we had the aircraft available.
We didn’t need as many flights, as many frequencies, because the traffic just wasn’t there. Through the waves, at the beginning, traffic was down 97%. Then the next wave, it was down 80, and then the next wave, it was down, more like 50. We just had a lot of aircraft, that could do different jobs. We thinned the network out. We didn’t close cities, but we did reduce routes in some cases, and especially reduced depth and frequency. That’s how were able to fund the cities in Hawaii. What a lot of folks don’t know is, the 18 cities, and our Hawaii expansion, took 92 aircraft to do that. I’ve been asked a lot-
Unnikrishnan: Out of fleet out [crosstalk].
Jordan: Out an active fleet, in the six hundreds, right now.
Unnikrishnan: So, one sixth.
Jordan: I’ve had a lot of folks say, “Well, are you going to open 10 more cities next year?” We may open a few, but the vast majority of the 114 aircraft we’re getting next year, which is a record by the way, they’re going to go to restoring the network depth, to what we were pre-pandemic. If we use 92 aircraft to go expand, and expand Hawaii, the vast majority of that 114 net retirements, is really all about restoring the network to the depth, that we had in 2019. Without the depth, it’s just harder to recover your customers. It’s harder to move your employees around, it just makes things a lot more difficult. So we’ll spend the vast majority of that fleet expansion, restoring the network.
Unnikrishnan: I’ve heard you say recently, that most of the cities you added, and where you’re concentrating the network is on, I think you called it surf and ski destinations, is that right? Those are leisure routes, right?
Jordan: I don’t surf, or ski, by the way, but-
Unnikrishnan: Neither do I.
Jordan: Well, not well.
Unnikrishnan: So, those are mainly leisure routes, right? Is that where you’re seeing a lot of the traffic now, especially toward, if you look out at the end of the year?
Jordan: Again, it’s a little bit of a mixed story, but yeah, the leisure traffic came back much faster. You look at the summer, and there was an inflection point in February, where you could see the bookings just took off, it was obvious. It had to be the vaccines, the availability of vaccines.
Bookings were really strong into the summer, and the vast majority of that, was leisure. Now, we’ve had success opening, primarily business airports, too. You look at intercontinental in Houston, and O’Hare in Chicago, and those are doing really well. In fact, all of the 18, and the Hawaii expansion, are really all doing well, and they are either at, or ahead of the plans that we had for them, which is just terrific.
Unnikrishnan: What about, I heard, Gary Kelly, the current CEO of Southwest, say that he thought, about 20% of business travels, is not coming back. Do you still think that’s true? This is months ago.
Jordan: Boy, it is. We could poll the room, and get all kinds of answers. That is a huge question. I do think every time you’ve had a prediction, that it’s different this time, that’ll never happen, that’ll never come back, typically, it does. I think what you’re going to see as a slow recovery. You’ve had offices that intended to open earlier in the year, and then you had the wave. You had offices then intended to open, and bring back their employees Labor Day, you’ve got the wave, so, they pushed that out either this fall, or into next year. I think it’s more a matter of time, than it is a matter of, it will never come back. Now, is it going to come back to a hundred percent? It’s hard to say, but the first time I’ve had a lot of my consulting friends especially, tell me, the first time I lose a deal, because I wasn’t there in person, I’m on the road.
I’m actually very optimistic for business travel recovery, over time, but I think it’s going to take a long time.
Unnikrishnan: Yesterday, the CEO of Hilton, was on the stage, and he said that Hilton’s seeing a lot of travel from, bookings from small and medium enterprises, not the large corporates. Is that what Southwest is seeing, as well?
Jordan: It’s a blend, but yes, I would say, that generally, that’s the case for us. If you look at our managed business in total, we were picking up about five points, of getting back to normal every single month, we were on a really good pace. Then, the delta variant hits, and we stalled. We stalled in July, August, September, in the down 63, down 64 range, compared to 2019. That was really across the board, all of our managed travel. Now, we’re beginning to see that pick up again. It’s just hard to predict what that pace is going to be, though. Again, I’m very optimistic.
Unnikrishnan: Optimistic that it’ll come back?
Jordan: I’m an optimistic guy. I’m very optimistic that we’re going to get the travel back. We are seeing the leisure travel, again over the summer, before the wave really hit. The leisure travel was really strong. The interesting thing within that, we are seeing new customers, that we’ve never seen before. We’re seeing a record number of customers, that have never flown, especially the fare stimulation, low prices, are bringing them into the market. I’m actually really encouraged about that, as well. We need to retain them.
Unnikrishnan: Well, I wanted to ask, with some of these new passengers, and just in general, have you seen a rise in unruly passengers, after the mask mandate? Now, I want to a little backstory. Ted Christie, the CEO of Spirit Airlines, put it this way, he said, “If you take the totality of flights, and the number of passengers that fly every day, and the number of unruly passenger incidents, it’s more a media narrative, than reality.” Would you agree with that?
Jordan: I feel like I keep saying, it depends. I’ll tell you this, I’ve been on a lot of our Southwest Airlines flights, lately. Again, I’m trying to be somewhere in an airport every week, to be with our wonderful employees, and just talk to them, listen to them, encourage them, and I always talk obviously, to our flight crews. I would tell you two things, the majority of them have not experienced the sensational headline, that you’ve seen, some really bad behavior, fighting, that kind of thing, but they are all experiencing a very different environment.
