Historically, Southwest Airlines (LUV 0.71%) has been one of the most successful airlines in the history of the industry. Unlike most of its major rivals, the company has never gone through bankruptcy proceedings, working its way through the most difficult of circumstances to stand out from its peers.

One thing that has worked in Southwest's favor is its scrappy attitude and commitment to customer service. The company has shied away from trends that major carriers like Delta Air Lines (DAL 1.25%), American Airlines Holdings (AAL 0.14%), and United Airlines Holdings (UAL -0.06%) have followed, with Southwest choosing not to impose checked baggage fees on all customer luggage and maintaining its open-seating policy. Those customer-friendly moves have kept Southwest shareholders happy, even when they've meant potentially leaving some money on the table for the airline stock.

Now, however, Southwest is facing a massive customer service challenge. With federal regulators coming into the picture, Southwest will need to work hard to demonstrate to its customers and its shareholders that it hasn't lost the competitive edge that has served it so well throughout its 55-year history.

Stormy times for Southwest

Shares of Southwest Airlines were down more than 5% at the start of regular trading on Tuesday morning. The airline's shareholders reacted negatively to ongoing developments that threaten to leave a huge group of customers scrambling to reach their destinations during the key holiday travel season.

Winter storms late last week wrought havoc on the airline industry, leading to massive disruptions. However, the impact on Southwest was particularly severe and noteworthy. After having canceled nearly half of its flights on Sunday, the airline followed up with nearly 2,900 cancellations on Monday. That was roughly 70% of its entire flight schedule, and by late Monday, Southwest had already canceled about 60% of its scheduled flights for today (Tuesday) and another 2,300 flights for Wednesday as well.

Southwest certainly wasn't alone in facing the immediate challenges that the winter storm caused as it brought freezing temperatures, harsh winds, and heavy snowfall to some key airports across the nation. However, some operational challenges appear to be responsible for why Southwest hasn't been able to get things back up and running as quickly as its rivals, despite serving many of the same markets from some of the same hub cities.

Why this could be a Southwest problem

Southwest acknowledged in a press release late Monday that the impacts on its customers and employees have been unacceptable. It explained that the sheer number of schedule changes pushed its operational tools beyond their capacity. As a result, the airline chose to fly only about a third of its scheduled flights over the next several days, putting safety first in its recovery efforts.

Some industry watchers saw Southwest's comments from a technological perspective, pointing out that some of the systems Southwest uses haven't seemed up to the task. Reports suggested that the airline had trouble coordinating availability of aircraft, pilots, flight attendants, and ground crews where they needed to be in order to recover successfully from the storm's effects. As a result, problems could potentially last beyond New Year's Day into 2023.

To be clear, other airlines had numerous cancellations as well. However, efforts from Delta, American, and United to get personnel where they needed seem to have helped them recover more quickly than Southwest.

Watch Southwest in 2023

At this point, Southwest will have to satisfy investigators at the U.S. Department of Transportation that its treatment of dislocated customers is consistent with federal requirements. That will specifically raise questions about how much of the problem was weather-related and how much was within Southwest's control.

Regardless of what regulators find, though, Southwest simply has to do whatever it takes to restore travelers' confidence after their terrible experience. If it can't distinguish itself through outstanding service in response to its past failure, then Southwest risks losing the reputation it has built up over more than half a century.