Dive Brief:

• Southwest Airlines didn’t meet its short-term customer satisfaction goals last year, according to its proxy statement filed last week. The airline hit 81% of its target.
• Southwest grades customer satisfaction, along with operational excellence, progress on major initiatives and financial success, in determining executives’ short-term incentive compensation. With the airline hitting only 58% of its overall performance target in 2023, executives all received payouts well below their targets in 2023. 
• Customer satisfaction — which it measures using the net promoter score for on-time flights — made up 15% of executives’ weighted scores.

Dive Insight:

In addition to an executive’s base pay, Southwest compensates executives based on a short-term incentive scorecard. Unlike in years past, 100% of short-term incentive compensation in 2023 was based on these performance measures and targets.

While the airline surpassed its goal for operational excellence for completed flights, it fell short of its financial success goal, meeting just 4% of its target. 

Executives eligible for short-term incentive compensation included Robert Jordan, CEO and president; Tammy Romo, executive VP and CFO; Gary Kelly, executive chairman of the board; Andrew Watterson, COO; and Mark Shaw, executive VP and chief legal and regulatory office and corporate secretary.

Jordan received $805,000 of the $1.4 million he could have possibly received.

In designing the short-term incentive scorecard for 2023, Southwest “deemed it of paramount importance for the company to demonstrate progress in operational resiliency and to emphasize progress towards returning to the company’s historical levels of financial results, reliability, and efficiency.”

The airline made no adjustments to the scorecard’s “quantitative metrics and related targets and performance levels” in light of its 2022 holiday meltdown that saw over 16,900 flights canceled. That operational disruption negatively impacted the company’s on-time performance, on-time NPS and overall performance level, Southwest said.

Even so, customer satisfaction has improved after a concerted effort to improve customer experience. At the end of last year, the airline named Tony Roach as its first chief customer officer to lead such efforts.

During a Q4 2023 earnings call this January, Jordan touted the airline’s recovered NPS scores. “Sentiment is fully recovered at this point,” Jordan said.

Southwest is not the only airline tying executive pay to customer experience. In 2017, United Airlines announced that it would implement an executive pay program linked to customer satisfaction.