Southwest holiday crisis reveals a clubby world of stagnant airline execs - Critics say company's 'founder-based culture' isn't nimble enough to handle new challenges

The operational chaos that engulfed Southwest Airlines Co. over the busy holiday period was a crisis decades in the making.

In the aftermath of a meltdown that led to 16,700 flight cancellations and may cost the airline more than $800 million, blame has fallen on an outmoded crew scheduling system and an unusual point-to-point route network. Southwest was overwhelmed and unable to adapt as a severe storm swept the U.S.

But behind those specific issues is an insular management team that critics say lacks the imagination and technology expertise to help avoid such crises. While the bootstrap culture instilled by co-founder Herb Kelleher turned Southwest into one of the nation's largest carriers, the size of the company now demands new ways of thinking and investment in innovation.

"It makes you wonder if there isn't sort of a correlation or cause and effect here, where you've got a fairly entrenched, stagnant board, a grow-your-own leadership team since it was a very small, scrappy airline," said Keith Meyer, global leader of the CEO and board practice at executive search firm Allegis Partners. "A founder-based culture can only take it so far."

Southwest is full of lifers. Bob Jordan, who took over as chief executive officer in February, has been with the airline 34 years. The chief financial officer and communications chief have each worked there 30 years, while the chief commercial and chief legal officers have been around at least 20. The closest to a newbie among Southwest's top management might be Chief Operating Officer Andrew Watterson, who joined a decade ago from Hawaiian Airlines.

Jordan doesn't see it as a problem.

"We've always been proud of the fact we've developed leaders here and that we have folks with so much tenure," he said. "They have a very deep airline knowledge, functional knowledge and very deep relationship that serves you well in normal times and when you get into an incident like this."

Southwest isn't alone in recruiting from within. American Airlines Group Inc.'s top leadership had been together since the mid-1990s, first at America West Airlines, then US Airways before a merger with American. The group first began to fracture when Scott Kirby moved to United Airlines Holdings Inc. in 2016 and later became CEO there.

"The aviation industry more broadly has been a bit of a laggard experimenting with executives from outside, let alone their boards," said Jason Hanold, CEO of executive search firm Hanold Associates.

But Southwest is in a unique position, with the challenges of a major carrier and the mindset of a small one.

The airline, which began flying between a handful of cities within Texas in 1971, has grown into a behemoth that has carried more domestic passengers than any other airline in recent years. That expansion has added complexity to its keep-it-simple business model, and resulting cost pressures mean it often can't offer the cheapest fares.

Southwest's focus on stretching every dollar has also made it more conservative than other carriers in a highly regulated, safety focused industry that rewards consistency, said Samuel Engel, senior vice president for innovation at ICF, and former head of the consultant's aviation group. It leans more on insiders because of "the continued belief that Southwest is different."

The carrier has a long-standing reputation of being slow to adopt new technology, and spent years implementing a new reservation system and updating its maintenance operations. It's now spending $2 billion to improve a balky Wi-Fi system, add power ports at seats and install larger overhead bins.

"Southwest is the largest domestic airline in the U.S. and it should start behaving that way," Helane Becker, an analyst with Cowen Inc., said in a research note.