Folks, just sitting for hours with the mask on, and nobody likes to have to enforce that, either the passenger, or our employees. I do think the environment is just tougher, and Southwest Airlines, are one of our greatest, if not the greatest advantage, are our wonderful employees, that just love to deliver customer service, to our customers. It’s just harder to do that with the mask on, because they love to smile, and take care of you, and the environment that we’re in, you can’t do that. You’ve got a mask, and they’re taking drink orders by looking at a card, and they just can’t provide that touch, that they could, but I will tell you this, no one, that we’ve had a flight attendant that was punched. No one deserves that, and we’re not going to tolerate that.
Nobody deserves to come to work, and have that happen to them. So, we’re not going to tolerate that. And two, even though it’s difficult, we have the best employees, and best flight attendants, on the planet, and I’m extremely proud of the way they’ve handled themselves, and taking care of our customers.
Unnikrishnan: Let’s talk about employees. Southwest is, for those of you in the audience who don’t know, Southwest has never laid off, or furloughed a single employee, and it’s 47, 48 years, I think we’re-
Jordan: Oh, yeah, our 50 years.
Unnikrishnan: … 50 years of existence, but you’re a smaller airline, than you were in 2019?
Jordan: We are.
Unnikrishnan: You went through voluntary buyouts, and voluntary leaves of absences, and buyouts are much smaller, but you are also adding 114 airlines, and our aircraft, and that’s a lot of growth. So, are you ramping up hiring now, and are you facing any challenges with that?
Jordan: Yeah, this whole last 18 months has been a complete whipsaw. It’s incredible, the pivots that have gone on, but no, we had 5,000 take an early retirement. We had about 11,000 take temporary leaves, up to two years. We had folks taking monthly leaves. Our employees reacted and rose to the challenge, in just an admirable way. We needed to cut costs, and they did that, but it was all voluntary. I’m very proud of the airline, and our company, for being able to do that, and not put all of this on the backs of our employees. So, you do all that, and then suddenly, the demand becomes, to come back, and we are in the summer, in the midst of recalling almost everybody, that we had on a leave. So, you got to retrain, and that’s very difficult.
Then, you move from that to, oh my gosh, we need to hire. We are hiring 5,000 this fall, across the company. We anticipate, we’re going to hire about 8,000 next year.
Unnikrishnan: Is this in all work groups?
Jordan: All work groups, again, they’re primarily on the front line, but across all work groups, and it is really difficult. We’re a terrific company, that has never had any issue attracting applicants, and even we are finding it hard. We’re raising wages, and that’s both in the contract, and the non-contract areas, and it’s just difficult. Where we used to typically receive about 42, 43 applications per opening, I believe, we’re receiving about 14, right now. It’s just the number of open jobs, everybody’s experiencing it. I’ve never seen a time, when you go to a restaurant or a store, and it says, we’re closed at three o’clock today, because we don’t have staff.
I’ve been with the company 33 years, 34 here in February, and the constraints have always been, can we get aircraft, can we get facilities, can we get gates? I’ve never experienced a time when the constraint is, can we get employees?
Unnikrishnan: Let’s talk about that for a second. I’ve worked for, in full disclosure, I’ve worked for a couple airlines, and there’s a very great benefit.
Jordan: You could say it, United.
Unnikrishnan: There’s a very great benefit, that the airlines offer, and that’s the travel benefits, but you are finding it difficult to track people, who are you competing against for talent?
Jordan: It depends on, on the type of position. I would say, for our more entry level positions, like the ramp, or in an airport, you are competing with everybody. We’ve moved our wages along, but we’ve defacto become as a country, a $15 minimum wage, it feels like. We’re hiring all over the place, but a good example, is Denver. I was in Denver two weeks ago. We need to hire about 250 people on the ramp, and we’re offering obviously great wages, a great career, your pay goes up very quickly in the union scale, travel benefits, terrific health benefits, but to get someone to come interview with Southwest Airlines, and if you know where the Denver airport is, it’s a little ways out of the city, they probably have to drive by 30 places that have job application, or job opening posted in the window, that are all offering similar wages, and so, it’s just difficult.
This may not make any sense, who’s familiar with Whataburger? Come on, it’s the best burger on the planet-
Unnikrishnan: In-N-Out is.
Jordan: No, no, no.
Unnikrishnan: I’m a Californian, In-N-Out is.
Jordan: No, no, cheap imitation.
Unnikrishnan: Ah, no.
Jordan: No, we’re not going to debate burgers.
Unnikrishnan: We can talk about it offline.
Jordan: So, I’m in Dallas, and at one point, I go through the Whataburger drive through which, I try to be healthy, I don’t do that very much. I go through the Whataburger drive through, go through, I pay, I get my bag, and stapled to the bag, is a job application.
Jordan: They are stapling a job application to the sack of food, that every single person coming to the drive through gets, and you go, that’s what it’s come to. Now, usually when I tell this story at Southwest Airlines, the first thing they ask me, is whether I applied or not?
Unnikrishnan: Did you?
Jordan: I did not. I’m not sure I’m qualified, but it has become to me, sort of the symbol of the job market, that we live in here. There’s so much competition. Now, I’m confident we’ll get staffed, but I’ve told everybody internally, sort of, back to the priorities. I want to communicate, be with our employees, but transition. Job one, this fall, is get staffed, and get stable in our operation, because stability in our operation, depends on getting staffed.
Unnikrishnan: Well, we’re almost out of time, but I got to ask you one question.
Unnikrishnan: Will bags continue to fly free?
Jordan: What do you think?
Unnikrishnan: You got to pay.
Jordan: This isn’t United.
Unnikrishnan: You got to repaint a lot of airplanes.
Jordan: Bags fly free, no change fees, it’s part of our DNA, it is not changing. Absolutely.
Unnikrishnan: All right, Bob, thank you very much for joining us today.
Jordan: Thank you, thank you so much.