Low-Cost Southwest Airlines Puts Millions Into IT Upgrades

Southwest Airlines Co. has invested $12 million during the past three years to standardize corporate and terminal operations on about 10,000 Dell OptiPlex desktop and Latitude notebook computers, executives told TechWeb on Wednesday.

Southwest wanted to replace its well-known, brightly-colored plastic boarding passes with an electronic system with bar-code paper boarding passes. So it installed about 350 touch screen ticket readers powered by Dell OptiPlex desktops. "We're a little late to the game in issuing paper boarding passes in locations outside the gate area, but we took advantage in switching from plastic to paper using bar codes instead of a traditional magnetic strip," said Don Harris, senior director of airport solutions at the ground operations department at Southwest Airlines. "The bar code gives us more information to automatically reconcile the number of boarding passes we issue and the number of passengers that actually board the plane."

A technology laggard, maybe, but some analysts believe Southwest is among the most profitable airlines. Southwest on Oct. 21 posted better-than-expected third-quarter earnings, end Sept. 30, despite rising fuel prices. It reported net income of $227 million, or 28 cents per diluted share, compared with $119 million for third quarter 2004, or 15 cents per diluted share.

Although the technology will help Southwest Airlines remain efficient by consolidating passenger information for the company's 3,000 daily flights, there were concerns it could lengthen the time to get travelers on board. About 70.9 million passengers traveled on Southwest Airlines in 2004. Harris said scanning each bar code on the boarding passes didn't increase or shorten boarding schedules, but it did take minutes from administrative processes, such as looking up customer records.

The new paper bar code system is giving Southwest ticket agents the ability to match a customer record within having to scroll through and log into multiple software screens. The process is much more automated. Once the bar code on the boarding pass is scanned at the terminal gate it checks off the person from the passenger list in real time.

The old method proved inefficient when trying to quickly match the 137 passengers who received a plastic boarding pass with those who actually boarded the plane. It was a manual process to find the information, scrolling through several software screens from reservations to check-in to boarding.

The bar code hardware to scan the boarding passes has been deployed. The company is in the process of replacing customer service back-office equipment at airports. Computer systems also are being installed at the company's Dallas headquarters.

There are more technology upgrades to come. Software applications, such as those used by clerks to check in passengers, are being replaced. Southwest Airlines' internally-written "Airport Application Suite" is expected to rollout next year as the company transitions from green screens to Window-based user interface. There are between 75 and 100 projects in the works each year supported by approximately 900 IT employees.

Similar to Wal-Mart Stores Inc., Southwest Airlines believes in developing in-house the software that runs its operations. The company uses very little off-the-shelf software. Radio frequency identification technology also is on Southwest's radar. It plans to test RFID technology sometime in 2006. "It's fair to say that Southwest is playing a little catch-up, but in many cases we're able to leapfrog to more sophisticated applications because we waited so long," Harris said.