Winter Travel Woes Highlight The Need For Robust ESG Programmes

Winter Travel Woes Highlight The Need For Robust ESG Programmes

Every holiday travel season has its unique challenges, but in the US, the obstacles in 2022 were unlike those seen before. With airline travel volume returning to pre-pandemic levels and a “once in a generation” winter storm impacting most of the country, over 12,000 domestic flights were cancelled between December 21st and December 25th. By December 26th, most major airlines were operating like business as usual – with the exception of Southwest Airlines, which continued to cancel more than 60% of its flights for several days.

There have been many explanations of what caused Southwest’s failure to rebound from the storms, including Southwest’s unique ‘point-to-point’ business model, postponed operational investments and the use of outdated IT systems. Regardless of the cause, the problems faced by Southwest highlight how important it is for corporates to take advantage of ESG and sustainability and risk management programmes that target the following:

1. Strategy development and scenario planning.
   To mitigate the impacts of extreme weather events, corporates need to develop plans and procedures to ensure business continuity. Southwest’s employees were stranded at smaller airports inundated by winter weather, prohibiting the successful operation of many Southwest flights. In contrast, Southwest’s competitors have developed better strategies to mitigate impacts of bad weather. JetBlue, for instance, has proactively engaged with airports and developed processes to ensure flight dispatch flexibility, resulting in its ability to recover from severe weather events more quickly.
   
   
2. Prioritizing employee and customer wellbeing.
   Reports are circulating of Southwest’s employees and customers sleeping on airport floors and being unable to contact Southwest’s customer service team to rebook flights. Additionally, unlike many other major airlines in the US, Southwest did not have any agreements in place to allow passengers to fly on competitors’ flights. Employees and customers took to social media to describe their frustration and disappointment with how Southwest handled their situations, increasing Southwest’s reputational damage.
   
   
3. Governance practices.
   In October 2021, Southwest cancelled more than 1,800 flights in a two-day period, resulting in losses of about $75 million; no other major airlines had widespread cancellations during this time. Southwest blamed these cancellations on a combination of bad weather, limited staff and an air traffic control problem. On an October 21st 2021 call with Wall Street analysts, Southwest’s then-CEO, Gary Kelly, noted that Southwest had made adjustments to prevent similar meltdowns in the future. However, the problems incurred in December 2022 mirror those of October 2021, highlighting Southwest’s failed attempt to resolve the issue, and likely eroding stakeholders’ trust.
   
   

For more information on service firms offering ESG and sustainability strategy development and scenario planning, see Verdantix Green Quadrant: ESG & Sustainability Consulting 2022; for more information on digital ESG risk management strategies, see Verdantix Strategic Focus: How Corporations Can Leverage Software to Manage ESG Risks.