NEW YORK, July 22, 2024 (GLOBE NEWSWIRE) — Bragar Eagel & Squire, P.C., a nationally recognized shareholder rights law firm, is investigating potential claims against Southwest Airlines Co. (NYSE: LUV) on behalf of long-term stockholders following a class action complaint that was filed against Southwest Airlines on January 12, 2023 with a Class Period from June 13, 2020 to December 31, 2022. Our investigation concerns whether the board of directors of Southwest Airlines have breached their fiduciary duties to the company.
Winter storms disrupted holiday travel during the 2022 holiday season, leaving thousands of travelers stranded in airports around the United States. However, not all domestic airlines were affected equally. Southwest Airlines flight cancellations accounted for the vast majority of domestic flight cancellations, leaving travelers unable to visit loved ones over the holidays, and attracting the ire of the federal government.
As flights were getting cancelled around the country, it soon emerged that the root cause behind Southwest Airlines’ cancellations was outdated and ineffective technology, in particular, its crew scheduling system (called “Sky Solver”). Further compounding on this issue, Southwest Airlines used an aggressive flight schedule that left it prone to greater cancellations than its competitors in the event of unusual conditions, such as nationwide storms.
As various national news outlets focused on how Southwest Airlines’ utter failure to provide adequate services to its customers left thousands stranded at airports across the country, the truth about the Company’s business began to emerge.
On December 26, 2022, Business Insider published an article about Southwest Airlines entitled “U.S. Department of Transportation says it plans to look into Southwest Airlines following the airline’s unacceptable holiday flight cancellations.” The article highlighted that the Department of Transportation had announced that it would examine “whether cancellations were controllable,” and whether Southwest Airlines was complying with its stated customer service plan, after reports of a lack of prompt customer service in the wake of cancellations.
On the same day, CNN published an article entitled “Massive Southwest Airlines Disruption Leaves Customers Stranded and Call Centers Swamped.” CNN discussed how the winter conditions had affected Southwest Airlines to a much greater extent than its competitors, and then discussed how it had been provided a transcript of a message from Defendant Jordan to Southwest’s employees. In this message, Defendant Jordan stated that “[Southwest Airlines] has a lot of issues in the operation right now,” and that “[p]art of what we’re suffering is a lack of tools. We’ve talked an awful lot about modernizing the operation, and the need to do that.”
Then, on December 27, 2022, Reuters published an article entitled “Southwest cancels thousands more flights; U.S. Government Vows Scrutiny.” This article quoted Casey Murray, president of the Southwest Airlines Pilots Association (the “SWAPA”), who said “Southwest is using outdated technology and processes, really from the ‘90s, that can’t keep up with the network complexity today.”
The Reuters article also discussed Southwest Airlines’ flight schedule. Rather than flying out of hubs, Southwest Airlines relies on the aforementioned point-to-point service, which leaves Company staff vulnerable to being stranded during disruptions (such as inclement weather). Murray said that this complex and aggressive business model was possible. However, executing this strategy in adverse conditions would only be possible with software that was more effective than Sky Solver, Southwest Airlines’ proprietary software that is used to match flight staff personnel with different flights. Murray stated that “[w]e had aircraft that were available, but the process of matching up those crew members with the aircraft could not be handled by our technology.” Due to Sky Solver’s failure, the Company had to manually match crew members to specific flights, a process that Murray called “extraordinarily difficult.”
On the same day, CNN published an article entitled “Why Southwest is Melting Down,” which quoted Kathleen Bangs, a spokesperson for a flight tracking website called FlightAware, who stated that Southwest’s schedule was aggressive in that it focused on shorter flights with tight turnaround times. Bangs further stated, “[t]hose turnaround times bog things down.”
The December 27 CNN article quoted Lyn Montgomery, the president of the labor union which represents Southwest Airlines’ flight attendants, as saying “[t]he phone system the company uses is just not working. They’re just not manned with enough manpower in order to give the scheduling changes to flight attendants, and that’s created a ripple effect that is creating chaos throughout the nation.”
The December 27 CNN article revealed that it also obtained a transcript of a phone call between Southwest Airlines’ COO, Andrew Watterson, and various company employees, in which Watterson stated “[t]he process of matching up [crew members] with the aircraft could not be handled by our technology.”
On this news, Southwest Airlines stock fell from a closing price of $36.09 on December 23, 2022, to $33.94 on the next trading day, December 27, 2022, and then to $32.19 on December 28, 2022, a drop of over 12%.
More news emerged about Southwest Airlines over the following days. On December 30, 2021, My Tech Decisions published an article about Southwest Airlines entitled “Southwest Airlines’ Holiday Collapse Due in Part to Outdated IT Systems,” which discussed how the SWAPA had warned that the Company needed to improve its technological infrastructure. SWAPA stated, “A systemic failure of Southwest Airlines leaders to modernize, support, and staff its operation leaves every frontline employee, Pilots included, tired of apologizing to our passengers. [. . .]. For more than a decade, leadership shortcomings in adapting, innovating, and safeguarding our operations have led to repeated system disruptions, countless disappointed passengers, and millions in lost profits.” Further, “[we call for investing in infrastructure in the form of] crew scheduling software that takes into account our point-topoint network, [. . .] and communication tools that would have allowed for displaced crews to remain in in constant contact with our Company.”
On December 31, 2022, The New York Times published an article entitled “The Shameful Open Secret Behind Southwest’s Failure,” which discussed how it was an “open secret” within Southwest Airlines that it desperately needed to modernize its scheduling systems. In particular, the article discussed how software shortcomings had “contributed to previous, smaller-scale meltdowns,” and that Southwest Airlines worker unions had warned the Company about the software at various times before the Company’s meltdown over the 2022 holiday season.
On this news, Southwest Airlines stock fell from a closing price of $33.67 on December 30, 2022 to $32.6 on the next trading day, January 3, 2023, a drop of over 3%.
As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s common shares, Plaintiff and other Class members have suffered significant losses and damages.
If you are a long-term stockholder of Southwest Airlines, have information, would like to learn more about these claims, or have any questions concerning this announcement or your rights or interests with respect to these matters, please contact Brandon Walker or Marion Passmore by email at investigations@bespc.com, by telephone at (212) 355-4648, or by filling out this contact form. There is no cost or obligation to you.
About Bragar Eagel & Squire, P.C.:
Bragar Eagel & Squire, P.C. is a nationally recognized law firm with offices in New York and California. The firm represents individual and institutional investors in commercial, securities, derivative, and other complex litigation in state and federal courts across the country. For more information about the firm, please visit www.bespc.com. Attorney advertising. Prior results do not guarantee similar outcomes.
Contact Information:
Bragar Eagel & Squire, P.C.
Brandon Walker, Esq.
Marion Passmore, Esq.
(212) 355-4648
investigations@bespc.com
www.bespc.com
