This is only “a failure” if the loss from this is worse than all of the money they have saved over the years by running so lean.
This type of event is the obvious possible downside that is well known when you structure a company this way. It’s not that events like this aren’t expected, it’s that prepping for them costs more than the loss from not being able to absorb them.
The human element doesn’t matter at all? Their workers are fed up.
This tunnel visioning on financial metrics is so superficial and narrow that it makes me angry. A company is a community of interacting, real people, not a video game.
The money they earned in the past are already spent and forgotten. The failure is now. So for the people who got the bonuses in the past it may be worth it (that's probably why they did it), but for the company as an ongoing concern it certainly isn't. It's like eating a lot of unhealthy foods and later getting sick - maybe some people consider it worth it, but most people kinda regret it when they get sick.
The thing is, a company isn't a person. In fact, LTDs were effectively invented in order to dissociate company lifecycles from human ones.
So, from a purely rational perspective, if the company makes $100m profit over 10 years then gets "sick", well, job done - you just start another one and carry on. Money doesn't care for future consequences; if anything, inflation puts pressure on disposing of profits quickly while postponing losses (and risk), even if doing so will eventually kill the company.
Extreme "financialization" of our ways of production has given us great rates of efficiency and innovation, at the expense of long-term stability.
> So, from a purely rational perspective, if the company makes $100m profit over 10 years then gets "sick", well, job done - you just start another one and carry on. Money doesn't care for future consequences; if anything, inflation puts pressure on disposing of profits quickly while postponing losses (and risk), even if doing so will eventually kill the company.
This is a purely financial take, not necessarily a purely rational one. I say that because it's pretty easy to dismiss all the human aspect of a company dying, all the suffering it creates as something to not be taken "rationally" but what it actually means is to push the human-factor into the statistics field and be done with it.
Operating a business is a lot like flying an airline in one respect: It's not your average hight above the zero point that matters so much as never, ever going below it.
Failure to maintain altitude above ground level and failure to maintain solvency are in many ways equivalent.
Both domains involve taking risks, but with severe consequences when either risks are miscalculated or ground truths change. Financial bets can be hedged in ways flight profiles often cannot be, and Southwest are credited for doing this (with fuel purchase futures notably), but there's a sense in which businesses are arbitraging latent risks for present profits in ways which can prove catastrophic. (Venture start-ups are particularly prone to this IMO.)
Southwest's single-airframe fleet affords efficiencies, but also risks should faults arise with that airframe or subsystems of it (as with the 737 MAX scenario).
"Solvency", writ large, is ability to service debts.
It's not quite as simple as cash-on-hand, turnover, or profitability. Start-ups without revenues or net profits may be solvent if investment capital is available, premised on future profitability or a viable exit strategy. But it's fairly strongly related.
Airworthiness is more an overall assessment of risk.
A substantially compromised aircraft, with expert piloting and favourable weather, can still land successfully.
A fully-airworthy aircraft experiencing CFIT won't. Nor will one flown into unanticipated adverse conditions such as violent weather, volcanic ash, or wind shear.
And of course, a sufficiently crippled craft cannot be landed successfully no matter what.
(An additional case is of a landing with partial survival of passengers and crew. We'll omit that.)
Airworthiness increases he probability of a successful flight. It's neither strictly necessary, nor sufficient. It is part of the overall risk assessment, effectively a creditworthiness rating.
An airworthiness certificate is a specific certification of such airworthiness.
> Don't forget all of the future losses by losing the trust of both the customers and the employees.
Who's going to remember this? Even a large percentage of the stranded passengers are likely to fly Southwest again to save $36 on a flight.
> This assumes that they can absorb these losses.
If they couldn't, then they could very very likely receive a bailout or other assistance. It is the existence of these safetynets that allows these businesses to operate so lean. The cynical might say that bailouts encourage the practice.
> Who's going to remember this? Even a large percentage of the stranded passengers are likely to fly Southwest again to save $36 on a flight.
You can see how this is a problem, right? This essentially means the market is not working as it should - instead of improving quality of service, it makes people absorb the bad experience, ad infinitum. The market is not able to deliver feedback to the companies, who instead rely on some degree of "capacity for suck" in their customers, and the fact that there's a new sucker born every minute - by the time they burn out a cohort of their clients, a new population of naive, hopeful people shows up to replace them.
> This essentially means the market is not working as it should
Actually the market works just fine: it transfers price pressures efficiently across all participants - including human beings. It's society that doesn't work anymore, because it has now lost any meaning of 'value' beyond monetary terms for most of the population. Most consumers now cannot choose not to minimize expenditure: either because they cannot afford it, or because they simply don't know how to look at experiences through a lens different from "what is the price".
Well, some people are OK with getting shitty service once in a while in exchange for drastically lower prices. The thing is, I don't see Southwest prices being drastically lower - I had been checking it for a while when travelling and at least where I go, their price level is no different from their competition - they occasionally have a good deal, but so do the competitors, and their regular prices aren't that different otherwise in my experience. Maybe statistically it's not true but anecdotally for me I'm not sure there's even minimizing expenditure that much...
>Most consumers now cannot choose not to minimize expenditure:
Leaving aside flying private--which is a whole different magnitude of cost--consumers can absolutely choose to pay more to insulate themselves from much of the unpleasantness of flying. Doesn't help much when flights are canceled or delayed of course but you have Pre-Check, airline lounges, business class seating, etc. which do generally improve the experience.
But, yes, society in the aggregate does not value the better experience at what it would cost to deliver--certainly not to the point of effectively excluding a significant segment of the population from routine flying but, in the process, making it a more pleasant experience for others.
I don't think people will be as forgiving of this as GP thinks. I will certainly not book with them for my next N flights unless I hear that they have massively changed their tune.
This type of event is the obvious possible downside that is well known when you structure a company this way. It’s not that events like this aren’t expected, it’s that prepping for them costs more than the loss from not being able to absorb them.