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By Marty Lariviere

Southwest Airlines (NYSE:LUV) along with Wal-Mart (NYSE:WMT) and Toyota (NYSE:TM) have long been stock examples in Operations Management classes. They have always been reliable go to examples of firms whose success has depended in non-trivial ways on how they manage their operations. Of course, the problem with relying on a stock example is that little things like, I dunno, recalling millions of cars can dampen the persuasiveness of the example. It’s not just Toyota. Wal-Mart too has had some issues and missteps. Now comes word that Southwest is having operational difficulties (As Southwest Airlines tries to cope with its success, problems at Midway will get team’s attention, Mar 3, Chicago Tribune).

Bags still fly for free on Southwest Airlines, but travelers are paying a price in other ways. They’re encountering more lapses in Southwest’s hallmark on-time performance as the carrier departs from what once was its core principles of avoiding congested airports and shunning hub-and-spoke complexity in favor of getting passengers to their destinations on a single aircraft.

Revenue soared as Southwest added business destinations such as New York’s LaGuardia Airport and connecting flights at Chicago’s Midway Airport. But as it struggles to cope with increasing numbers of passengers and bags, Southwest risks tarnishing the reliability it has touted since the 1970s. …

While its rivals shrank their U.S. operations following 2008′s Great Recession, Southwest added 13 million more passengers per year. The carrier also took a scalpel to its schedule, canceling flights that didn’t attract great numbers of passengers and adding more flights to peak periods.

With little room to make up for delays, Southwest’s on-time arrivals in 2010 dipped below the carrier’s historic 80 percent rate. The lapse was magnified as rivals like United Airlines posted the best on-time numbers in their history.

Part of the issue is that Southwest has tweaked its traditional business model (something we have written about before), flying to more congested airports and operating more of a hub-and-spoke system. Part of this is related to growth. At some point, Southwest was bound to run out of secondary airports in relatively populous areas. That would leave a choice of going into smaller cities (where reliably filling a 737 would be hard) or sucking it up and going to busier airports that pose operational challenges but at least have lots of traffic. That seems a pretty obvious choice. As does a hub-and-spoke system. Once Southwest began flying to cities on both coasts, it was inevitable that passengers would look to book long trips. Having five-hour layovers then costs you business and you start to have more peaked flight schedules. The next thing you know, half of Southwest’s Midway traffic is connecting passengers.

Of course, peaked schedules with tight connection times makes for challenging operations. The proof is in the data. Not only has Southwest’s on-time performance suffered, Midway’s has. It is now last in on-time departures .

And Southwest’s bags fly free policy doesn’t help.

It’s not unusual for bags and passengers on a flight landing at Midway to connect to 12 departing flights, sending workers scurrying to sort and deliver the luggage to 12 points around the airport.

“The planes are coming in with more bags, period, because people check more bags,” [Charles] Cerf[ president of TWU Local 555, which represents ground workers at Southwest] said. “They’re having to hold some of those departures because normal connecting time isn’t enough to get the bags over there. We feel we don’t have enough agents.”

This too makes sense. Ryanair claims to emphasize baggage fees in order to keep costs down. If Southwest is going to welcome check bags, it has to expect higher costs. The question is, what can Southwest do? The article says the company is loathe to increase the scheduled time for flights or scheduled layover since that would dramatically decrease productivity. That leaves adding resources (for example, it is renting more gates at Midway and adding workers) or revising the work. The latter is obviously the most desirable outcome. It will be interesting to see if the company can pull it off.

Source: Southwest Airlines: Do Free Bags Create a Drag?